term paper on economic growth

What is economic growth? And why is it so important?

The goods and services that we all need are not just there – they need to be produced – and growth means that their quality and quantity increase..

Good health, a place to live, access to education, nutrition, social connections, respect, peace, human rights, a healthy environment, and happiness. These are just some of the many aspects we care about in our lives.

At the heart of many of these aspects that we care about are needs for which we require particular goods and services . Think of those that are needed for the goals on the list above – the health services from nurses and doctors, the home you live in, or the teachers who provide education.

Poverty, prosperity, and growth are often measured in monetary terms, most commonly as people’s income. But while monetary measures have some important advantages, they have the big disadvantage that they are abstract. In the worst case, monetary measures – like GDP per capita – are so abstract that we forget what they are actually about: people’s access to goods and services.

The point of this text is to show why economic growth is important and how the abstract monetary measures tell us about the reality of people’s material living conditions around the world and throughout history:

• In the first part, I want to explain what economic growth is and why it is so difficult to measure.
• In the second part, I will discuss the advantages and disadvantages of several measures of growth, and you will find the latest data on several of these measures so that we can see what they tell us about how people’s material living conditions have changed.

What are these goods and services that I’m talking about?

Have a look around yourself right now. Many of the things you see are products that were produced by someone so that you can use them: the trousers you are wearing, the device you are reading this on, the electricity that powers it, the furniture around you, the toilet that is nearby, the sewage system it is connected to, the bus or car or bicycle you took to get where you are, the food you had this morning, the medications you will receive when you get sick, every window in your home, every shirt in your wardrobe, and every book on your shelf.

At some point in the past, many of these products were not available. The majority did not have access to the most basic goods and services they needed. A recent study on the history of global poverty estimates that just two centuries ago, roughly three-quarters of the world "could not afford a tiny space to live, food that would not induce malnutrition, and some minimum heating capacity.” 1

Let’s look at the history of the last item on that list above, books.

A few centuries ago, the only way to produce a book was for a scribe to copy it word-for-word by hand. Book production was a slow process; it took a scribe about eight months of daily work to produce a single copy of the Bible. 2

It was so laborious that only very few books were produced. The chart shows the estimates of historians. 3

But then, in the 15th century, the goldsmith Johannes Gutenberg combined the idea of movable letters with the mechanism that he knew from the wine presses in his hometown. He developed the printing press. Gutenberg developed a new production technology, and it changed things dramatically. Instead of spending months to produce one book, a worker was now able to produce several books a day.

As the printing press spread across Europe, book production soared. Books, which were previously only available to a tiny elite, became available to more and more people.

This is one example of how growth is possible and what economic growth is : an increase in the production of goods and services that people produce for each other.

A list of goods and services that people produce for each other

Before we get to a more detailed definition of economic growth, it’s helpful to remind ourselves of the astonishingly wide range of goods and services that people produce. I think this is helpful because measures of economic output can easily become abstract. This abstraction means we easily lose the mental connection to the goods and services such measures actually talk about.

This list of goods and services isn’t meant as a definitive list, but it helped me to think about the relevance of poverty and growth: 4

At home: Light in your home at night; the sewage system; a shower; vacuum cleaner; fridge; heating; air conditioning; electricity; windows; a toilet – even a flush toilet; soap; a balcony or a garden; running water; warm water; cutlery and dishes; a hut – or even a warm apartment or house; an oven; sewing machine; a stove (that doesn’t poison you ); carpet; toilet paper; trash bags; music recordings or even online streaming of the world’s music and film; garbage collection; radio; television; a washing machine; 5 furniture; telephone; a comfortable bed, and a room for one’s own.

Food: The most fundamental need is to have enough food. For much of human history, a large share of people suffered from hunger , and millions still do .

But we also need to have a richer and more varied diet to get all of the nutrients we need. Unfortunately, billions still suffer from micronutrient deficiency .

Also, think of clean drinking water; reliable markets and stores with a wide range of available goods; food that rarely poisons you (pasteurized milk, for example); spices; tea and coffee; kitchen utensils and practical ingredients (from a bag of flour to canned soups or a yogurt); chocolate and sweets; fresh fruit and vegetables; bread; take-away food or the possibility to go to a restaurant; ways to protect your food from spoiling (from the cold chain that delivers the goods to the cellophane to wrap it with); wine or beer; fertilizer ( very important); and tractors to work the fields.

Knowledge: Education from primary up to university level; books; data that allows us to understand the world around us; newspapers; vocational training; kindergartens; and scientific knowledge to understand ourselves and the world around us.

Infrastructure: Public transportation with buses, subways, and trains; roads; paved roads; airplanes; bridges; financial services (including bank accounts, ATMs, and credit cards); cities; a network of competent workers that can help you to fix problems; postal services (that delivers fast); national parks; street cleaning; public swimming pools (even private pools); firefighters; parks; online shopping; weather forecasts; and a waste management system.

Tools and technologies: Pencils, ballpoint pens, and paper; lawnmowers; cars; car mechanics; bicycles; power tools like drills (even battery-powered ones); a watch; computers and laptops; smartphones (with GPS and a good camera); being able to stay in touch with distant friends or family members (or even visiting them); GPS; batteries; telephones and mobiles; video calls; WiFi; and the internet right here.

Social services: Caretakers for those who are disabled, sick, or elderly; protection from crime; non-profit organizations financed by the public, by donations or by philanthropies; insurance (against many different risks); and a legal system with judges and lawyers that implement the rule of law.

There is also a wide range of transfer payments, which in themselves are not services (they are transfers) but which become more affordable as a society becomes more prosperous: sick leave and disability benefits; unemployment benefits; and being able to help others with a regular donation of some of your income to an effective charity . 6

Life and free time : tents; travel and holidays; surfboards; skis; board games; hotels; playgrounds; children’s toys; courses to learn hobbies (from painting to musical instruments or courses on the environment around us); a football; pets; the cinema, theater or a music concert; clothes (even comfortable and good-looking ones that keep you warm and protect you from the rain); shoes (even shoes for different purposes); shoe repair; the contraceptive pill and the ability to choose if and when to have children; sports classes from rock climbing to pilates and yoga; cigarettes (not all goods that people produce for each other are good for them); 7 a musical instrument; a camera; and parties to celebrate life.

Health and staying well: Dentists; antibiotics; surgeries; anesthesia; mental health care from psychologists and psychiatrists; vaccines; public sewage; a haircut; a massage; midwives; ambulances; modern medicine; band-aids; pharmaceutical drugs; sanitary pads; toothbrushes; dental floss (some do floss); disinfectants; glasses; sunglasses; contact lenses; hearing aids; and hospitals – including very well-equipped, modern hospitals that offer CT scans, which include intensive care units and allow heart or brain surgery or organ transplants.

Specific needs and wishes: Most of the products listed above are generally helpful to people. But often, the goods and services that are most important to one individual are very specific.

As I’m writing this, I have a big cast on my left leg after I broke it. These days, I depend on products that I had no use for just three weeks ago. To move around, I need two long crutches, and to prevent thrombosis, I need to inject a blood thinner every day. After I broke my leg, I needed the service of nurses and doctors. They had to rely on a range of medical equipment, such as X-ray machines. To get back on my feet, I might need the service of physiotherapists.

We all have very specific needs or wishes for particular goods and services. Some needs arise from bad luck, like an injury. Others are due to a new phase in life – think of the specific goods and services you need when you have a baby or when you take care of an elderly person. And yet others are due to specific interests – think of the needs of a fisherman, or a pianist, or a painter.

All of these goods and services do not just magically appear. They need to be produced. At some point in the past, the production of most of them was zero, and even the most essential ones were extremely scarce. So, if you want to know what economic growth means for your life, look at the list above.

What is economic growth?

So, how can we define what economic growth is?

A definition that can be found in so many publications that I don’t know which one to quote is that economic growth is “an increase in the amount of goods and services produced per head of the population over a period of time.”

The definition in the Oxford Dictionary is almost identical: “Economic growth is the increase in the production of goods and services per head of population over a stated period of time”. And the definition in the Cambridge Dictionary is similar. It defines growth as “an increase in the economy of a country or an area, especially of the value of goods and services the country or area produces.”

In the following footnote, you find more definitions. Bringing these definitions together and taking into account the economic literature more broadly, I suggest the following definition: Economic growth is an increase in the quantity and quality of the economic goods and services that a society produces.

I prefer a definition that is slightly longer than most others. If you want a shorter definition, you can speak of ‘products’ rather than ‘goods and services’, and you can speak of ‘value’ rather than mentioning both the quantity and quality aspects separately.

The most important change in quantity is from zero to one when a new product becomes available. Many of the most important changes in history became possible when new goods and services were developed; think of antibiotics, vaccines, computers, or the telephone.

You find more thoughts on the definition of growth in the footnote. 8

What are economic goods and services?

Many definitions of economic growth simply speak of the production of ‘goods and services’ collectively. This sidesteps a key difficulty in its definition and measurement. Economic growth is not concerned with all goods and services but with a subset of them: economic goods and services.

In everything we do – even in our most mundane activities – we continuously ‘produce’ goods and services in some form. Early in the morning, once we’ve brushed our teeth and made ourselves toast, we have already produced one service and one good. Should we count the tooth-brushing and the toast-making towards the economic production of the country we live in? The question of where to draw the line isn’t easy to answer. But we have to draw the line somewhere. If we don’t, we end up with a concept of production that is so broad that it becomes meaningless; we’d produce a service with every breath we take and every time we scratch our nose.

The line that we have to draw to define the economic goods and services is called the ‘production boundary’. The sketch illustrates the idea. The production boundary defines those goods and services that we consider when we speak about economic growth.

