Discuss how high rates of saving and investment is identifying characteristic of modern economic growth according to kuznets and refference
Kuznets, a renowned economist, argued that high rates of saving and investment are an identifying characteristic of modern economic growth. According to him, saving refers to the act of abstaining from current consumption in order to allocate resources to future production. Investment, on the other hand, involves the allocation of saved resources to acquire capital goods, such as machinery, buildings, or infrastructure, which enhance future production capacity.
Kuznets believed that modern economic growth is characterized by increasing levels of productivity, output, and living standards. Such growth can only be sustained if there are high rates of saving and investment within an economy. Here are a few reasons supporting Kuznets' argument:
1. Capital accumulation: Saving and investment play a crucial role in generating capital accumulation, which leads to increased production capacity and productivity. By saving a portion of their income and investing it in productive assets, individuals and businesses contribute to the expansion of the capital stock. This, in turn, helps drive economic growth, as more capital allows for increased production and innovation.
2. Technological progress: Saving and investment are closely linked to technological progress. Investment in research and development, as well as in new technologies and infrastructure, facilitates innovation and boosts productivity. Higher saving rates provide the necessary funds for such investments, leading to technological advancements that contribute to economic growth.
3. Job creation: Increased investment resulting from high rates of saving leads to job creation. Investment in capital goods helps create employment opportunities, as businesses expand their production capacity and require a larger workforce. This not only reduces unemployment but also contributes to increasing income levels and overall economic growth.
4. Infrastructure development: Adequate saving and investment are essential for developing and maintaining vital infrastructure, such as roads, bridges, power grids, and telecommunications networks. Infrastructure investments enhance productivity, facilitate trade, and attract further investment. This leads to increased economic activity and growth.
A reference for Kuznets' ideas about high rates of saving and investment as identifying characteristics of modern economic growth can be found in his seminal work "Modern Economic Growth: Rate, Structure, and Spread."