Unemployment low economic growth and boosting the

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unemployment, low economic growth, and boosting the international trade (Spremo and Mićić 2016). The Chinese government decided to complement the private sector with an export-based economic model. Hence, trade policies were friendly to international investors and the country provided a cheap and reliable labor force. By 2005, China was featured in the Global Economic Forum, as one of the developing countries with the highest economic growth rate. Therefore, Spremo and Mićić’s research concurs with the Chinese evolution case, which makes it relevant and legitimate.
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ROLE OF SMES IN PROMOTING SOCIAL ECONOMIC GROWTH 5 According to Tihomir (2017), a majority of developed economies rely on SMEs output and advancement to sustain their economic superiority and sustainability. The research terms SMEs and entrepreneurship as the key source of economic dynamism, flexibility, and high innovation rates around the world. In this case, the developed economies promote the private sector because apart from maximizing the GDP volume, they enable the countries to endorse high innovation and creativity rates. Given that innovativeness and creativity are among the vital factors used by enterprises to gain a high competitive advantage, products produced by a majority of developed countries enjoy a high bargaining power in the global economy. The high bargaining power aids in securing a favorable balance of trade. On the other hand, developing countries such as Cuba, which operate under a bureaucratic system and majors in the public sector, experiences a high trade deficit. The unemployment rates in Cuba are alarmingly high, which increases the poverty rates. In this case, failing to invest in SMEs models subjects an economy to a growth crisis. A research conducted by Ramki elaborates that the overall industrial economy of India relies on the SME sector to increase its economic productivity. The government supports the entrepreneurial culture by setting friendly trade policies. In this case, more citizens are sensitized to save and invest in small businesses. The national financial system also sets relatively low tax rates, which, in turn, minimizes the operational costs of running a business. As a result, both local and international investors are enticed to start-up small and medium-sized companies. In the long-term, the country has managed to increase its GDP growth rate by 7% in the last 5 years. The implication of SMEs in Enhancing Equality in Income Distribution Income distribution disparity is one of the main pressing factors that limit economic growth, especially in developing countries. Although scholars such as Adam Smith argue that free trade and social enlightenment can independently curb the income inequality constraint, the
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ROLE OF SMES IN PROMOTING SOCIAL ECONOMIC GROWTH 6 poverty levels have increased consistently even after the advancement in civilization. Thus, education and incorporation of free markets are not responsive and sustainable responses to the income inequality problem. However, some economies, such as India, China, and Dubai are
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