Why should all economies grow

First Overall growth can have two causes: increasing use of production factors such as labor, capital, energy, etc. and increasing efficiency. The main driver of efficiency is technical progress. This does not arise in a single country, but through countless innovations around the world. That is why countries will only have no long-term growth if their economies cannot take advantage of global technical progress and the use of production factors decreases, be it because of the wrong incentives or because their population is shrinking.

 

Secondly Today growth is mostly measured by the change in gross domestic product. Put simply, the nominal gross domestic product measures the total value of the goods and services produced, i.e. prices times quantities. Nominal growth thus arises because quantities and prices change. But thanks to technical progress, the quality of the products is also changing. Anyone interested in real gross domestic product and growth must therefore remove the pure price increases from the nominal gross domestic product and factor in the quality increases. That is exactly what the statistical offices do. In this way, thanks to technological progress, nominal shrinkage due to cheaper and better goods becomes real growth.

Third Finally, a distinction has to be made between overall and per capita growth in the economy. While the overall growth due to population growth naturally leads to more resource consumption and environmental pollution, per capita growth is very well compatible with constant or falling resource consumption. The economic output per capita is almost exclusively relevant for the well-being of the residents. If the entire economic output were important for the inhabitants, the inhabitants in large countries would have to be systematically happier than in small ones. But there is no evidence for this. If so, the opposite is true. But things look different for some politicians. You benefit from population and overall growth. More residents means more tax revenue, more government spending and more influence and importance of politicians. The same applies to the managers of umbrella organizations and companies protected from new competitors. For them, more residents means more members, customers, sales, profits and bonuses. In unprotected industries, on the other hand, the number of providers increases with the population, so that the sales etc. per provider remain constant.

 

Thus Income per capita growth is not bad; it is good and natural. But unfortunately there are many countries where governments, out of self-interest or inability, are hindering good, resource-saving per capita growth and relying on poor, resource-intensive overall growth.

 

question Helmut Zander, Professor of Comparative Religious History and Interreligious Dialogue
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expert Reiner Eichenberger is Professor of Theory of Financial and Economic Policy. In his studies, Reiner Eichenberger analyzes political institutions and combines economic with psychological approaches.
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