The rapid growth force of will targeting economics implies a direct growth of the production of goods. When it comes to services, it refers to the expansion of such services, whether there are more services offered or a higher range of customers.
Now, here comes one aspect that most people forget to pay attention to. The economic growth measurement does not count the effects of inflation as well. Therefore, while sometimes it might look like there is economic growth, the harsh effects of inflation can cancel it, without showing any signs at all.
Economic growth is not a general concept. Instead, it is measured over specific periods of time – from one time to another. While it is usually nominal – inflation is overlooked, it can also be real. This is the aspect you are interested in because it also counts inflation.
You get the point – while it may look like there is economic growth if it is nominal, the real economic growth could show no growth at all. Statistics can be manipulated in one way or another to convince the audience of an apparent growth, even if it is not there.
While not always a general rule, economic growth is normally measured based on the GNP – Gross National Product. The GDP – Gross Domestic Product – is also a common measurement, yet other metrics could be used.
Becoming familiar with economic growth
The idea of economic growth refers to the overall value of goods and services within a particular economy. It will create more profit for businesses and a higher quality of life for people, but also add to the government’s funds.Stock prices keep going up too, meaning companies gain more and more capital. They can expand or hire more people, meaning they create even more room for growth. There are more jobs out there, incomes skyrocket, and consumers end up with more money to buy stuff.
These are the main reasons wherefore governments are after a rapid growth force of will. Forcing the economy to grow means people are happier because they do better, meaning governments also gain more money.
Now, from a different point of view, economic growth defines the production growth throughout an economy. Aggregate growth in such production tends to draw in more phenomenons, such as marginal productivity – not always a general rule, though.
However, should marginal productivity increase too, the income will skyrocket. People end up with more money in their pockets, so they spend more money – it is in human nature. As a direct consequence, quality of life goes higher.
Technical explanations could be a bit more difficult to understand if you are not experienced in this field. For example, economics experts will see growth as an extension of four different factors – technology, labor force, human and physical capital.
So, how does this chain work? Easy – you need both quantity and quality when it comes to the working-age people. You need the same for the tools and equipment used in the process, but you also need the right ideas to combine materials, capital, and labor for steady and continuous economic growth.
There are plenty of ideas when it comes to generating economic growth. One thing at a time though… First, physical capital goods within the economy represent a plus and the first step in the process. Second, extra capital to the respective community will add to the productivity in terms of work.
To keep it simple, people need better, newer, and more advanced tools. It is one thing to do manual labor and a different thing to have automated technology and machines doing all the work. As a result, the output over a specific period of time will be higher.
Imagine a hunter, for example. Give them a stick and a rock, and it will take ages to hunt something. Give them a pistol, and they will do it better. Give them a rifle with a scope, and they will end up hunting some game in no time.
It sounds easy, but there are a few things that could make a difference in the process. One of them is gaining capital. You need to save money in one way or another. You may have to sacrifice things to get there – after all, these resources must be freed up, and you must get them from somewhere.
Second, the capital must be the optimal type. The first step is like a business – you invest or put money in if you want to grow. In this case, you may need higher taxes or lower wages to get the capital to move on with the growth.
Then, having capital is not everything. You need the right type and the right amount. You need to invest it in the right direction and in the optimal field if you want workers to benefit from it and increase productivity.
Now, economic growth can also be achieved with technological advancements. There are lots of examples over the past decades, and some of them are part of your everyday life too. Take gasoline fuel, for instance.
Gasoline was not known to have the capability to generate energy. Petroleum was not really a major asset on the market. It was useful, indeed, but not one of the best. These days, it dominates the market. Gasoline is used all over the world, and petroleum-rich countries have boosted their economies overnight.
Gasoline has been intensively researched, so it has become even more productive. Better technology makes it crystal clear – workers will increase productivity with less resources or capital. Again, just like in business, your success rate depends on what you are willing to put in.
Some jurisdictions go in a different direction, though. While technology seems to be extremely beneficial, the truth is you do not always need it. You can also get things done the hard and slow way, yet the economy can still move.
Growing the labor force is one of the things that will push the economy forward without any major investments in technology. The idea is fairly simple to understand. You can do a certain amount of work with ten people and much more with 100 people – common sense.