For a huge number of goods or services, there is no question that they are of the ‘economic’ type. But for some of them, it can be complicated to decide on which side of the production boundary they fall. One example is the question of whether the production of illegal goods should be included. Another is whether production within a household should be included – should we consider it as economic production if we grow tomatoes in our backyard and make soup from them? Different authors and different measurement frameworks have given different answers to these questions. 9

There are some characteristics that are helpful in deciding on which side of the boundary a particular product falls. 10 Economic goods and services are those that can be produced and that are scarce in relation to the demand for them. They stand in contrast to free goods, like sunlight, which are abundant, or those many important aspects in our lives that cannot be produced, like friendships. 11 Our everyday language has this right: we don’t refer to the sun or our friendships as a good or service that we ‘produce’.

An economic good or service is provided by people to each other as a solution to a problem they are faced with, and this means that they are considered useful by the person who demands it.

A last characteristic that helps decide whether you are looking at an economic product is “delegability”. An activity is considered to be production in an economic sense if it can be delegated to someone else. This would include many of the goods and services on that long list we considered earlier but would exclude your breathing, for example.

Because economic goods are scarce in relation to the demand for them, human effort is required to produce them. 12 A shorter way of defining growth is, therefore, to say that it is an increase in the production of those products that people produce for each other.

The majority of goods and services on that long list above are uncontroversially of the economic type – everything from the light bulbs and furniture in your home to the roads and bridges that connect your home with the rest of the world. They are scarce in relation to the demand for them and have to be produced by someone; their production is delegable, and they are considered useful by those who want them.

It’s worth recognizing that many of the difficulties in defining the production boundary arise from the effort to make measures of economic production as comparable as possible.

To give just one concrete example of the type of considerations that make the discussion about specific definitions so difficult, let’s look at how the production boundary is drawn in the housing sector.

Imagine two countries that are identical except for one aspect: home ownership. In Country A, everyone rents their homes, and the total sum of annual rent amounts to €2 billion per year. In Country B, everyone owns their own home, and no one pays rent. To provide housing is certainly an economic service, but if we only counted monetary transactions, then we would get the false impression that the value of goods and services in Country A is €2 billion higher than in Country B. To avoid such misjudgment, the production boundary includes the housing services that are provided without any monetary transactions. In National Accounts, statisticians take into account the “imputed rental value of owner-occupied housing” – those households who own their home get assigned an imputed rental value. In the imagined scenario, these imputed rents would amount to €2 billion in Country B so that the prosperity of people in these two countries would be judged to be identical.

It is the case more broadly that National Account figures (like GDP) do include important non-market goods and services that are not included in household survey measures of people’s income. GDP does not only include the housing services by owner-occupied housing but also the provision of most goods and services that are provided by the government or nonprofit institutions.

How can we measure economic growth?

Many discussions about economic growth are extraordinarily confusing. People often talk past one another.

I believe the key reason for this is that the discussion of what economic growth is gets muddled up with how it is measured .

While it is straightforward enough to define what growth is, measuring growth is very, very difficult.

In the worst cases, measures of growth are mixed up with a definition of growth. Growth is often measured as an increase in income or inflation-adjusted GDP per capita. But these measures are not the definition of it – just like life expectancy is a measure of population health but is certainly not the definition of population health.

To see how difficult it is to measure growth, take a moment to think about how you would measure it. How would you determine whether the quantity and quality of all economic goods and services produced by a society increased or decreased over time?

Finding a measure means that you have to find a way to express a huge amount of relevant information in a single metric. As the sketch shows, you have to first measure the quantity and quality of all the many, many goods and services that get produced and then find a way to aggregate all of these measurements into one summarizing metric. No matter what measure you propose for such a difficult task, there will always be problems and shortcomings in any proposal you might make.

In the following section, I will show four possible ways of measuring growth and present some data for each of them to see how they can inform us about the history of material living conditions.

Measuring economic growth by tracking access to particular goods and services

One possible way to measure growth is to make a list of some specific products that people want and to see what share of the population has access to them.

We do this very often at Our World in Data . The chart here shows the share of the world population that has access to four basic resources. All of these statistics measure some particular aspect of economic growth.

You can switch this chart to any country in the world via the “Change country” option. You will find that, judged by this metric, some countries achieved rapid growth – like Indonesia – while others only saw very little growth, like Chad.

The advantage of measuring growth in this way is that it is concrete. It makes clear what exactly is growing, and it’s clear which particular goods and services people gain access to.

The downside is that it only captures a small part of economic growth. There are many other goods and services that people want in addition to water, electricity, sanitation, and cooking technology. 13

You could, of course, expand this approach of measuring growth to many more goods and services, but this is usually not done for both practical and ethical considerations:

One practical reason is that a list of all the products that people value would be extremely long. Keeping lists that track people’s access to all products would be a daunting task: hundreds of different toothbrushes, thousands of different dentists, hundreds of thousands of different dishes in different restaurants, and many millions of different books. 14 If you wanted to measure growth across all goods and services in this way, you’d soon employ half the country in the statistical office.

In practice, any attempt to measure growth as access to particular products, therefore, means that you look only at a relatively small number of very particular goods and services that statisticians or economists are interested in. This is problematic for ethical reasons. It should not be up to the statisticians or economists to determine which few products should be considered valuable.

You might have realized this problem already when you read my list at the beginning of this text. You might have disagreed with the things that I put on that list and thought that some other goods and services were missing. This is why it is important to track incomes and not just access to particular goods: measuring people’s income is a way of measuring the options that they have rather than the choices that they make. It respects people’s judgment to decide for themselves what they find most important for their lives.

On our site, you find many more such metrics of growth that capture whether people have access to particular goods and services:

• This chart shows the share of US households having access to specific technologies.
• This chart shows the share that has health insurance.
• This chart shows access to schools.

Measuring economic growth by tracking the ratio between people’s income and the prices of particular goods and services

To measure the options that a person’s income represents, we have to compare their income with the prices of the goods and services that they want. We have to look at the ratio between income and prices.

The chart here does this for one particular product – books – and brings us back to the history of growth in the publishing sector that we started with. 15 Shown is the ratio between the average income that a worker receives and the price of a book. It shows how long the average worker had to work to buy one book. Note that this data is plotted on a logarithmic axis.

Before the invention of the printing press in the 15th century, the price was often as high as several months of work. The fact that books were unaffordable for almost everyone should not be surprising. It corresponds to what we’ve seen earlier that it took a scribe several months to produce a single book.

The chart also shows how this changed when the printing press increased the productivity of publishing. As the labor required to produce a book declined from many months of work to less than a day, the price fell from months of wages to mere hours.

This shows us how an innovation in technology raises productivity and how an increase in production makes it more affordable. How it increases the options that people have.

Global inequality: How do incomes compare in countries around the world?

In the previous section, we measured growth as the ratio between income and the price of one particular good. But of course, we could do the same for all the many goods and services that people want. This ratio – the ratio between the nominal income that people receive and the prices that people have to pay for goods and services – is called ‘real income’ . 16

Real income = Nominal income / price of goods and services

Real income grows when people’s nominal income increases or when the prices of goods and services decrease.

In contrast to many of the other metrics on Our World in Data, a person’s real income does not matter for its own sake but because it is a means to an end. A means to many ends, in fact.

Economic growth – measured as an increase in people’s real income – means that the ratio between people’s income and the prices of what they can buy is increasing: goods and services become more affordable, and people become less poor. It is because a person has more choices as their income grows that economists care so much about these monetary measures of prosperity.

The two most prominent measures of real income are GDP per capita and people’s incomes, as determined through household surveys.

They are shown in this chart.

Before we get back to the question of economic growth, let’s see what these measures of real income tell us about the economic inequality in the world today.

Both measures show that global inequality is very large. In a rich country like Denmark, an average person can purchase goods and services for $54 a day, while the average Ethiopian can only afford goods and services that cost $3 per day.

Both measures of real incomes in this chart are measured in international dollars, which means that they take into account the level of prices in each country (using purchasing power parity conversion factors). This price adjustment is done in such a way that one international-$ is equivalent to the purchasing power of one US-$ in the US . An income of int.-$3 in Ethiopia, for example, means that it allows you to purchase goods and services in Ethiopia that would cost US-$3 in the US . All dollar values in this text are given in international dollars, even though I often shorten it to just the $-sign.

If you are living in a rich country and you want to have a sense of what it means to live in a poor country – where incomes are 20 times lower – you can imagine that the prices for everything around you suddenly increase 20-fold. 17 If all the things you buy suddenly get 20-times more expensive your real income is 20-times lower. A loaf of bread doesn’t cost $2 but $40, a pair of jeans costs $400, and an old car costs $40,000. If you ask yourself how these price increases would change your daily consumption and your day-to-day life, you can get a sense of what it means to live in a poor country.

The two shown measures of real income differ:

• The data on the vertical axis is based on surveys in which researchers go from house to house and ask people about their economic situation. In some countries, people are asked about their income, while in other countries, people are asked about their expenditure – expenditure is income minus savings. In poor countries, these two measures are close to each other since poor people do not have the chance to save much.
• On the other hand, GDP per capita starts at the aggregate level and divides the income of the entire economy by the number of people in that country. GDP per capita is higher than per capita survey income because GDP is a more comprehensive measure of income. As we’ve discussed before, it includes an imputed rental value of owner-occupied housing and other differences, such as government expenditure.

Income as a measure of economic prosperity is much more abstract than the metrics we looked at previously. The comparison of incomes of people around the world in this scatterplot measures options, not choices. It shows us that the economic options for billions of people are very low. The majority of the world lives on very low incomes of less than $20, $10, or even $5 per day. In the next section, we’ll see how poverty has changed over time.

• GDP per capita vs. Daily income of the poorest 10%
• GDP per capita vs. Daily average income

Global poverty and growth: How have incomes changed around the world?

Economic growth, as we said before, is an increase in the production of the quantity and quality of the economic goods and services that a society produces. The total income in a society corresponds to the total sum of goods and services the society produces – everyone’s spending is someone else’s income. This means that the average income corresponds to the level of average production, so that the average income in a society increases when the production of goods and services increases.

