Factors of Economic Growth

It is a well-known fact that economic growth depends on certain factors but before delving into them, it is pertinent to understand what economic growth means and why is it important for countries to maintain it. It is the improvement or increase in the inflation-adjusted market value of all the goods and services produced by a nation over a period of time. It is measured as the percentage rate of increase in the real Gross Domestic Product or the real GDP. Thus, basically, it is a process of augmenting a country’s real GDP and an increase in its value suggests the production of more goods and services so that people can afford to consume more.

Hence, economic growth is important as it includes the analysis of variables that lead to a sustained increase in production capacity. While looking at the world economic growth from 1950 onwards, it can be seen that while the average worldwide income increased by 4.4 times, the global population also increased by three times which means that on average, everyone in the world would have been three times poorer compared to that in 1950. A three-fold population increase multiplied by a 4.4 times increase in average prosperity points to the fact that the global economy has increased by 13 times since 1950. Thus, economic growth makes everyone better off even when the number of people who need attention within an economy increases.

However, it is important to highlight the economic growth factors and they primarily include natural resources, human resources, technology, deregulation and infrastructure. Countries that are rich in natural resources like coal, gas, oil, etc. can prosper more quickly than those that do not have them. However, nations that lack natural resources can make it up with high-quality human resources as Singapore can be cited as a prime example. Technology and infrastructure bring in newer ideas and create more jobs and opportunities while deregulation helps trading easier for everyone.

Thus, it is evident that when these five factors are met successfully, it spurs economic activity tremendously within a nation. Among the best economic growth examples, gasoline can certainly be mentioned because before the discovery of the energy-generating power of the fuel, its economic value was relatively low while contemporarily, it has become the best method of transporting goods.