History shows us that rapid growth force of will is actually possible. Look at the USA throughout the 19th century, though. It was one of the most attractive places back then, and there were lots of opportunities for everyone who wanted a better life.
Much of the growth was not achieved with technology improvements. Instead, the country faced an incredible influx of workers. Immigrants from all over the world got into the USA – many of them from undeveloped countries and willing to work for insignificant amounts of money.
In theory, this is a different way to boost the economy. In practice, there are many similarities between this option and others. For example, the extra labor force also adds to the consumption – wages, food, facilities, and so on. If new workers consume more than what they produce, the process is useless.
Just like capital, the labor force must meet some conditions. Get the wrong types of workers and put them in the wrong place, and the production will not show significant growth. This is why you get people who are trained for what to do.
Look at countries with an old population trying to refresh it. Germany had such an attempt during the refugee crisis from the Middle East, when millions of refugees tried their best to get to Germany. From an economic point of view, most of them had no training or language knowledge.
Germany hoped to refresh its population, which was slowly aging. However, if new potential workers are not trained and cannot integrate into a completely different society, things tend to go wrong – just extra consumers that will not contribute to the local economy.
Moving on, adding to the human capital is another option for rapid growth force of will. What does that mean? No extra money and no extra workers. Instead, you train current workers. They gain new knowledge and skills, so they add to the productivity with their knowledge and experience.
Loads of extra practice and training can and will help. Along with savings and investments, this is probably the most efficient way to add to the economic growth. Take a look at some of the richest and happiest countries out there.
Take Switzerland or Liechtenstein or perhaps Luxembourg, Norway or Denmark. These countries do well with low population, but pretty much everyone growing there is highly qualified and can benefit from superior education.
In this particular situation, the human capital may go in more directions and could also relate to social capital. Looking after people, ensuring safety and high quality of life will make them produce more – it is just how people work.
How economic growth works
Understanding economic growth is one thing. Figuring out how it works is a completely different thing because numbers and statistics can be seen from more directions. Again, while some countries may show constant growth, they might as well be losing, without anyone to know.The gross domestic product – GDP – is probably the most common to measure this growth. It is more popular than other options because it checks everything. Nothing is left behind. The growth is counted, but also the inflation – both the pluses and minuses.
The GDP measures everything in a country. It counts products and services, as well as businesses and what they can produce for sale. It makes no difference where these things are sold or how businesses operate. They can be local or international – no one really cares.
The GDP is focused on the final numbers – the actual production. It does not count parts that might be produced to come up with a product, though. Instead, it is concentrated on the final product. It includes exports because what goes out of the country is made there.
Imports are also removed from economic growth, so numbers cannot be faked by importing high amounts of goods and exporting them at higher prices later on. Most countries out there will measure their growth every three months, but then again, this is not a general rule.
Again, the GDP can be nominal or real. To measure the actual growth, you want the real one because it also counts the inflation. This is one of the biggest factors that can kill an economy, so there is no point in counting the growth without it.
Despite being more popular, the GDP is not a universal rating. Take the World Bank, for instance. It does not make decisions based on the GDP. Instead, it relies on the gross national income. It also includes the money sent back by foreigners.
For instance, there are millions of Polish, Romanian and Bulgarian citizens working in Germany or the UK. They send money back to their families. The same rule applies to Asian people working in Europe to support families back home, not to mention Mexicans working in the USA or Canada.
The World Bank does count this money as well. After all, there are millions going into each country every now and then, especially when it comes to emerging markets. Counting the real GDP will show some good estimates, but this form of income can seriously add to the economy.
Things not included in GDP measurements
Despite seeming quite complete, the GDP is not extremely accurate. For instance, the above-mentioned example can seriously change these numbers. But then, there are many other things that the GDP does not include.Take unpaid services, for instance. They are never counted. Then, how about child care? How about volunteers who never get paid for their work or time? Plus, the less developed a country is, the more intense the illegal black market becomes. None of these things is included in the GDP.
