Economic growth
Economic growth is the increase over time in the quantity of goods and services an economy produces.
Almost everything people care about, health, opportunity, the relief of poverty, rides on a quiet, compounding number: the rate of economic growth.
Economic growth is the increase over time in the quantity of goods and services an economy produces, usually measured as the rise in real gross domestic product. Sustained over decades, it is the single most powerful force shaping human living standards.
The tyranny of compounding
Growth matters out of all proportion to the modest annual percentages it is reported in, because it compounds. An economy growing at one per cent a year takes about seventy years to double; one growing at three per cent doubles in roughly twenty-four. Over a lifetime, small differences in the growth rate produce enormous differences in prosperity. This is why economists obsess over fractions of a percentage point that seem trivial in any single year.
Where growth comes from
In the long run, growth comes from two broad sources: accumulating more inputs, labour and capital, and using them more productively. Adding inputs eventually runs into diminishing returns, so sustained growth depends largely on rising productivity, which in turn flows from technology, knowledge, better institutions, and improved ways of organising work. The part of growth not explained by more inputs, attributed to productivity, is where the lasting gains live.
The qualifications
Growth is indispensable but not the whole story. It says nothing about distribution, so an economy can grow while many people do not benefit. It can come at environmental cost. And gross domestic product, the usual measure, misses much that matters and counts some things it should not. None of this means growth is unimportant, only that it is a means, the expansion of what a society can afford, rather than an end in itself.
Economic growth is the closest thing economics has to a master variable, because so much else depends on it. Understanding what raises it, and what stalls it, is among the most consequential questions in the discipline, and the compounding mathematics is what makes the question matter so much.