Financial and Social Growth Support Each other

Asia is a hotspot of growth and researchers are trying to figure out how this growth was realized. The researchers Pradhan, et. al (2013), reviewed 15 Asian countries from 1961 to 2011 to determine the causal nexus between financial development, social development and economic growth.  They hoped to understand how these factors work together in terms of fostering growth within their target countries. 

Financial services offer help in terms of moving capital to growth markets. As countries growth they continually seek higher levels of outside resources to perpetuate this growth. Financial institutions help in transferring wealth from other locations into faster growth markets that can realize greater profit.  Financial institutions help in the process of financial transfers. 

These financial services also create opportunities for financing, investing in the form of stocks, and the secure holding of money. A well-established financial market maintains a level of operational trust that helps in fostering growth. Services should encourage investment opportunities within the economic market by providing a safe and secure method of transfer. 

Social growth is a concept the entails ensuring that the social environment grows with the financial and economic environments. Social growth would include things like health and education. To perpetuate this growth would require basic economic assumptions that if a person is of good health and education he/she will be able to earn a high salary. Without this assumption, people within this environment do not have an incentive to improve themselves. 

The authors found that economic development relies on social development. The economic elements must find value in improving themselves within the system and there must be resources available for them to invent and develop their markets for their own self-interest. Policy makers should focus on financial development and social development. Some countries developed their financial services first while others developed their social environments first leading to support for both demand following and supply leading hypothesis. 

Comment: The authors were not able to clearly differentiate between the chicken and egg concepts of financial versus social growth. The study seems to lend support to the idea that any one of these may lead to national growth. In some cases, improvements in financial services came first and in other cases social development came first. Decision makers may be wise to consider that both financial and social growth is two sides of the same coin and should be fostered together. 

Pradham, R. et. al. (2013). Financial development, social development, and economic growth: the causal nexus in Asia. Decision, 40.

Book Review: The New Middle Class by Steve Gunderson

The New Middle Class Creating Wealth, Wages and Opportunity in the 21^st Century by Steve Gunderson delves into the problems faced by middle class Americans. He expresses concern over the mismatch of American values, education, economic policy and American competitiveness. The middle class is slipping away and policy makers should consider new ways of encouraging a 4-5% growth rate and higher levels of educational attainment to maintain prosperity. 

National development should be based on those values that made America great. It is the desire to continue to move up the economic ranks while not ignoring wider responsibilities. Yet without improving upon the education system the grasps of middle class are sifting through the hands of those who desire it the most. The system needs to change and improve if the U.S. will maintain its competitive stance. 

The far majority of jobs today (85%) need some secondary education beyond high school.   The path to maintaining the middle class is through education. It is a process of learning the skills, trades, theories, processes, technology, and values that will help individual families grow so that the nation may continue to lead. The quality of education, way in which government views education and economic policies should be reviewed. 

Students will need to continue to learn throughout their lives and become the life-long learner. As the environment changes they will need to ensure that their skills are updated to match current needs. To graduate and never update one’s understandings doesn’t fulfill either individual or national needs. Those with less than a high school education earned approximately $21K per year while those with a bachelor’s degree earned approximately $58K per year creating a wide disparity. Income and life-long learning go together.

He provides the following strategies:

Strategy 1: Create a system for lifelong learning by engaging public-sector-private-sector partnerships.

Strategy 2: Create a growth economy in the U.S., enabling most Americans to work, succeed, and build a future.

Strategy 3: Create a new era of income security for individuals and families. 

Steven Gunderson was raised in rural Wisconsin and made his way into both Wisconsin and national politics.  He spent eight years in the house and was appointed to the White House Fellows program in 2010. The White House Fellows program was developed by President Johnson in 1964 and outlined its objective as, "to give the Fellows first hand, high-level experience with the workings of the federal government and to increase their sense of participation in national affairs."  He is currently the President of and CEO of the  Association of Private Sector Colleges and Universities.  You may learn more about him at Career.org