Civil Engineering Reference
In-Depth Information
Sustained Economic Growth
A long-term objective of all governments is to achieve steady increases in productive
capacity. Governments measure
economic growth
by the annual change in the rate
of output, and the commonly used measure of economic output is GDP -
gross
(total)
domestic
(home)
product
(output). GDP figures are used worldwide as a
proxy for a country's progress towards prosperity: since the more money a country
makes, the higher its GDP growth, the assumption is that increases in GDP mean
that the citizens of that country are enjoying a higher standard of living. The way
GDP measures output can be seen as a giant till ringing up all the transactions
taking place inside a country. To accurately portray the rate of change of actual
output, GDP must be corrected for price changes from one time period to another.
When this is done, we get what is called 'real' GDP. So a more formal measure
of economic growth can be defined as the rate of change in real GDP over time
(usually one year). As the footnotes indicate, the growth data in
Table 12.1
has been
corrected accordingly. It is, therefore, a clear indicator of
boom
or
recession
. A
fuller coverage of GDP and how it is calculated is given in
Chapter 13
.
External Balance
All international economic transactions are recorded in a country's
balance of
payments
statistics. The ideal situation represents a position in which, over a
number of years, a nation spends and invests abroad no more than other nations
spend or invest in it. Economic transactions with other nations can occur on many
levels and, for accounting purposes, these transactions are often grouped into
three categories: current account, capital account and financial account. Of these
three, the most widely quoted is the current account. This involves all transactions
relating to the exchange of visible goods (such as manufactured items, which would
include building materials), the exchange of invisible services (such as overseas work
undertaken by consultants) and investment earnings (such as profits from abroad).
Clearly, in any one year, one nation's balance of payments deficit is another nation's
balance of payments surplus - ultimately, however, this is not sustainable and, in the
long run, debts must be paid. The data in
Table 12.1
show a worrying trend, in so
far as the UK current account figures are all negative amounts. However, in addition
to buying and selling goods and services in the world market, it is also possible
to buy and sell financial assets and these are recorded separately in the financial
account. The UK's annual position on its financial account is usually in balance.
A further qualifying remark regarding foreign trade is to recognise that balances
of payment figures are notoriously difficult to record accurately. (In fact, of all the
statistics shown in
Table 12.1,
the balance of payments estimates are subject, by far,
to the biggest amendments.) In practice, therefore, statistics relating to the external
balance need to be considered in a broader historical context.
Environmental Protection
The environment has gained a high political profile in recent years, and there is a
recognition that a healthy economy depends upon a healthy resource base. We have
