Economic growth is the rise in the monetary value of goods and services produced in an economy over time. It is usually measured as an increase in the gross domestic product (GDP) or Purchasing Power Parity GDP. It is an important concept for economists and people concerned with the overall welfare of a population.
In a society without economic growth, it is impossible for anyone to become richer without someone else becoming poorer. In a society that achieves economic growth, however, it becomes possible to grow as a whole while everyone’s income remains the same. This increase in income can be the result of higher productivity, better technology, labor reallocation from agriculture, increased capital investment, or a combination of these.
When used with caution, a well-chosen measure of economic growth is a useful indicator of a country’s prosperity. In contrast, other measures that are based on consumption, GDP, or purchasing power parity tend to be misleading and skewed by a narrow interpretation of what constitutes a good life. For example, consumption-based metrics tend to exclude exchanges that do not revolve around cash—such as volunteerism or political participation.
Moreover, a reductionist interpretation of growth neglects the fact that it is not simply an objective function of production; it is also a function of human choices and values. For example, a high-growth society may prioritize wealth and consumerism over environmental protection or educational investments. Similarly, the dietary habits associated with high-income growth can lead to obesity, diabetes, heart disease, and other problems that diminish quality of life.
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