Average production = average income

In this final section, let’s see how incomes have changed over time, first as documented in survey incomes and then via GDP per capita.

Measuring economic growth by tracking incomes as reported in household surveys

The chart shows the income of people around the world over time, as reported in household surveys. It shows the share of the world population that lives below different poverty lines: from extremely low poverty lines up to $30 per day, which corresponds to notions of poverty in high-income countries .

Many of the poorest people in the world rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians who produce these figures estimate the monetary value of their home production and add it to their income.

Again, the prices of goods and services are taken into account: these are measures of real incomes. As explained before, incomes are adjusted for price differences between countries, and they are also adjusted for inflation. As a consequence of these two adjustments, incomes are expressed in international dollars in 2017 prices, which means that these income measures express what you would have been able to buy with US dollars in the US in 201 7.

Global economic growth can be seen in this chart as an increasing share of the population living on higher incomes. In 2000 two thirds of the world lived on less than $6.85 per day. In the following 19 years, this share fell by 22 percentage points.

In 2020 and 2021 — during the economic recession that followed the pandemic — the size of the world economy declined, and the share of people in poverty increased . As soon as global data for this period is available, we will update this chart.

The data shows that global poverty has declined, no matter what poverty line you choose. It also shows that the majority of the world still lives on very low incomes. As we’ve seen, we can describe the same reality from the production side: the global production of the goods and services that people want has increased, but there is still not enough production of even very basic products. Most people in the world do not have access to them.

An advantage of household survey data over GDP per capita is that it captures the inequality of incomes within a country. You can explore this inequality with this chart by switching to see the data for an individual country via the ‘Change country’ button.

Measuring economic growth by tracking GDP per capita

GDP per capita is a broader measure of real income, and in contrast to survey income, it also takes government expenditures into account. A lot of thinking has gone into the construction of this very prominent metric so that it is comparable not only over time but also across countries. This makes it especially useful as a measure to understand the economic inequality in the world, as we’ve seen above. 18

Another advantage of this measure is that historians have reconstructed estimates of GDP per capita that go back many centuries. This historical research is an extremely laborious task , and researchers have dedicated many years of work to these reconstructions. The ‘Maddison Project’ brings together these long-run reconstructions from various researchers, and thanks to these efforts, we have a good understanding of how incomes have changed over time.

The chart shows how average incomes in different world regions have changed over the last two centuries. Looking at the latest data, you see again the very large inequality between different parts of the world today. You now also see the history of how we got here: small increases in production in some world regions and very large increases in those regions where people have the highest incomes today.

One of the very first countries to achieve sustained economic growth was the United Kingdom. In this chart, we see the reconstructions of GDP per capita in the UK over the last centuries.

It is no accident that the shape of this chart is very similar to the chart on book production at the beginning of this text – very low and almost flat for many generations and then quickly rising. Both of these developments are driven by changes in production.

Average income corresponds to average production, and societies around the world were able to produce very few goods and services in the past. There were no major exceptions to this reality. As we see in this chart, global inequality was much lower than today: the majority of people around the world were very poor.

To get a sense of what this means, you can again take the approach we’ve used to understand the inequality in the world today. When incomes in today’s rich countries were 20 times lower, it was as if all the prices around you today would suddenly increase 20-fold. But in addition to this, you have to consider that all the goods and services that were developed since then disappeared – no bicycle, no internet, no antibiotics. All that’s left for you are the goods and services of the 17th century, but all of them are 20 times more expensive than today. The majority of people around the world, including in today’s richest countries, live in deep poverty.

Just as we’ve seen in the history of book production, this changed once new production technologies were introduced. The printing press was an exceptionally early innovation in production technology; most innovations happened in the last 250 years. The starting point of this rise out of poverty is called the Industrial Revolution.

The printing press made it possible to produce more books. The many innovations that made up the Industrial Revolution made it possible to increase the production of many goods and services. Compare the effort that it takes for a farmer to reap corn with a scythe to the possibilities of a farmer with a tractor or a combined harvester, or think of the technologies that made overland travel faster – from walking on foot to traveling in a horse buggy to taking the train or car; or think of the effort it took to build those roads that the buggies once traveled on with the modern machinery that allows us to produce the corresponding public infrastructure today .

The production of a myriad of different goods and services followed trajectories very similar to the production of books – flat and low in the past and then steeply increasing. The rise in average income that we see in this chart is the result of the aggregation of all these production increases.

In the past, before societies achieved economic growth, the only way for anyone to become richer was for someone else to become poorer; the economy was a zero-sum game. In a society that achieves economic growth, this is no longer the case. When average incomes increase, it becomes possible for people to become richer without someone else becoming poorer.

This transition from a zero-sum to a positive-sum economy is the most important change in economic history (I wrote about it here ) and made it possible for entire societies to leave the extreme poverty of the past behind.

Conclusion: The history of global poverty reduction has just begun

The chart shows the global history of extreme poverty and economic growth.

In the top left panel, you can see how global poverty has declined as incomes increased; in the other eight panels, you see the same for all world regions separately. The starting point of each trajectory shows the data for 1820 and tells us that two centuries ago, the majority of people lived in extreme poverty, no matter where in the world they were at home.

Back then, it was widely believed that widespread poverty was inevitable. But this turned out to be wrong. The trajectories show how incomes and poverty have changed in each world region. All regions achieved growth – the goods and services that people need saw their production and quality increase – and the share living in extreme poverty declined. 19

This historical research was done by Michail Moatsos and is based on the ‘cost of basic needs’-approach as suggested by Robert Allen (2017) and recommended by the late Tony Atkinson. 20 The name ‘extreme poverty’ is appropriate as this measure is based on an extremely low poverty threshold. It takes us back to what I mentioned at the very beginning; this historical research tells us – as the author puts it – that three-quarters of the world "could not afford a tiny space to live, food that would not induce malnutrition, and some minimum heating capacity.”

Since then, all world regions have made progress against extreme poverty – some much earlier than others – but in particular, in Sub-Saharan Africa, the share of people living in deep poverty is still very high.

The last two centuries were the first time in human history that societies have achieved sustained economic growth, and the decline of global poverty is one of the most important achievements in history. But it is still a very long way to go.

This is what we see in this final chart. The red line shows the share of people living in extreme poverty that we just discussed. Additionally, you now also see the share living on less than $3.65, $6.85, and $30 per day. 21

The world today is very unequal, and the majority of the world still lives in poverty: 47% live on less than $6.85 per day, and 84% live on less than $30. Even after two centuries of progress, we are still in the early stages. The history of global poverty reduction has only just begun.

That the world has made substantial progress but nevertheless still has a long way to go is the case for many of the world’s very large problems. I’ve written before that all three statements are true at the same time: The world is much better, the world is awful, and the world can be much better. This is very much the case for global poverty. The world is much less poor than in the past, but it is still very poor, and it remains one of the largest problems we face.

Some writers suggest we can end poverty by simply reducing global inequality. This is not the case. I’m very much in favor of reducing global inequality, and I hope I do what I can to contribute to this. But it is important to be clear that a reduction of inequality alone would still mean that billions around the world would live in very poor conditions. Those who don’t see the importance of growth are not aware of the extent of global poverty. The production of many crucial goods and services has to increase if we want to end it. How much economic growth is needed to achieve this? This is the question I answered in this recent text .

To solve the problems we face, it is not enough to increase overall production. We also need to make good decisions about which goods and services we want to produce more of and which ones we want less of. Growth doesn’t just have a rate, it also has a direction, and the direction we choose matters – for our own happiness and for achieving a sustainable future .

I hope this text was helpful in making clear what economic growth is. It is necessary to remind ourselves of that because we mostly talk about poverty and growth in monetary terms. The monetary measures have the disadvantage that they are abstract, perhaps so abstract that we even forget what growth is actually about and why it is so important. The goods and services that we all need are not just there – they need to be produced – and economic growth means that the quality and quantity of these goods and services increase, from the food that we eat to the public infrastructure we rely on.

The history of economic growth is the history of how societies leave widespread poverty behind by finding ways to produce more of the goods and services that people need – all the very many goods and services that people produce for each other: look around you now.

Acknowledgments: I would like to thank Joe Hasell and Hannah Ritchie for very helpful comments on draft versions of this article.

Our World in Data presents the data and research to make progress against the world’s largest problems. This article draws on data and research discussed in our topic pages on Economic Inequality , Global Poverty , and Economic Growth .

Version history: In October 2023, I copy-edited this article; it was a minor update, and nothing substantial was changed.

Michail Moatsos (2021) – Global extreme poverty: Present and past since 1820. Published in OECD (2021), How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

At the time when material prosperity was so poor, living conditions were extremely poor in general; close to half of all children died .

Historian Gregory Clark reports the estimate that scribes were able to copy about 3,000 words of plain text per day.

See Clark (2007) – A Farewell to Alms: A Brief Economic History of the World. Clark (2007). In it, Clark quotes his earlier working paper with Patricia Levin as the source of these estimates. Gregory Clark and Patricia Levin (2001) – “How Different Was the Industrial Revolution? The Revolution in Printing, 1350–1869.”

There are about 760,000 words in the bible (it differs between various translations and languages; here is an overview of some translations).

This implies that the production of one copy of the Bible meant 253.3 days (8.3 months) of daily work.

Copying the text was not the only step in the production process for which productivity was low. The ink had to be made, parchment had to be produced and cut, and many other steps involved laborious work.

Wikipedia’s article about scribes reports sources that estimate that the production time per bible was even longer than 8 months.

Clark himself states in the same publication that “Prior to that innovation, books had to be copied by hand, with copyists on works with just plain text still only able to copy 3,000 words per day. Producing one copy of the Bible at this rate would take 136 man-days.” Since the product of 136 and 3000 is only 408,000, it is unclear to me how Clark has arrived at this estimate – 408,000 words are fewer words than in the Tanakh and other versions of the bible.

