What are the limitations of economic growth?

Limitations of economic growth

The process of economic growth has certain limitations as well. Thus we should not lose sight of these in the blind race of growth as these could have serious social and economic re percussions for the society (as happened in many of the Latin American countries).

Inequality of income:

Growth rarely delivers its benefits evenly. So the issue of distribution of the fruits of the growth process becomes first important limitation of process of economic growth. There is evidence to suggest that, at least in the initial stages of development; growth tends to worsen the distribution of income.

Although the relationship between growth and distribution is far from settled. There is no doubt that rapid economic growth creates the potential means for alleviating the problem of poverty which affect almost all the developing countries.

With adequate state intervention, this potential has been used to significantly reduce the poverty incidence in the economies of East and South East Asian economies as well as China.

It is possible to have economic growth without the majority of population being any better off, as the expanded output enriches only a small section of powerful population.

But such developments are immoral, and would result in more social conflicts and could undermine the economic policy-making which benefit only a few.

Pollution (and other negative externalities):

The drive for increased output tends to put more and more pressure on the environment and the result will often be increased pollution – air, water, and noise. This may be water or air pollution, but growth also creates significantly increased noise pollution. Traffic growth and increased congestion are prime examples of this.

Loss of non-renewable resources:

The more we want to produce, the more resources we need to do that. The faster we use these resources, the less time they will last. This invariably leads to loss of non­renewable resources like oil, and other minerals, forests etc.

It is clear that economic growth, by either increasing the total availability of goods and services, or by increasing the capacity to do so, makes it possible for people to reach higher level of material welfare for some commodities and at present.

However, economic growth process may reduces social welfare as sometimes increasing the level of output may lead to relative scarcity of some other resources or same factors for future generations and could make it more difficult for them to maintain the present level of welfare in the times to come.