Approaches in Growth Theory

APPROACHES IN GROWTH THEORY The economic aspect is a vital thing in a country. The economy is often the main focus for every country in structuring government. Because, this economic aspect is also a benchmark for community welfare. Of course, the welfare of the people is one of the main goals of achieving national interests. In a country's economy, the concept of economic growth is known. Understanding the concept of economic growth is important, in addition to economic development. For more details, we will try to analyze economic growth along with the theories of economic growth put forward by experts. Economic growth is the development of activities that cause an increase in the amount of production of goods and services. Economic growth has a general meaning that describes development in a country. This means that economic growth can be used to measure the achievements that will be achieved in the development of an economy. Economic development can be seen from the increase in a country's Gross Domestic Product (GDP). GDP itself can be interpreted as the number of goods and services produced by all people in a country during one year. Therefore, economic growth can also be interpreted as an economic condition that shows an increase in a country's GDP when compared to the previous year. Economic growth is different from economic development. In economic development, calculations for economic growth ignore whether the increase is greater or smaller than existing population growth. Calculations of economic development also do not consider whether there are changes in the economic structure or not. To calculate the level of economic growth of a country, quantitative data is used. This economic growth data can also be compared between one period and another. Basically, every country certainly wants to experience economic growth with positive values from year to year. However, the real economic growth of a country often does not correspond to its economic growth potential. Experts have long tried to understand the concept of economic growth that has occurred in society. Based on expert opinions, several theories put forward can be analyzed by comparing the opinions of economic growth experts as follows: a. Adam Smith According to Adam Smith, economic growth can occur if there is an acceleration of the production system in a country. To analyze economic growth based on Adam Smith, it can be done in two ways, namely total output and population growth factors. Calculation of total output is carried out using three variables, including natural resources, human resources, and capital stock. Meanwhile, for the second, it is used to determine market size and the rate of economic growth. b. David Ricardo According to David Ricardo, economic growth occurs when population or labor growth is able to influence a decrease in marginal product due to limited land. Increasing labor productivity really requires technological progress and sufficient capital accumulation, so that economic growth can be fulfilled. c. Thomas Robert Malthus Thomas Robert Malthus argued about economic growth. According to Thomas, a country's economic growth is determined by population growth. Because as the population increases, the demand for goods and services will automatically increase. Apart from that, the economic development of a country also requires an increase in the amount of capital for continuous investment. d. Walt Whitman Rostow Meanwhile, according to WW Rostow, economic growth that occurs in a country takes place in several stages, namely: a. Traditional society b. Take-off prerequisite stage c. Takeoff stage d. Stage towards maturity e. High consumption stage e. Karl Marx Meanwhile, the opinion expressed by Karl Max focuses on a lack of consumption which will paralyze production capabilities. Excessive production in general will lead to the collapse of the theory of capitalism. f. Neo Keynes In this theory, economic growth is about the influence of investment on aggregate demand and growth in production capacity. Because, this investment can then increase economic growth. This theory views that capital investment is a very important component in the process of determining the success of economic growth. All the opinions of the figures have the same goal, namely how to develop a country's economy and be able to meet the needs of its people. If people's needs are met then the country can be said to be a developed and prosperous country. It could also be said that economic growth is basically an innovation process carried out by innovators and entrepreneurs. Apart from that, economic growth can be interpreted as a series of activities that originate from four main factors, namely people, capital, technology and results (output). So, it can be concluded that economic growth in general can occur because of several factors that can measure that growth. Apart from that, the balance between population, capital and currently developing production and technology must be a serious concern for stakeholders, so that the desired results in the growth process can be achieved optimally.