The data is taken from Eltjo Buringh and Jan Luiten Van Zanden (2009) – Charting the “Rise of the West”: Manuscripts and Printed Books in Europe, a Long-Term Perspective from the Sixth through Eighteenth Centuries. In The Journal of Economic History Vol. 69, No. 2 (June 2009), pp. 409-445. Online here .

Western Europe in this study is the area of today’s Great Britain, Ireland, France, Belgium, Netherlands, Germany, Switzerland, Italy, Spain, Sweden, and Poland.

On the history and economics of book production, see also the historical work of Jeremiah Dittmar.

I’ve relied on several sources to produce this list. One source was the simple descriptions of the consumption bundles that are relied upon for CPI measurement – like this one from Germany’s statistical office . And I have also relied on the national accounts themselves.

This list is also inspired partly by this list of Gwern and I’m also grateful for the feedback that I got via Twitter to earlier versions of this list. [ Here I shared the list on Twitter ]

This is Hans Rosling’s talk on the magic of the washing machine – worth watching if you haven’t seen it.

Of course all of these transfer payments have a service component to them, someone is managing the payment of the disability benefits etc.

Because smoking causes a large amount of suffering and death I do not find cigarettes valuable, but my opinion is not what matters for a list of goods and services that people produce for each other. Whether some good is considered to be part of the domestic product depends on whether it is a good that some people want, not whether you or I want it. More on this below.

Very similar to the definitions given above is the definition that Kimberly Amadeo gives: “Economic growth is an increase in the production of goods and services over a specific period.”

“Economic growth is an increase in the production of economic goods and services, compared from one period of time to another” is the definition at Investopedia .

Alternatively, to my definition, I think it can be useful to think of economic growth as not directly concerned with the output as such but with the capacity to produce this output. The NASDAQ’s glossary defines growth in that way: “An increase in the nation's capacity to produce goods and services.”

Wikipedia defines economic growth as follows: “Economic growth can be defined as the increase in the inflation-adjusted market value of the goods and services produced by an economy over time.” Definitions that are based on how growth is measured strike me as wrong – just like life expectancy is a measure of population health and hardly the definition of population health. I will get back to this mistake further below in this text.

An aspect that I emphasize more explicitly than others is the quality of the goods and services. People obviously do just care about the number of goods, and in the literature on growth, the measurement of changes in quality is a central question. Many definitions speak more broadly about the ‘value’ of the goods and services that are produced, but I think it is worth emphasizing that growth is also concerned with a rise in the quality of goods and services.

OECD – Measuring the Non-Observed Economy: A Handbook .

The relevant numbers are not small. For the US alone, “illegal drugs add $108 billion to measured nominal GDP in 2017, illegal prostitution adds $10 billion, illegal gambling adds $4 billion, and theft from businesses adds $109 billion” if they were to be included in the US National Accounts. This is according to the report by Rachel Soloveichik (2019) – Including Illegal Activity in the U.S. National Economic Accounts . Published by the BEA.

Ironmonger (2001) – Household Production. In International Encyclopedia of the Social & Behavioral Sciences. Pages 6934-6939. https://doi.org/10.1016/B0-08-043076-7/03964-4

Or for some longer run data on the US: Danit Kanal and Joseph Ted Kornegay (2019) – Accounting for Household Production in the National Accounts: An Update, 1965–2017 . In the Survey of Current Business.

Helpful references that discuss how the production boundary is drawn (and how it changed over time) are: Lequiller and Blades – Understanding National Accounts (available in various editions) Diane Coyle (2016) – GDP: A Brief but Affectionate History https://press.princeton.edu/books/paperback/9780691169859/gdp

The definition of the production boundary by Statistics Finland

Itsuo Sakuma (2013) – The Production Boundary Reconsidered. In The Review of Income and Wealth. Volume 59, Issue 3; Pages 556-567.

Diane Coyle (2017) – Do-it-Yourself Digital: The Production Boundary and the Productivity Puzzle. ESCoE Discussion Paper 2017-01, Available at SSRN: http://dx.doi.org/10.2139/ssrn.2986725

A more general way of thinking about free goods and services is to consider them as those for which the supply is hugely greater than the demand.

Their production, therefore, has an opportunity cost, which means that if someone obtains an economic good, someone is giving up on something for it – this can either be the person themselves or society more broadly. Free goods, in contrast, are provided with zero opportunity cost to society.

It is also the case that the international statistics on these measures often have very low cutoffs for what it means ‘to have access’; this is, for example, the case for what it means to have access to energy.

10 years ago, Google counted there were 129,864,880 different books, and since then, the number has increased further by many thousands of new books every day.

This chart is from Jeremiah Dittmar and Skipper Seabold (2019) – New Media New Knowledge – How the printing press led to a transformation of European thought . I was unfortunately not able to find the raw data anywhere and could not redraw this chart; if someone knows where this (or comparable) data can be found, please let me know.

In the language of economists, the nominal value is measured in terms of money, whereas the real value is measured against goods or services. This means that the real income is the income adjusted for inflation (it is adjusted for the changes in prices of goods and services). Thereby, it allows comparisons that tell us the quantity and quality of the goods and services that people were able to purchase at different points in time.

I learned this way of thinking about it from Twitter user @Kirsten3531, who responded with this idea to a tweet of mine here https://twitter.com/Kirsten3531/status/1389553625308045317

We’ve discussed one such consideration that is crucial for comparability when we consider how to take into account the value of owner-occupied housing.

Whether economic growth translates into the reduction of poverty depends not only on the growth itself but also on how the distribution of income changes. The poverty metrics shown in this chart and in previous charts take both of these aspects – the average level of production/income and its distribution – into account.

Jutta Bolt and Jan Luiten van Zanden (2021) – The GDP data in the chart is taken from The Long View on Economic Growth: New Estimates of GDP, How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

The latest data point for the poverty data refers to 2018, while the latest data point for GDP per capita refers to 2016. In the chart, I have chosen the middle year (2017) as the reference year.

The ‘cost of basic needs’-approach was recommended by the ‘World Bank Commission on Global Poverty’, headed by Tony Atkinson, as a complementary method in measuring poverty.

The report for the ‘World Bank Commission on Global Poverty’ can be found here .

Tony Atkinson – and, after his death, his colleagues – turned this report into a book that was published as Anthony B. Atkinson (2019) – Measuring Poverty Around the World. You find more information on Atkinson’s website .

The CBN-approach Moatsos’ work is based on what was suggested by Allen in Robert Allen (2017) – Absolute poverty: When necessity displaces desire. In American Economic Review, Vol. 107/12, pp. 3690-3721, https://doi.org/10.1257/aer.20161080 .

Moatsos describes the methodology as follows: “In this approach, poverty lines are calculated for every year and country separately, rather than using a single global line. The second step is to gather the necessary data to operationalize this approach alongside imputation methods in cases where not all the necessary data are available. The third step is to devise a method for aggregating countries’ poverty estimates on a global scale to account for countries that lack some of the relevant data.” In his publication – linked above – you find much more detail on all of the shown poverty data. The speed at which extreme poverty declined increased over time, as the chart shows. Moatsos writes, “It took 136 years from 1820 for our global poverty rate to fall under 50%, then another 45 years to cut this rate in half again by 2001. In the early 21st century, global poverty reduction accelerated, and in 13 years, our global measure of extreme poverty was halved again by 2014.”

These are the same global poverty estimates – based on household surveys – we discussed above.

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Essay on Economic Growth: Top 13 Essays | Economics

Here is a compilation of essays on ‘Economic Growth’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Economic Growth’ especially written for school and college students.

Essay on Economic Growth

Essay Contents:

• The New (Endogenous) Economic Growth Theory

Essay # 1. Introduction to Economic Growth:

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Various theories, viewpoints and models have been presented from time to time to account for the sources of economic growth and the determinants of economic development. To most peo­ple, a theory is a contention that is impractical and has no factual support.

For the economist, however, a theory is a systematic explanation of interrelationships among economic variables and its purpose is to explain causal relationships among these variables. Usually a theory is used not only to understand the world better but also to provide a basis for policy. This essay discusses a few of the major theories of economic development, from which emerged alterna­tive approaches to economic development.

The earliest students of development economics were the mercantilists. Mercantilists were a group of traders. They believed that exports were always good for a country because exports implied inflow of precious metals (such as gold and silver). By contrast, imports were harmful for a country because imports implied outflow of precious metals. So, in their view, growth and development of a nation depended on its accumulation of precious metals.

Essay # 2. Adam Smith and Economic Growth :

The mercantilist view was challenged by Adam Smith (1723-1790), the Father of Economics, in 1776. Smith, in his Wealth of Nations, pointed out that the mercantilist view contained a major fallacy. International trade is just like a two-person zero-sum game in which one coun­try’s gains is the other country’s loss. So two trading nations cannot have trade surplus (or favourable balance of trade) at the same time. In the late 18th century Smith argued that the true wealth of a nation is not its accumulated gold and silver hut its labour power— the human factor of production.

And the wealth of nation depended on two main factors:

(i) The productivity of labour, and

(ii) The proportion of productive labour in the total labour force (i.e., the labour force participation rate).

Smith believed that division of labour, specialisation, and exchange were the true springs of economic growth.

Smith argued that in a market-based (competitive) economy, with no collusion, cartel or monopoly, each individual, by acting in his (her) own interest, promoted the public interest. A producer who charges more than others will not find buyers, a worker who asks more than the going wages will not get job, and an employer who pays less than the market wage (i.e., the wages competitors pay) will not find anyone to work.

It was as if an invisible hand were behind the self-interest of capitalists, merchants, landlords and workers, directing their actions toward maximum economic growth. So Smith advocated a laissez-faire (non-interference of govern­ment in economic matters) and free trade policy as two growth-promoting measures.

