Economic Cycles, Growth, Unemployment, and Poverty
Economic Cycles
Cycle: Successive phases of boom and bust are apparent in economic activity. These phases determine variations in production, income, employment, and prices in an economy.
Phases of the Economic Cycle
- Expansion: An ascending phase characterized by growth in GDP and employment levels, income, and consumption. As demand increases, investments rise, providing more employment.
- Peak (Auge): The highest capacity utilization is achieved, with high levels of production, employment, and income.
- Recession: Employment increases significantly, leading to decreases in income levels and consumption. Demand decreases as investments decline.
- Crisis: The economic cycle reaches its lowest point. Business failures occur, and unemployment rises to its maximum level.
Causes of Economic Cycles
- Alterations in production costs influence prices and employment.
- Variations in the amount of money in circulation.
- Prices rise if increased demand is not met.
- Natural catastrophes.
Economic Growth
Economic Growth: A continuous process of increasing GDP, matching the expansion phase of the economic cycle. GDP is the appropriate measure.
Determining Factors of Economic Growth
- Improvement of physical capital.
- Human capital improvement.
- Site development and application of organizational techniques.
Growth and the Environment
Sustainable development is giving way to a more responsible awareness of the natural environment.
Environmental Impacts of Economic Growth
- Global warming of the atmosphere due to greenhouse gas emissions.
- Ozone layer depletion.
- Deforestation.
- Soil and water contamination by industrial and agricultural spills.
- Disappearance of flora and fauna species.
Measures for Sustainable Growth
- Internalize costs.
- Life extension of products.
- Reduce, reuse, and recycle.
- Implement special aid for manufacturers of biodegradable goods.
Unemployment
Unemployment: Refers to individuals who are unable to work due to physical or legal reasons, or those who do not want to work, despite having the ability to do so.
Measurement of Unemployment
- Labor Force Survey (LFS).
- National Employment Institute (INEM).
- Registers affiliated with Social Security.
Types of Unemployment
- Cyclical.
- Seasonal.
- Structural.
- Frictional.
Implications of Unemployment
- Economic: Diminution of actual production, contraction of demand, increase in public spending.
- Social and Personal: Physiological and discriminative effects.
Intermediary Objectives to Reduce Unemployment
- Increased demand.
- Decreased labor costs.
- Labor market flexibility.
Poverty
Poverty: A situation defined by the lack of basic resources to cover basic needs. It often results from extreme poverty, low educational and vocational training, leading to social problems. Unemployment and rural poverty often affect older individuals, with the most dramatic situations occurring in large cities.
Underdevelopment: Causes and Effects
Development requires growth of certain magnitudes, such as GDP, combined with increased quality of life through improved distribution of wealth, education, etc. An underdeveloped economy is not necessarily growing. To reflect inequalities, we often speak of the North-South dualism.
Features of Underdevelopment
- Low economic growth.
- Inequality in the distribution of income and wealth.
- Weak healthcare structure.
- Limited productivity.
- High unemployment.
- Unbalanced economic structure.
- Expansion of external debt.
Causes of Underdevelopment
- Lack of technical resources and physical capital.
- Numerous and unproductive human resources.
- Instability and weakness of the public sector.