Answer to Question #123781 in Macroeconomics for Ingrid

Question

It is clear that the South African economy needs to grow. We need to make up for lost incomes, lost
jobs, lost tax revenue. Our fiscal stance will be more sustainable if GDP grows. Apply your knowledge
of the drivers of growth and explain what can drive long-run economic growth for South Africa. You
can use models, graphs and explain in your own words what plans you propose to get the drivers of
growth going.

Answer 1

Technological progress. Technology is the critical driver for the long-run growth of any economy. According to the law of diminishing returns, despite the addition of extra unit input of other factors of growth, such as capital and labor, the economy will eventually decline if the technology is not prioritized. Consequently, a country cannot maintain a continuous growth of her economy by just amassing extra capital or labor. Therefore, South Africa must plan to incorporate technology for her to experience the long-run growth of her economy. This not only stimulates economic growth but also addresses the unemployment problem by getting her citizens working on those industries and operating them. This will also increase revenues through the taxes collected.

 Capital is another driver of economic growth. Generally, capital in economics refers to capital goods, which include manufacturing plants, tools, machines, and equipment used in the production process within the economy. Therefore, South Africa must invest more capital on these capital goods that are deemed to have a long-term impact on its economy. The country should start more manufacturing plants, buy or invent more equipment, and focus on increasing the number of trucks or forklifts. By so doing this, the country will start experiencing positive impacts on her economy, thus increase in revenues collected from taxes. On the other hand, this will as well as address the unemployment problem. All these have a long-term impact on the economy.

Entrepreneurship as well is another factor that triggers the long-run economic growth of a country. This includes people who are visionary and as well as innovators in the production sector. Therefore, South Africa should encourage the entrepreneurial spirit among its citizens. Besides, South Africa should provide the necessary support to the entrepreneurs to ensure that they succeed in their innovative process. This will first address the unemployment rate, and as well as generation of revenue to the economy through taxes. Most entrepreneurship programs are usually long term thus benefiting the country for an extended period.

Labor is also another factor. These are people who are responsible for the goods. They may include workers, salespeople, and engineers. For instance, engineers are responsible for designing machines used in the production process. Therefore, South Africa should ensure that her citizen has appropriate skills for working in various sectors of the economy. This is enhanced by giving them relevant training. This will also address the unemployment rate, increase revenue, and bring a positive impact on the economy for an extended period.