Essay # 3. The Classical Theory of Economic Stagnation :

The classical theory, based on the work of David Ricardo (1772-1823), had a pessimistic view about the possibility of sustained economic growth. For Ricardo, who assumed little continu­ing technical progress, growth was limited by scarcity of land. A major tenet of Ricardo was the law of diminishing returns.

For him, diminishing returns due to population growth and a fixed supply of land threatened economic growth. Since Ricardo believed that technical change or improved production techniques could only temporarily avert the operation of the law of di­minishing returns, increasing capital was seen as the only way to offset this long-run threat.

However, any fall in the rate of capital accumulation would lead to eventual stagnation. Ricardian stagnation might result in a Marxian scenario, in which wages and investment would be maintained only if property were confiscated by society and payments to private capitalists and landlords stopped.

Essay # 4. Marx’s Theory of Economic Development :

Marx (1818-83) predicted that the capitalist system would in the initial stage grow due to increased profit (surplus value which was the result of exploitation of labour) and would pro­vide funds for accumulation. But since wages were pegged at the subsistence level, due to the existence of a huge reserve army of unemployed, the capitalists would suffer from a realisation crisis. They would not be able to realise the profits embodied in already produced goods. And, according to Marx, the under consumption of the masses is the root cause of all crises.

Marx, in fact, made certain predictions about the growth, maturity and stagnation of capital­ism. He predicted that the capitalist system would ultimately collapse for want of markets and would yield place to socialism.

Unfortunately, history has not obliged Marx. The year 1989 saw the collapse of socialism (especially in erstwhile USSR and its satellite countries) and with it the abandonment of the centralised planning system and the emergence of newborn post-socialist countries.

All these countries have embraced the market system which is now thought to be a more efficient mecha­nism for solving society’s economic problems, promoting faster economic growth and improv­ing the living standards of the people.

Essay # 5. Rostow’s Stages of Economic Grow th:

By criticizing Marx’s stages of growth, viz, feudalism, capitalism and socialism, Walter W. Rostow sets forth a new historical synthesis about the beginnings of modern economic growth on six continents.

His economic stages are:

(i) The traditional society,

(ii) The preconditions for takeoff,

(iii) The takeoff,

(iv) The drive to maturity, and

(v) The age of high mass consumption.

The most important stage is the third one, i.e., the takeoff stage. In order to reach that stage a country must save and invest at least 10 -12% of its national income. Many Western countries had already reached the stage when Rostow’s book appeared. Many underdeveloped countries reached the stage later (mainly under the influence of planning).

Essay # 6. Vicious Circle Theory of Economic Growth :

The vicious circle theory presented by Ragnar Nurkse in his book- The Problems of Capital Formation in Underdeveloped Countries, 1953) indicates that poverty perpetuates itself in mutually reinforcing vicious circles on both the supply and demand sides. In fact, low per capita income is both the cause and the effect of poverty.

A. Supply Side :

At low levels of income, people cannot save much. Shortage of capital leads to low productiv­ity of labour, which perpetuates low levels of income. Thus the circle is complete, as shown in Fig. 1. A country is poor because it was previously so poor that it could not save and invest. Or, as Jeffrey Sachs (2005) explains the poverty trap: ‘Poverty itself is the cause of economic stagnation.’

In short, various obstacles to development are self-enforcing. Low levels of income prevent saving, retard capital growth, hinder productivity growth and keep income low. Successful development may require taking steps to break the chain at various points. By contrast, as countries get richer they save more, creating a virtuous circle in which high sayings rates lead to faster growth. A country is rich because it was rich in the past. Or a rich country is likely to become richer in the future.

B. Demand Side:

In addition, due to the narrow size of the domestic market for light consumer goods (such as shoes, textiles, radio, etc.) there is hardly any incentives for potential entrepreneurs to investment. Lack of invest means low factor productivity and continued low income. A country is poor because it was so poor in the past that it could not provide the market to spur investment.

Essay # 7. Balanced Vs. Unbalanced Economic Growth :

A major debate in the areas of development economics from the 1940s through the 1960s concerned balanced growth versus unbalanced growth. The term balanced growth has been used in different senses. The meaning of the term may vary from the absurd requirement that all sectors grow at the same rate to the more sensible plan that a minimum attention has to be given to all major sectors—industry, agriculture, and services.

Balanced Growth :

The main advocate of the doctrine of balanced growth was Nurkse. To him, balanced growth means the synchronized application of capital to a wide range of different industries. Nurkse considers this strategy as the only escape route from the vicious circle of poverty (under­development).

Big Push Thesis :

The advocates of the Nurkseian doctrine support the big push thesis, arguing that a strategy of gradualism is bound to fail. A substantial effort is needed to overcome the inertia inherent in a stagnant economy. According to Paul N. Rosenstein-Rodan (1943), the factors that contribute to economic growth—such as demand and investment in infrastructure—do not increase smoothly but are subject to sizable jumps or indivisibilities. These indivisibilies result from flows created in the investment market by external economies (positive externalities), that is, cost advantages en­joyed by one firm due to output expansion by another firm.

These benefits spillover to society as a whole, or to some members of it, rather than to the investor concerned. This means that the social profitability of this investment exceeds its private profitability. Furthermore, unless the government intervenes, total private investment will be grossly inadequate compared to soci­ety’s needs.

Indivisibility in Infrastructure :

For Rosenstein-Rodan, a major indivisibility is in infrastructure, such as power, transport and communications. This basic social capital reduces costs to other industries.

Indivisibility in Demand :

The indivisibility arises from the interdependence of investment decisions; that is, a prospec­tive investor is uncertain whether the output from his investment projects will find a market. This problem can be solved if a number of industries are set up so that new producers become each other’s customers and create additional markets through increased incomes. Complemen­tary demand reduces the risk of not finding a market. Reducing interdependent risks increases the incentive to invest.

Hirschman’s Strategy of Unbalanced Growth:

A. O. Hirschman develops (1958) the idea of unbalanced investment to complement existing imbalances. In his view, deliberately unbalancing the economy, in line with a predesigned strategy, is the best path for economic growth. He argues that the big push theory cannot be applied to less developed countries (LDCs) because they do not have the skills needed to launch such a massive effort. The scarcest resource in LDCs is the decision-making input, i.e., entrepreneurship, not capital. Economic development is held in check not by shortage of savings, but by that of risk-takers and decision-makers.

In Hischman’s view, low-income countries need a development strategy that spurs invest­ment decisions. He suggests that since physical resources and managerial skills and abilities are scarce in LDCs, a big push is sensible only in strategically selected industries within the economy. Growth is then likely to spread from one sector to another (similar to Rostow’s concept of leading and lagging sectors).

However, it is not in the Tightness of things to leave investment decisions solely to indi­vidual entrepreneurs in the market. The reason is that the profitability of different investment projects may depend on the order in which they are undertaken. For example, the return from a car factory may be 12%, and that from a steel plant 10%. However, if the car factory is set up first, its return is likely to be low due to shortage of steel.

However, if the steel plant is set up, the returns to the car factory may increase in the next period from 12 to 15%. This means that society would be better off investing in the steel plant first and the car factory next, rather than making independent decisions based on the market. So planners and policy-makers need to consider the interdependence of one investment project with another so that they maximise overall social profitability.

They need to make that investment which promotes the maximum investment. Investment should be concentrated in those industries which have the strongest linkages—both backward (to enterprises that sell inputs to the industry) and forward (to units that buy output from the industry).

The steel industry, for instance, may be accorded the maxi­mum priority by the planners because it has backward linkages with coal and iron ore indus­tries, and forward linkages with car and engineering industries. So there is need for making public investment in steel industry which has a strong investment potential in the sense that it is likely to spur private investment. Similarly, public investment in power and transport will in­crease productivity and thus encourage investment in various other industries.

Critique of Unbalanced Growth :

One main drawback of unbalanced growth approach is that it fails to stress the importance of agricultural investments. According to Hirschman, agriculture does not stimulate linkage for­mation so directly as other industries.

However, empirical studies indicate that agriculture has substantial linkages to other sectors. Moreover, as Johnston and Mellor have pointed out, agri­cultural growth makes vital contributions to the non-agricultural sector through increased food supplies, added foreign exchange, labour supply, capital transfer and wider markets.

The truth is that there is no conflict between these two strategies of development. An opti­mum strategy must combine some elements of balance as well as imbalance. As E. Wayne Nafziger has opined- ‘What constitutes the proper investment balance among sectors requires careful analysis. In some instances, imbalances may be essential for compensating for existing imbalances. By contrast, Hirschman’s unbalanced growth should have some kind of balance as an ultimate aim.’

Essay # 8. Underdevelopment as Coordination Failure :

To some modern economists underdevelopment is result of coordination failure. This is why the theory of big push or critical minimum effort or balanced growth has been put forward. The coordination failure problem leads to multiple equilibria, as has been suggested by M. P. Todaro.

The basic point is that benefits an economic agent receives from taking an action depends positively on how many other agents are expected to take the same action or the extent of these actions. For example, price a farmer can expect to receive for his output depends on the number of intermediaries who are active in channel of distribution which, in turn, depends on number of other farmers who specialise in the same product.

Likewise, fertility decision need in effect to be coordinated across families. All are better if average fertility rate declines. But any one family may be worse off by being only one to have fewer children. The reason is that in rural areas children are a source of labour power for agricultural families. So if only one family adopts the small family norm it will have to hire workers from the external labour market by paying higher wages.

In Fig. 2 the S-shaped privately rational decision function YY first increase at a increasing rate and the at a decreasing rate.

This shape reflects typical nature of complementariness. For example, some economic agents may take complementary action such investing even if others in the economy do not, particu­larly when interactions are expected through foreigners, say, through exporting. If in this case one or a few agents take action, each agent may be isolated from others. So spillovers may be minimum.

