Why might high GDP growth not always be beneficial?

High GDP growth may not always be beneficial due to potential inflation, inequality, and environmental degradation.

High GDP growth can lead to inflation if the growth is too rapid. When the economy grows too quickly, demand can outpace supply, leading to price increases. This is known as demand-pull inflation. If left unchecked, this can lead to a decrease in the purchasing power of money, which can negatively impact the standard of living, particularly for those on fixed incomes. Moreover, high inflation can create uncertainty in the economy, which can discourage investment and saving.

Another potential downside of high GDP growth is increased income inequality. This can occur if the benefits of growth are not evenly distributed across society. For example, if the growth is driven by sectors of the economy that are capital-intensive, such as technology or finance, then those with the necessary skills or capital to participate in these sectors will benefit disproportionately. This can lead to a widening wealth gap, which can in turn lead to social and political instability.

High GDP growth can also lead to environmental degradation. Economic growth often involves increased production and consumption, which can put pressure on the environment. This can lead to deforestation, pollution, and loss of biodiversity, among other issues. While some argue that economic growth can provide the resources necessary to address these issues, it is clear that unchecked growth can lead to significant environmental harm.

Finally, high GDP growth can lead to a misallocation of resources. In the pursuit of growth, resources may be diverted away from sectors that are not growing as quickly but are still important for the overall well-being of society. For example, resources may be diverted away from public services like education and healthcare, which can have long-term negative impacts.

In conclusion, while high GDP growth can bring many benefits, it is not without its potential downsides. It is therefore important for policymakers to manage growth in a way that maximises its benefits while minimising its potential harms.