Analyze Venezuela recent growth experience from the standpoint of the growth models
Analyze Venezuela Recent Growth Experience from the Standpoint of the Growth Models.
Economic growth is primarily defined as the increase in the value of inflation-adjusted services and goods that are produced by a particular economy over a period of time. Conventionally, it is measured as a percentage of the increase in the real GDP. Among other important factors that are put under consideration is the growth ratio of the gross domestic product to population also referred to as gross domestic product per capita. Growth increase caused by the efficient use of population, territory, or physical capital is called intensive growth. The growth of the economy is computed from the data collected by a particular country on population and gross domestic product. Small values of growth rates over a broad time frame tend to have an enormous impact on the economic growth of a nation (Barro p.13). This is due to the mathematical factor of exponential growth. This situation results in a vast improvement of the living standards of the inhabitants of said nation if this growth happens over a period of many years.
Physical capital refers to the buildings, computers, equipment and machinery that assist the production process of turning raw materials into the finished products. Economists refer to physical capital as a factor of production since it is part and parcel of the production process (Weil p.16). Since physical capital is a primary element in the production process, an increase of investment in physical capital makes the process of production faster and more effective than before. When investment is poured into more computers, equipment, and machinery used to turn raw materials into finished products, then the country would have more goods and services produced thus resulting in a higher gross domestic product than before. This increase in the real GDP results in the growth of the economy and development in general including higher standards of living for the population.
Human capital is the skills, knowledge, and motivation that a population has, which brings about economic value. Human capital has a direct proportionality to the growth of the economy. This relationship between economic growth and human capital is primarily measured by how much the government has invested in the education of its population. A good example is when the government subsidizes the cost of learning in institutions or provides free education to the citizens of the country. This resolve is encouraged by the fact that when people gain knowledge through education, then they will help build the economy using the skills they possess in the form of skilled and semi-skilled labor which is also an important factor of production.
Thus, both human capital and physical capital are directly proportional to the economy’s productive capacity. An increase in human capital might in itself impact the physical capital’s rate of growth. If physical capital and human capital complement each other, then increase in investment in human capital should in turn increase the growth of physical capital in an economy. Hence, the underlying growth rate of the economy and development, in general, which comes from a rise in production from factors besides measured inputs tend to depend on the level of educated present in the economy.
In the case of Venezuela, the gross domestic product per capita, PPP (current international $) has been rising between the year 1990 and 2014. The graph above shows that this GDP per capita rose from around 9000 dollars in 1990 to around 17500 dollars in the year 2014. This can be attributed to the Venezuelan government increasing the investment in physical capital in the nation resulting in general increase in the real gross domestic product of the nation.
This second graph, on the other hand, portrays the gross domestic product per capita growth (annual %). It fluctuates between -2 % and 5 % in the years 1966 to 1976. In the years 1988 to date, the GDP per capita ranges between -10.5 % and 16 %.
This third chart shows the school enrollment (% gross) of primary, secondary, and tertiary institutions. In primary education, the enrolment of students was higher when compared to the secondary and tertiary levels. The curve of the secondary and tertiary school enrolment show that there was an increase in the level of education of the population. This apparent rise depicts that the government of Venezuela has been paramount in investing in the human capital of its economy between the years 1970 to 2014 with the highest growth of the number of school enrolment in secondary and tertiary institutions. This investment in the human capital shows that there are a larger number of skilled and semi-skilled labors in the recent years as opposed to the 1970s.
As much as there was a definite increase in investment in human capital in Venezuela over the past five decades, another variable that is ought to be considered to understand further the growth rate of the Venezuelan economy is the national estimate of the total unemployment rate (% of total labor force). As depicted in chart four above, when there is a considerable percentage of the labor force that is unemployed, the economic growth of a nation tends to stagnate. This factor is also paramount in giving us a hint as to why the GDP per capita growth (% annual) ranges.
Works Cited.Barro, Robert J. Economic Growth. Cambridge, Mass.: MIT, 1999. Print.
Weil, David N. Economic Growth. Boston: Addison-Wesley, 2005. Print.