Thus the curve YY does not rise quickly at first as more agents take the decision to invest. But after enough invest there may be a cumulative effect, in which most agents begin to provide external benefits to neighbouring agents and the curve rises at a much faster rate. Finally, after most potential investors have been seriously affected and most important gains have been realised the curve starts to rise at a decreasing rate.

In Fig. 2 function YY cuts the 45° line three times. Thus there is possibility of multiple equilibria. Of these D 1 and D 3 are stable equilibria. The reason is that if expectations were slightly changed to a little above or below these-levels economic agents (investors) would adjust their behaviour in such a way as to bring the economy back to equilibrium levels. In each case YY function cuts 45° line from above. This is the hallmark of a stable equilibrium.

The intermediate equilibrium at D 2 cuts YY function from below. So it is unstable. This is because if a few less entrepreneurs were expected to invest equilibrium would be D 1 and if a few more, equilibrium would shift to D 3 .

Therefore, D 2 may be treated as chance equilibrium, i.e., it could be an equilibrium only by chance. Thus in practice we can think of an unstable equilibrium such as a D 2 as ways of dividing ranges of expectations over which a higher or lower stable equilibrium will hold sway.

Thus there is need for coordinating investment decisions when the value (rate of relation) of one investment depends on the presence or the extent of other investments. All are better off with more investors or higher rate of investment.

But this cannot be achieved only through market system. So there is need for government intervention. It is possible to achieve the de­sired outcome only under the influence of certain types of government policies. Difficulties of investment coordination give rise to government-led strategies for industrialisation.

Technology Spillover :

The investment coordination perspective explains the nature and extent of problems posed when technology has spread effects, i.e., development of technology by one firm has favour­able effects on other firms, i.e., positive externality.

Now suppose we show average rate of investment expected of other key firms or in the economy as a whole on the horizontal axis or profitable rate of investment for a particular firm on the vertical axis, given what other firms are expected to invest on average. In this case points where the YY the curve crosses 45° line in Fig. 2 depict equilibrium investment rates.

Then due to direct relation between investment and growth, the economy may get struck in a low growth rate largely because its expected rate of investment is likely to be low. Changing expectations may not be sufficient if it is more profitable for a firm to wait for others to invest rather than to take the lead and become a ‘pioneer’ investor. In that case there is need for government policy in addition to a change of expectation of investors.

This is why attention to the presence of multiple equilibria is so important. Market forces can bring us to one of these equilibria but they are not sufficient to ensure that no equilibrium will be achieved and they offer no mechanism to move from a bad equilibrium to a good one.

In general when jointly profitable investment may not be made without coordination multi­ple equilibria may exist in which the same individuals with access to same resources and tech­nologies could find themselves in either a good or bad situation. For example, the extent of effort of each firm in a developing region puts to increase the rate of technological transfer depends on effort put by other firms.

No doubt bring in modern technology from abroad often has spillover effects for other firms. But the presence of multiple equilibria subject to making better technology available is a necessary but not a sufficient condition to achieve faster economic growth and consequent improvement in the living standards of the people.

Essay # 9. The Lewis Model of Economic Growth :

In the Lewis model, economic growth occurs due to an increase in the size of the industrial sector, which accumulates capital, relative to the subsistence agricultural sector, which does not accumulate any capital. The source of capital in the industrial sector is profits from the low wages paid in unlimited supply of surplus labour from traditional agriculture. An unlimited supply of labour available to the industrial sector facilitates capital accumulation and economic growth.

Urban industrialists increase their labour supply by attracting workers from agriculture who migrate to urban areas when wages there exceed rural wages. Lewis elaborates this point while explaining labour transfer from agricultural to industry in a newly industrializing country. Industrial expansion would come to a halt when labour shortages develop in rural areas.

The significance of the Lewis model is that growth takes place as a result of structural change. An economy consisting mainly of a subsistence agricultural sector (which does not save) is transformed into one predominantly in the modern capitalist sector (which alone saves). As the relative size of the capitalist sector grows, the ratio of profits and other surplus to na­tional income grows.

Essay # 10. The Fei-Ranis Modification of Lewis Model of Economic Growth :

In John Fei and Gustav Ranis, in their modification of the Lewis model, contend that the agri­cultural sector must grow, through technical progress, for output to grow as fast as population; technical change increases output per hectare to compensate for the growing pressure of labour on land, which is a fixed resource. As with the Lewis model, the advent of fully commercialized agriculture and industry ends industrial growth (or what Fei-Ranis calls the take-off into self-sustained growth).

Essay # 11. Baran’s Neo-Marxist Thesis :

Paul A. Baran incorporated Lenin’s concepts of imperialism and international class conflict into his theory of economic growth and stagnation. For Baran LDCs were unlikely to achieve growth and development because of Western economic and political domination, especially in the colonial period.

Capitalism arose not through the growth of small competitive firms at home but through the transfer from abroad of advanced monopolistic business. Baran felt that as capitalism took hold, the bourgeoisie (business and middle classes) in LDCs, lacking the strength to spearhead thorough institutional change for major capital accumulation, would have to seek allies among other classes.

From Marxian perspective Baran writes:

What is decisive is that economic development in underdeveloped countries is profoundly inimical to the dominant interests in the advanced capitalist countries. The backward world has always represented the indispensable hinterland of the highly developed capitalist West.

The only way out of the impasse may be worker and peasant revolution, expropriating land and capital, and establishing a new regime based on collective effort and the creed of the pre­dominance of interests of society over the interests of a selected few.

Essay # 12. Dependency Theory of Economic Growth :

According to A. G. Frank, a major dependency theorist, underdevelopment is not simply non-development, but is a unique type of socioeconomic structure that results from the depend­ency of the underdeveloped country on advanced capitalist countries.

This results from foreign capital removing a surplus from the dependent economy to the advanced country by structur­ing the underdeveloped economy in an ‘external orientation’ that includes the export of pri­mary products, the import of manufactures, and dependent industrialisation. As Frank states- ‘It is capitalism, world and national, which produced under development in the past and still generates underdevelopment in the present.’

Frank’s dependency approach maintains that countries become underdeveloped through integration into, not isolation from, the international capitalist system. However, despite some evidence supporting Frank, he does not give adequately demonstration that withdrawing from the capitalist system results in faster economic development.

Unequal Exchange :

According to dependency theorists, the same process of capitalism that brought development to the presently advanced capitalists countries resulted in the underdevelopment of the depend­ent periphery. The global system is such that the development of part of the system occurs at the expense of other parts. Underdevelopment of the periphery is the Siamese twin of develop­ment of the centre.

Centre-periphery trade is characterised by unequal exchange. This may refer to deteriora­tion in the peripheral country’s terms of trade. It may also refer to unequal bargaining power in investment, transfer of technology, taxation, and relations with multinational corporations. According to S. Amin, unequal exchange means the exchange of products whose production involves wage differentials greater than those of productivity.

The Neoclassical Counterrevolution :

The neoclassical counterrevolution to Marxian and dependency theory emphasised reliance on the market, private initiative, and deregulation in LDCs. Neoclassical growth theory empha­sised the importance of increased saving and capital formation for economic development and for empirical measures of sources of growth. The neoclassical model predicts that incomes per capita between rich and poor countries will converge. But empirical studies do not support this prediction.

This is why N. G. Mankiw and others propose an augmented Solow neoclassical model which includes human capital as an additional explanatory variable to physical capital and labour. The Washington institutions of the World Bank, IMF, and US Government have applied neoclassical analysis in their policy-based lending to LDCs.

Essay # 13. The New (Endogenous) Economic Growth Theory :

The new (endogenous) growth theory developed by Paul Romer arose from concerns that neo­classical economists neglected the explanations of technical change and accepted the unrealis­tic assumption of perfect competition. For Mankiw, Romer, and Weil, human capital and for Romer, endogenous (originating internally) technology, when added to physical capital and labour in neoclassical growth theory, are important factors contributing to economic growth.

One reason is that although there are diminishing returns to physical capital, there are constant returns to all (human and physical) capital. The new growth theory, however, does no better than an enhanced neoclassical model in measuring the sources of economic growth.

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The Outlook for Long-Term Economic Growth

What are the prospects for economic growth in the United States and other advanced countries over the next several decades? U.S. growth for the past 150 years has been surprisingly stable at 2% per year. Growth theory reveals that in the long run, growth in living standards is determined by growth in the worldwide number of people searching for ideas. At the same time, a growth accounting exercise for the United States since the 1950s suggests that many other factors have temporarily contributed to growth, including rising educational attainment and a rising investment rate in ideas. But these forces are inherently temporary, implying that growth rates could slow in the future. This prediction is reinforced by declining population growth throughout the world. In contrast, other forces could potentially sustain or even increase growth. The emergence of countries such as China and India provides large numbers of people who could search for ideas. Improvements in the allocation of talent --- for example, the rise of women inventors --- and increased automation through artificial intelligence are other potential tailwinds.

Prepared for the August 2023 Jackson Hole Symposium panel on “Globalization at an Inflection Point.” This paper summarizes work reported in Jones (2022). The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.

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Growth in income per capita, growth and recipes, objects and ideas.

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Wednesday, November 1, 2017

Importance of economic growth, why economic growth is important.

• Reduction in poverty . Increased national output means households can enjoy more goods and services. For countries with significant levels of poverty, economic growth can enable vastly improved living standards. For example, in the nineteenth century, absolute poverty was widespread in Europe, a century of economic growth has lifted nearly everyone out of this state of poverty. Economic growth is particularly important in developing economies.
• Reduced Unemployment . A stagnant economy leads to higher rates of unemployment and the consequent social misery. Economic growth leads to higher demand and firms are likely to increase employment.
• Improved public services . Higher economic growth leads to higher tax revenues (even with tax rates staying the same). With higher growth, incomes and profit, the government will receive more income tax, corporation tax and expenditure taxes. The government can then spend more on public services. 

• Political aspect . Elected politicians have a vested interest in higher economic growth. Higher growth enables vote pleasing policies such as tax cuts and/or more public spending.

