Essay Sample on Exploring Economic Growth: Laws and Challenges

Introduction

Economic growth refers to the increase of goods as well as services produced per head of the given population over a duration of time. The growth of the economy often directly translates to the increase in profit margins for businesses. To better understand economic growth, scholars have come up with law theories to explain the various challenges that affect growth. These laws encompass a variety of discrete components involved in economic growth, such as the security of people, property right, and the government controls. Some of the majorly applied laws include the development theory, theory of modernization and growth, dependency and world system theories, and the neoclassical counterrevolution theory.

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The Development Theory

The development theory emerged in the United States in association with their newly formed policy in the early 1940s which focused on shaping the future of their independent state not to fall into the consumerism trap that existed in the Soviet bloc. The approaches given in this theory are concerned with development and governance. The development and growth of a country are directly influenced by governance. The pre-set development goals shape governance. Thus, for a country to involve itself in laws that could govern their finances, there must have been decisions made on whether it should be easier for people to walk away from their obligations such as payments and management of debts. Thus, in such cases, the creditors will only walk into a financial relationship when the legal systems do not make it easier for the debtors to walk away from their obligations. Economic growth requires the country to have legal systems which are not too taxing on the debtors. The legal systems must be developed in consideration of rights of the borrowers as well as the lenders (Png, 2017).

For this reason, it is always complex to come up with sound legal systems to support the existing financial markets. However, the existing development theories equate the development of a country or a region by its economic growth. The theories seem the state as its primary agent and try to explain the role of the state in the development process.

Theory of Modernization and Growth

The modernization and growth theory focuses on the innumerable variables, which include social, economic, political, cultural, gender, environmental, and religious factors. Despite integrating concepts and ideas from various disciplines, the theory is highly influenced by economic growth. The theory outlines the stages through which countries must pass to achieve the desired economic growth. These stages are inclusive of the contracts, as well as the property rights, which need to be predictable and sufficient in any given country to facilitate its growth. In cases of dispute that often arise in contracts and due to intellectual property rights, the individuals in the agreement often need of exhausting the available options before resorting to the legal actions. However, if there is litigation, the independent courts should be tasked with undertaking such issues and see it through to its resolution within the specified periods. For the delivered judgments, there is always a greater need for quick enforcement. Thus, the modernization and growth theory was formulated to shape the development of countries along the capitalist lines that existed (Rostow & Rostow, 1990).

The Dependency and World System Theory

The dependency and world system theory claim that the growth of economies was fueled by their contact with Western Europe and other North American Societies. The theory majors on the importance of economic growth, which is fundamental to every country and the world at large (Shannon, 2018). The growth of the economy directly translates to the increase in the gross domestic product, which influences the national output, national income, and total expenditures. When the economy of a given country grows, the citizens directly benefit through improved living standards and effective service delivery by the government. Countries with are said to have grown economically boast of reduced poverty, reduced unemployment rates, reduced debts, and improved public service.

As per the theory, most countries suffered from slow economic growth due to the nonindustrialization and the existing structural difference that existed between the countries and the developed Western countries (Shannon, 2018). The existing literature suggests that the slow pace of financial development experienced by these countries resulted due to the restructuring that was done by the developed Western European countries to make them the sources of raw material, cash crops, and foodstuff.

The Neoclassical Counterrevolution Theory

The theory presented dominance over structuralists and other schools of thought that existed in the world. The emergence of this theory coincided with the abandonment of the social democratic and the Keynesian economic theories that were common during World War II. The theory have also been accused by the critics to support them and offer justification for the wave of the market-oriented interventions by the international bodies in charge of monetary control such as the international monetary fund (IMF) and the World Bank which have led to the introduction of the the emergence of more structured products which separates the creditors from the debtors using complex financial infrastructures with the ability to transform as well as repackage the underlying assets (Acs & Szerb, 2007).

References

Acs, Z. J. & Szerb, L. (2007). Entrepreneurship, economic growth, and public policy. Small business economics, 28(2-3), 109-122.

Shannon, T. R. (2018). An introduction to the world-system perspective. Routledge.

Png, I. P. (2017). Law and innovation: evidence from state trade secrets laws. Review of Economics and statistics, 99(1), 167-179.

Rostow, W. W., & Rostow, W. W. (1990). The stages of economic growth: A non-communist manifesto. Cambridge university press.