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TopIntroduction: The Role Of Economic Growth In Improving People’S Living Standards
Economic growth is an increase in the gross domestic products (GDP) of the economy in a certain period, usually a year. When GDP generated in the following year is greater than the GDP created in the previous year (calculated by comparative price), then it is economic growth.
People’s Living Standards (PLS) is a socio-economic category defined by the satisfaction of physical and spiritual needs of members in a society. As the level of satisfaction of material and spiritual needs for the population increases, PLS is enhanced. There are 4 groups of criteria for assessing PLS, which are:
- (1)
The criteria reflecting working characteristics and conditions such as: job security for workers; the average length of working time in a day; rest time; labor intensity; proportion of work mechanized and automated; labor protection and occupational safety and hygiene; cultural activities, workplace spirit; transportation to work place of workers.
- (2)
The criteria reflecting the consumption of material wealth in society such as: per capita income; consumption of essential food and foodstuffs; housing conditions (average area, type of dwelling); durable goods.
- (3)
The criteria reflecting cultural and spiritual living conditions and health assurance such as the development of education and training systems; general education level of the population; status of people’s healthcare; the development of cultural works; public transport system; situation of environmental sanitation.
- (4)
General criteria reflecting the results of impact between factors such as: average life expectancy of the population; human resource development; the level of participation in social management of the population.
To improve PLS, first of all, there must be economic growth (or increase in the income of the economy), because the income of the population depends on the total income of the economy (or the results of the economic growth process). In addition, to increase PLS, the increase in the total income of the economy must be greater than the increase in population size. In particular, for developing countries, the population growth rate is high, the economic growth rate needs to be higher than the population growth rate.
However, in fact, there are countries with relatively high per capita income, but the proportion of the poor population, not having access to health and education services, is higher than that of the countries with lower capita income. For example, in 2007, Brazil had per capita income 1.24 times than that of China and 2.73 times that of Vietnam, but Brazil’s poverty rate was 21.5%, much higher than China’s (4.6%) and Vietnam’s (about 14%). Brazil’s literacy rate was 88.6%, lower than that of China (90.9%) and Vietnam (90.3%). The average life expectancy of Brazil was 71.7 years old, while that of China was 72.5 years and of Vietnam was 73.7 years old (United Nations Development Program, 2007/2008, p.236, 244).
From the above analysis, it can be confirmed that economic growth is only a necessary condition, not a sufficient condition to improve PLS.
In order to improve PLS, in addition to the necessary condition of economic growth, there must be sufficient condition, which is the role of regulating the distribution of economic growth results of the government. Specifically, the government deals with the following relationships:
- The relationship between final consumption and accumulation and reinvestment. In the context of limited economic conditions, if the government gives high priority to the goal of accumulation and re-investment with the expectation of increasing economic potential to achieve high and long-term economic growth in the future, PLS will not be lifted and vice versa.
- The relationship between personal consumption (increasing PLS) and government consumption (for security, defense, diplomacy ...). In the context of limited economic conditions, if the government gives priority to the objectives of security and national defense, etc. then it is necessary to reduce the target of improving PLS and vice versa.