Furthermore, environmental aspects are also left behind, which may not always make sense. Take plastic, for instance. It kills the world, but it is super cheap. Disposal costs are not taken into consideration. Not measuring these costs will impact the final result.
An expert would agree that a particular country can improve the living standards and quality of life by taking environmental costs into consideration too. But at the end of the day, societies measure the things they put a price on only – they measure what they care about and value.
From the same point of view, society will value things it measures only. Take countries like Denmark or Norway. Nordic countries are normally considered rich and happy. Their budgets go in certain directions, though.
The economic growth is based on a top-notch education and even free university access. These countries also provide extraordinary social programs. People are happy, and the standard of living grows too, meaning these factors will provide access to well-trained professionals with lots of motivation.
Now, taxes in such countries are higher than average too. But people make so much money that they can afford them. Furthermore, lacking corruption, their governments use such money to invest even more. People build their own economy, so further investments go into further growth too.
This is a vicious circle that could work wonders if used correctly. Such countries have managed to find the perfect recipe. But then, take countries in the eastern side of Europe, with a high level of corruption. When politicians fail to invest or create infrastructure, things are spiraling downwards.
Then, there are different scenarios somewhere in between. The USA, for example, may not be as bad as some less developed countries in Europe or even Asia. However, it is far from countries in the northern part of Europe too.
The USA puts no value on the actual individual. There are no investments at environmental and societal levels. There is no public healthcare, and you need to pay to be picked up by an ambulance. Different countries do it differently, and unfortunately, some systems are proven to fail, yet they are still used.
What northern European countries do is different from what the USA do. Debt is often used for short-term growth with no long-term consequences by improving military and consumer spending. Such activities are counted in the GDP, hence their popularity.
Understanding the different phases of economic growth
There are more phases a country goes through in order to determine economic growth. Similarly, a negative growth or a loss is also expanded over more stages and less likely to occur overnight – unless a sudden shock occurs, such as a war.The economic growth is always kept an eye on because experts need to be aware of the business cycle of a particular economy. The actual expansion is probably the most expected phase in the process, as well as the most prolific one.
This phase ensures steady and consistent growth of the economy. It grows in a healthy manner, making room for further growth as well. However, no matter how exciting it seems, too much growth is not necessarily a good thing.
Just like in real life – too much work will lead to exhaustion or burnout. Working on a machine for too long will cause it to fail. When it comes to economies, too much growth means the economy is likely to overheat at some point.
Overheating means there will be a bubble – most common, an asset bubble. Take the financial crisis of 2008, for example. While it killed the world in 2008, the truth is it began around 2005 and 2006, yet it was not that obvious.
The bubble occurs when there is too much money around but not as many goods. Basically, there is plenty of money chasing goods, but those goods or services are limited. This is when inflation becomes part of the game.
Although many economies aim to go this way, the truth is most of them go down once they get up there. It is not a sustainable phase. In fact, experts claim this is the peak phase in the cycle of an economy. From that point on, it starts going down.
Then, whether sooner or later, the economic growth will slowly dissipate. The same rule applies to those with blind confidence in it. Life simply becomes harder for the average individual, without being able to tell why.
The economy starts contrasting because people want to get rid of things. At this point, there are lots of sellers on the market, but not enough buyers. Based on governmental decisions, this phase could be temporary and less likely to affect the economy.
However, some governments are better than others. If the phase or cycle keeps going, recession will inevitably kick in. Things could get even worse – if the recession lasts for ten years, it is referred to as an economic depression.
While no one knows if such things have occurred before, the only recorded case was in 1929 – the Great Depression. It was the worst economic recession in the industrialized world and lasted until 1939. Millions of investors were wiped out, and jobs vanished overnight.
It is mostly associated with the USA, because the impressive fall in stock prices in the USA is what caused the problem. Just like the financial crisis of 2008, it quickly expanded across the world and became a worldwide problem.
Conclusion
As a short final conclusion, there are more reasons wherefore the economic growth is always monitored. Experts can identify patterns or potential problems at an early stage, but they can also guide investors and relationships in the right direction.The rapid growth force of will can be stimulated in more ways, and while each of them has both advantages and disadvantages, the truth is certain ideas have always been proven to work better in today's society.
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