Extensive and intensive factors of economic growth - what is the difference

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:46

The economy of any state in the modern world must necessarily take into account the intensive and extensive factors of economic growth.

In this article we will try to analyze the impact of these factors on the development of the country as a whole.

About the main thing

Economic growth is the main goal of government macroeconomics. It is achieved by exceeding the growth of the national product over the quantitative indicators of the constantly growing needs of the population.

Growth of the economy provides for several points that affect its dynamics. But the most important of them: extensive and intensive factors. They are characteristic of two types of states - developing and developed. There are also intermediate states.

History has shown that during the transition to the market, the influence of extensive and intensive factors oncompetitiveness.

Obviously, the economy of any country solves the same problems. They include meeting the growing needs of the population for goods and services, solving emerging problems (social, economic, environmental), optimizing the use of natural resources, and many others.

Extensive factor

It is also called "development in breadth". Such an economy implies the conduct of the economy in the country, in which the resources available are increasingly used. The concept of such "reserves" includes both a variety of minerals and natural resources (plants and animals). Also human (labor) are not excluded.

With extensive economic growth, the value of gross domestic product (GDP) increases due to an increase in the use of the above benefits, as well as the development of new territories. An increasing amount of natural resources is being drawn into production.

Main extensive factors

This development is progressive only at first glance. This is due to the fact that natural resources themselves are a temporary phenomenon (many of them are exhaustible). The possibility of resuming some of them (soil, natural gas, oil, coal) is very conditional, as it is too long in time as a geological factor.

The principle of "Get more, sow, plow" is typical for countries with a low level of developmenteconomy. An increase in the scale of the use of natural resources is a path to a possible economic crisis in the future.

Let's list the main signs of extensive growth:

• increasing financial investments without changing the way of production activities;
• employing more and more workforce;
• constant increase in the volume of raw materials, construction materials, and natural fuels used.

Intensive factor

Extensive and intensive factors have the same goal - economic growth, but the way to achieve it is very different. It is the opposite of the previous one in its principled approach to managing the economy in the country. In simple terms, it sounds like this: "Sow less, but harvest more." This statement generally characterizes the style of economic development.

With an intensive way of doing business in the state, the resources of science are used: the latest production technologies, discoveries in the field of chemistry, physics and related sciences. That is, the phenomenon of scientific and technological progress should occur in parallel with the economic recovery.

Main intensive factors

When the goal is growth, the use of outdated management methods significantly hinders the development of the state. The growing needs of the population cannot be met only by increasing the exploitation of natural raw materials and labor.

So extensive and intensivefactors contradict each other. We list the main factors of the "improved" way of farming:

• introducing the latest technologies and devices into production, updating the existing stock;
• training to improve the skills of workers;
• rational use and optimization of funds (both fixed and circulating);
• improving the organization of work, increasing its efficiency.

Intensive economy is distinguished by the improvement of the quality of management (systems), as well as the improvement of technological processes, the use of innovative methods. Thus, by modernizing production cycles, it is possible to achieve an increase in the level of gross product.

Human factor

The most important thing in any economy, no doubt, is the standard of living of the population. Be that as it may, if it is low, then there can be no talk of any economic growth in the country.

It should be noted that intensive and extensive factors of economic growth are based on human capital. But the approach is fundamentally different in both cases.

The increase in the number of workers in the enterprise may lead to a decrease in the level of production due to an overabundance of labor resources. In this way, the "profitability" of this "resource investment" is reduced. Moreover, the average indicator of labor efficiency does not fundamentally change. This is indicative of an extensive form of development.economy.

Standard of living

"The quality of the population" has always been one of the basic parameters of the state's economy. It includes life expectancy, its level, as well as GDP per capita. But this is not enough, it also includes the level of education, medical and social services.

The concept of "quality of human capital" was introduced by an intensive way of managing. It includes all kinds of actions aimed at training: training narrow specialists, creating new technological training courses, and improving the skills of employees.

These measures make it possible to reduce the amount of labor force, and, on the contrary, increase the effect of production. This simplifies the introduction of new technologies and their development. The efficiency of production increases both in general and in each specific case.

Extensive and intensive factors of labor productivity are also determined by the expediency of the activity of control systems. In the first case, an example could be the centralized management of the economy (in the USSR), planning and division into stages.

In the second case, the creation of centers and institutions, the training of management personnel are at the forefront of economic growth and progress in general. This is a guarantee of progress and long-term prospects for the growth of industrial production in the country.

Mixed type

BIn the modern world, there are not only extensive and intensive factors of development. In some countries of the world, there is another type of economy - mixed.

This option combines the above two types, being intermediate or "transitional". An example is the agricultural production of a typically "agrarian" state. When the rate of development of new lands and the attraction of labor force stops or significantly decreases.

The technical base is being replaced, the use of fertilizers, the use of the latest methods of cultivating land (irrigation, melioration), reducing losses during transportation, waste-free agricultural production and the food industry.

Extensive and intensive factors of enterprise development can also be combined, this can be observed during the transition to a market type of economy. Techniques and technologies are being introduced, the style of planning and logistics are changing. The quality indicator of the labor force is also increasing (the qualification of the working personnel is increasing).

Conclusion

It is important to note that economic growth can be both sustainable and unsustainable. Specialists constantly analyze the influence of intensive, extensive factors on the development of states.

Scientists have developed a coefficient that is calculated using a special formula and includes many parameters. This includes: profitability of production, capital turnover with average revenue, liquidity ratio, financial dependence and more.

It is clear that it is necessary to strive forsustainable growth of the state economy. Only in this case, many issues related to the needs of the population, as well as social and economic issues (within the country and at the interstate level) can be resolved.