Virtuous cycle of economic growth

• Countries with positive rates of economic growth will create a virtuous cycle
• Economic growth will encourage inward investment as firms seek to benefit from rising demand
• Higher growth leads to improved tax revenues which can be spent on long-term public sector works, such as improved transport and communication. This helps long-term growth.
• Confidence to invest. Higher growth encourages firms to take risks - innovate and invest in future products and productive capacity.

Limitations of economic growth

• Inequality and distribution . Economic growth doesn't necessarily reduce relative poverty, it depends on the distribution of incomes. Economic growth could bypass the poorest in society. For example in the 1980s, the Gini coefficient rose sharply - the richest 1% gained dis proportionality more.
• Negative externalities . Economic growth can cause negative externalities such as pollution, higher crime rates and congestion which actually reduce living standards. For example, China has experienced very rapid economic growth but is now experience very serious levels of air pollution in major cities.
• Economic growth may conflict with the environment . e.g. increased carbon production is leading to global warming. Economic growth may bring benefits in the short-term, but costs in the long-term.
• It depends on what is produced . The Soviet Union has fantastic rates of economic growth, but, often through producing a lot of steel and pig iron that was not actually very useful.
• Economic growth can be unsustainable . If growth is too rapid, it will cause inflation, current account deficit and can lead to boom and bust.
• Does happiness actually increase? Theories of hedonistic relativism suggest (beyond a certain level) increasing output has no effect on changing life quality or happiness.
• Causes of Economic Growth
• Benefits of economic growth
• The Importance of Economics

3 comments:

No one is explaining clearly WHY the UK deficit has got so much worse so suddenly in 2009. What items are (roughly) responsible for each part of the increase?

2008 Financial Crisis, read the following: https://www.ifs.org.uk/publications/13302

Are the answers the same with why economists take much attention to economic growth matters

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College Term Paper

🖋 best way to write a great college term paper, term paper on economic growth.

Economic Growth Term Paper:

Economic growth is the process of the increase of the production of goods and services in the economics a country during a certain period of time. Economic growth depends on the great number of factors: the political situation of the country, education, population, innovations, technologies, etc. Generally, economic grows is associated with the increase of production and consumption of the goods and services and the ability of people to pay for it. Economic growth can be achieved only due to the hard work and the correct management of economics. Businessmen should not be controlled by the government but should possess certain freedom and chance for development. Healthy business competition should be permitted in the country in order to enable the smart businessmen develop their firms and enrich the economics of the country with the taxes on their profit.

Evidently, without human resources and high level of education economic growth is impossible, because today we live in the world of technologies and information and only deep knowledge can be considered the key to success. Very often economic growth is connected with investment and donations. Investments can come from other countries which expect that the invested money will develop the economics of the country and bring profit to them. Economic growth is the quantitative indicator and is closely connected with the general growth of the quality of life of the country, its health care and affordability of the proper education, security of people and the reduction of the working hours.

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Economic growth is the aim of every county which wants to be a prosperous one. Economic growth opens wide opportunities for people, so it is extremely important to work hard to achieve it. A successful economic growth term paper is supposed to explain the topic in detail and describe the factors which influence the process. One should distinguish the key components of economic growth and define its advantages and disadvantages. A student should study the process and the factors which cause it on the basis of the direct examples, so that the countries which achieved the economic growth. One should also emphasize that the process of growth is not a permanent one and that such phenomena like crisis and depression follow every economic growth.

In order to cope with the assignment successfully a student should take advantage of the opportunities the Internet offers. A free example term paper on economic growth written by the expert is quite a good piece of help for every student who has troubles with the assignment. With the help of a free sample term paper on economic growth in the web a student will understand how to analyze the topic correctly and format the paper well.

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110 Economic Growth Essay Topic Ideas & Examples

🏆 best economic growth topic ideas & essay examples, 👍 good essay topics on economic growth, ⭐ simple & easy economic growth essay titles.

