Why are economic growth rates important
According to the commonly used definition, one speaks of economic growth when the amount of goods and services produced, more precisely the "real gross domestic product" (GDP), increases. The growth rate measures the percentage increase in real GDP from year to year.
In principle, economic growth can come about in two ways: on the one hand, through improved capacity utilization, and, on the other hand, through an expansion of production capacities, e.g. by purchasing new machines. The growth per capita of the population is an important measure of the supply of goods and services. Because if population growth is greater than economic growth, then GDP per inhabitant falls - so prosperity decreases.
Technical progress is one of the determining factors of economic growth. But investments in physical capital and in the "heads" (human capital) as well as the infrastructure determine the growth rate of an economy. More recent approaches also underline the importance of political stability and the institutional framework, i.e. regulatory policy, for growth. These factors and, above all, the rapid progress in information and communication technologies are also considered to be the main driving forces behind the so-called new economy.
Economic growth is considered to be one of the main goals of government economic policy almost everywhere in the world. Because growth, it is argued, increases the population's standard of living, creates jobs, can help to solve social conflicts better, facilitates structural change and ultimately also makes it possible to invest more money in tasks such as environmental protection and development aid.
However, there are also skeptics: Your criticism of growth in the industrialized countries assumes that the material standard of living in these countries is already sufficient. The production and consumption of a constantly growing amount of goods therefore cause ever greater environmental pollution and thus scarce resources. As a further argument against economic growth in the industrialized countries, the critics cite that due to the high labor productivity, full employment can no longer be achieved through growth anyway.
This criticism gave rise to the demand for qualitative growth: Growth should therefore first and foremost be environmentally friendly and conserve resources. Technical progress, such as microelectronics, should ensure that the value of goods increases through higher quality - and not through the use of more material. As far as the economical use of resources is concerned, however, the critics run open doors, because the resource intensity of macroeconomic production and growth has been declining for decades. (Gg)
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