Need for Economic Expansion

Abstract

The cost of social welfare has escalated to an extent that most governments are confronted with mounting difficulties in their endeavour to meet these obligations out of tax revenue or by borrowing, with the latter constituting a burden for future generations through interest payments due on outstanding government debt. The reasons for the rising costs of social welfare are manifold. In the health sector, for instance, medical advances have been considerable and the results should be at the disposal of those in need. Heavy medical expenses are also incurred by the extension of life, which simultaneously affects aggregate pension payments. All this coincides with governments and monetary authorities of the Western world having shifted their main economic objective towards fighting inflation; but in order to achieve the low inflation rate we now have, governments had to depress their respective economies. The price to be paid for this shift in policy takes the form of a low rate of economic growth with an accompanying increase in unemployment. Thus more unemployment benefits have to be paid, which substantially increases the total cost of social welfare.