• The Importance of Service Industries in Economic Growth The pursuit of service economy, which dictates the specialization in the service industries, is one of the newest economic concepts that ensure the realization of the economic growth.
• ICT and Economic Growth The study of knowledge economy highlights the significance of ICT and learning in the creation of wealth and competitive advantage in the global economy.
• Economic Growth and Development Differences between economic growth and economic development When compared to economic development as we are to witness shortly, economic growth is a simpler and narrower subject.
• The Relationship between Political Stability & Economic Growth The government is very crucial to stability and economic development in a country because it holds the responsibility of developing legislation.
• Entrepreneurship and Economic Growth Entrepreneurship capital is the main factor in the neoclassical production function which is the ability of economic representatives to start new organizations.
• The Relationship Between Economic Growth and Development To this end, the author is going to discuss the relationship between economic development and economic growth Economic Development Overview Economic development is characterised by the initiatives put in place to spearhead improvement of the […]
• Challenges to Sustainable Economic Growth in Africa In addition to the frequent outbreaks of conflict and instability among African states, the rapid increase in the continent’s population poses a threat to economic development.
• Latitude Can Cause Long-Run Economic Growth Differences Across Countries The researchers found that there was a clear relationship between the prevalence of disease, especially malaria, as well as the productivity of agriculture in tropical zones, and the low economic growth rate.
• Sustainable Development’ and Economic Growth’ Relationship The concepts of sustainable development and economic growth are interconnected with the aim of protecting the available wealth of the earth and at the same time creating more opportunities towards satisfaction of human needs.
• Relationship Between Population and Economic Growth Consequently, Solow argues that the rate of population growth will be equal to the rate of economic growth in steady states.
• Sogo Shosha’s Impact on Japan’s Economic Growth At the time, Japan had limited access to foreign markets, and the Sogo Shosha companies offered an important bridge between Japan and the rest of the world.
• Exploring the UAE Economy: PESTLE Analysis and Implications for Businesses According to the latest information on the state’s progress, the premises for the growth of the international business in the UAE have been set rather successfully, with a range of areas, where international organisations may […]
• Economic Growth in Canada Between 1990 and 2000 In addition, the paper discusses the sources of the economic growth data and the formula the country uses for making calculations of its various economic indicators like the GDP.
• Economic Growth and Environment Relation Although the relevance of the EKC and the focus on the stages of development as the important factors to speak about the relationship between the economic growth and environment are highly debatable issues, it is […]
• Ibn Khaldun’s Umran Theory and Economic Growth Although the subject matter is typically viewed as the means of explaining the development of the contemporary society from the perspective of the cause-and-effect concept; however, the specified approach is a common misconception and a […]
• Economic Growth and the Living Standards This arose from the high rate of economic growth as a result of the high rate of industrial revolution and technological progress.
• Nigeria’s Economic Evolution and Future Growth The Federal Republic of Nigeria is a country located in the western part of the African Continent. The paper is going to tackle the economic evolution and the current economic status of Nigeria.
• Concept of Economic Growth Development is a term that can be used to explain the way the resources are put to efficient use as the greater the positive usage of resources; the more the state of development.
• Social Equality and Economic Growth Social equality provides individuals with equal opportunities to contribute to the growth of the economy. Equality also ensures that the potential of the society is fully exploited to enhance the development of the entire community.
• Poor Economic Growth in Uganda The country’s fiscal policies are not effective and the ability of the government to control the money supply is significantly low.
• Economic Growth by David Weil Another factor the author explains in a more in-depth manner in the book is the method of the comparison made in the determination of the level of economic growth.
• Foreign Aid and Economic Growth in Developing States The paper under analysis covers the topic of the relationship between foreign aid and economic growth in developing countries. There is a raging debate on the real effect of foreign aid on developing countries, and […]
• External Debt and Economic Growth by Al Kharusi and Ada The journal article “External Debt and Economic Growth: The Case of Emerging Economy” by Sami Al Kharusi and Mbah Stella Ada highlights some of the impacts of external debts on a nation’s economic growth.
• The Impact of Automation and Robotization on Long-Run Economic Growth Due to the increased use of robotics and AI in the production industries, it is imperative to understand the contribution of mechanization in the economic world.
• Economic Growth and Role of Government The economy is a crucial aspect of any nation, and the role of government in its sustainable development is hard to overestimate.
• Who Reduces Economic Growth in Africa This is due to the fact that the financial assistance provided by the West to the countries of Africa is not gratuitous, but leads to the formation of state debt.
• Panama: Quality of Life and Economic Growth The inflation rate in the country is an indicator of the degree of depreciation of money. In the United States of America, this indicator is significantly higher and is 0.1%.
• Economic, Productivity Growth, and Free Trade The article by Saleem et al.is closely connected to the topic of factors contributing to productivity growth as researchers explored the impact of innovation and total factor productivity in Pakistan’s economic environment.
• Environmental Policy’s Impact on Economic Growth One common belief about the environmental policy is that it results in layoffs as well as closure of plants and reduces the level of competition in the market.
• Economic Growth and Unemployment Relationship in the USA The corresponding figures characterize the structure of economic dynamics and the diversification of the labor market. The research limitation is the multifactorial nature of economic growth and unemployment indicators.
• Family Business Promoting Economic Growth The primary goal of the article is to assess the role of the family business in the economic growth of Saudi Arabia.
• Growth and Equality – Development Objectives Compared National policy makers and the development economists have been interested in the study of the interface between growth and equality in the past, but recently there have been a revival of this subject.
• Economic Growth of Morocco in the Context of Sustainable Development However, the labor share of GDP is the highest in the upper-middle-income sector which demonstrates the growth of a strong middle class in the country.
• Ten-Year Economic Growth of Australia The aim of this report is to show the status of the economy of Australia. The number of young people in the country constitutes the greater percentage of the population.
• Climate Change and Economic Growth The graph displays the levels of the carbon dioxide in the atmosphere and the years before our time with the number 0 being the year 1950.
• Vietnam’s Economic Growth and Poverty & Inequality A significant part of the population was active in employment, and this means that the numerous income-generating activities improved the economy of this country.
• History of the Kenyan Economy: Stimulating the Economic Growth Through Various Means Political influence on monetary and fiscal policies of the country by the end of the century facilitated the continued stagnation of the Kenyan economy.
• John M. Quigley: Urban Diversity and Economic Growth The article reviews the part that the traditional scale economies and diversities in the improvement of the economic growth. The diversity of cities should therefore be valued as factor contributing to economic growth.
• U.S. Automobile Industry as a Large Segment of the National Economic Growth The main indicators of stability and efficiency in work were the factors for the oligopoly of the automobile market in the United States.
• Gasoline Prices, Rates of Unemployment, Inflation, and Economic Growth The data which has been queried from the database are related to gasoline prices in California, the unemployment rate in the US, the inflation rate in the US, and Real GDP.
• Economic Growth & Developing Countries Sponsorship of trademarks will help the general public identifying the owner of goods in the market as also the availability of goods and services in the market and can protect people against false practices.
• An Initial Examination of Correlates of Economic Growth The variable of choice is REGION because of the numerical values assigned to Southeast Asia and the OECD countries. Finally, the fourth variable is degree of participation in foreign trade.
• Irish Economic Growth and Standard of Living Ireland today being named as ‘Celtic Tiger’ for the economic boom it has experienced from 1990s to 2001 and then from 2003 to 2006, which has changed the fate of this poor economy to be […]
• Walmart Inc.’s Training and Development for Economic Growth In turn, the key deliverable that the exercise mentioned above is expected to produce will be represented by a rise in the quality of communication between employees and managers.
• Capitalism and Democracy – Social System Analysis It is suggested that the combination of these ideologies enhances the freedoms of individuals, and allows the economy of the country to develop at a rapid rate.
• Understanding the Role of Technology and Efficiency in Economic Growth At the beginning of this chapter, David Weil discusses the role of technologies in increasing economic growth and productivity. This notion is used to describe a situation when the arrival of new technologies harms both […]
• Economics: “The Elusive Quest for Growth” by Easterly In this case, it is arguable that technology has resulted in growth from the leaping effects in production and industrial efficiency.
• Economic Growth and Land Reform in Developing Countries The most common land reform approach is state-controlled land reforms where the state seeks to promote land redistribution to contribute to the socio-economic development of a country.
• Higher Education Financing and Economic Growth Throughout the article, the author uses data to show that increasing government spending on higher education has a negative impact on economic growth, and it leads to a decrease in the number of students joining […]
• Saudi Arabian Human Capital and Economic Growth The current situation poses a significant risk for the future, as it is unclear whether or not the country will be able to take its place on the global oil market again nor what the […]
• Education, Human Capital, and Economic Growth In the broad sense, it is an intensive productive factor of economic development, including the educated part of the labor resources, knowledge, tools of intellectual and managerial work, and the environment of living and working.
• Southeast Asia: Energy Security and Economic Growth The Southeast Asian peninsula is made up of the countries that are geographically positioned south of China, north of Australia, and east of India. The metropolitans are extensions of the cities to the periphery as […]
• China’s Law, Finance, and Economic Growth Nexus Besides providing the reflection of the status quo of China’s economic phenomenon aspect, section 3 offers recommendations that the country can establish to address the wanting legal protection of minority shareholders.
• Saudi Arabian Economic Growth Effect on Foreign Direct Investment The study is important because many studies that have analyzed the relationship between economic growth and FDI have examined the effect of FDI on economic growth.
• Economic Growth in Kenya: Past and Future Challenges To ensure that the country attracts more investment, the government has put in place strategies to make the country investment conducive for both local and foreign investors, mainly from the United States and the Middle […]
• Multinational Firms Impacts on the Economic Growth Although Byres affirms that MNCs may have a positive economic impact on their host countries, he says the economic sectors that align with their operations benefit from the companies, at the expense of other economic […]
• Role of Supply-side Policies in Balanced Economic Growth Considering the drawbacks of economic growth as a measure of performance for economies such as failing to record productivity in the black markets, Keith asserts that all nations endeavour to ensure a balanced economic growth.
• Kenya: Economic Growth and Health Care System As a result of the projects financed by the international lending organizations, Kenya has seen a growth in the percentage of children accessing free basic education.
• Gross Domestic Product and Economic Growth For instance, the business sector is responsible for the production of goods and services which have to be consumed for production to continue.
• Economic Growth of Singapore from 1965 to 2008 It is a country located south of Johor, one of the Malaysian state, and it is also to the north of the Equator.
• Supply Policies’ Role in Economic Growth Despite the flexibility aspect, the role of the government in the implementation of the supply side policies cannot be ruled out.
• China’s Export-Led Economic Growth and Development Supporters of China’s export-led growth strategy believe that the approach has enabled the country to improve its economic fortunes in the last three decades.
• Remittances Role in Spurring Global Economic Growth It is necessary to lower the cost of sending remittances in order to increase the annual amount by recovering the excess that is used to cater for the exorbitant costs imposed by money transfer companies.
• Cuba’s Quest for Economic Growth However, this has not had much impact on the development of the country due to inefficiencies in the government. It is important to note that the private sector is restricted in Cuba and the government […]
• Industrialization and Modern Economic Growth in India and China The other theory suggests that the de-industrialization of Indias economy was a result of the British victory in foreign markets for cottage made manufactures, followed by its penetration in the India’s home market with cheap […]
• Etihad Airways to Collaborate With Maharashtra Government for Economic Growth The main issue of the article is an establishment of collaborative bonds between Etihad Airways and the government of Maharashtra. The opportunity to extend the purposes of the transitional services by launching the first touristic […]
• Effect of Civil War on Economic Growth The sources will provide data about the state of Sudan before the civil war and the state of the economy after the war.
• Effect of Civil War on Economic Growth: Evidence From Sudan Of greater essence in the paper is the collection of a set of data and literature that will help in linking the scale of violence and instability caused by the civil war in Sudan and […]
• Sustaining Australia’s Rate of Economic Growth The Australian Bureau of Statistics declared that in the year 2005-06 to 2009-10 witnessed the increase of 21% in the GVA of mining industry in Australia.
• Services Industries’ Role in Building Economic Growth Overview of the task There is a compelling need to highlight the importance of services economy which policy makers and entrepreneurs alike can benefit from, by making use of the economic and business potential in […]
• Services Industries and Economic Growth Importance of technology in the service industry Another reason for building service economy is because of the technological advancement in the service industry.
• United Arab Emirates Vision 2021: Economic and Social Prosperity The national interest is to be proactive in responding to challenges affecting the people of the UAE and to leave a legacy of prosperity and stability.
• China’s Economic Growth and Financial Development It is the wish of every country to realize improved and sustainable economic growth and financial development in order to improve the living standards of the greatest majority among its citizenry.
• Democracy and Economic Growth: Asia-Pacific Region Experiences Kalpana and Jolly describe that to date, communication industry in the Asia-pacific area have been boosted by flexible and mobile networks and the relevant maintenance of data systems. The maintenance of high economic growth reduces […]
• Has Globalisation Led To Economic Growth? However, the benefits of globalization in promotion of economic growth outweigh the negative effects that it has in economic growth of a country.
• Australia’s Economic Growth One of the main dangers which awaits Australia as a result of the reduction of the Asian demand in its resources is the reduction in the investment.
• Economic History of Canada: How Did the Settlers Facilitate Economic Growth? The study of economic history of Canada involves the analysis of the prevalent economic institutions and industries. The major analytical part of the paper will concentrate on the role of settlers in developing the economy.
• Impact of Economic Growth on Environmental Sustainability Because of constant development of the richest economies, such as the United Kingdom, and United States, the consumption levels of the global population surpass the actual amount of natural resources that the Earth has prepared […]
• Institutional Reforms and China’s Economic Growth The paper also evaluates some of the issues that China has to do in order to maintain the country’s future economic growth and development.
• Building Economic Growth: Service Industries Significance For example, service industries form the largest category in the Australian and Canadian economy in regards to employment, and businesses. In addition, the need for organizations to develop their service offerings is due to the […]
• Services Industries Are Important in Building Economic Growth Ettlie Rosenthal postulates that a customer is always engaged in provision of a service, and the reaction of the customer to the service affects the quality.
• India’s Highs and Lows in Economic Growth India in particular has become one of the fastest growing countries in the world after China and the country shows signs of maintaining the growth momentum in a sustainable manner.
• International Trade Policy and Economic Growth Realization Similarly, the labor, which is the human asset employed in the realization of this output of cooperation, will necessitate the international bodies to observe and regulate all the players in the international trade.
• Technology Progress in Realising Sustainable Economic Growth Because of the growth theory and the development theory having fostered the process of technological advancement as the core reason for economic growth, most of the Asian economies have embarked on the initiative.
• The Economic Growth of China and India The new infrastructure invested in China and the increase in credit in India show that there is a bigger growth of credit in India than in China.
• China’s Rapid Economic Growth This piece of work gives a critical discussion of the various factors that are associated with the rapid economic growth in China in the last three decades and their implications in the country as well […]
• Rising Oil Prices’ Effects on Economic Growth Increase in production costs and the decrease in consumption expenditure caused by the rise in oil prices prompt producers to reduce outputs.
• The Role of the State in Encouraging Economic Growth Despite the call for minimization of the role of the state in regulating trade and other economic activities by proponents of trade liberalization following the demise of the Cold War in 1980s and 1990s,it is […]
• Theories of Economic Growth Too, despite highlighting the plight of the global poor, most of these activities are executed with the aim of increasing the foreign aid to the poor.
• China’s Economic Growth and Inflation On the road to becoming the second largest economy, China has experienced growth rates of about 10% in the last 30 years making it to top the list of the fastest growing economies.
• Effects of China’s Economic Growth on Sub-Saharan Africa On the same note, trading with China has led to increase in prices of raw materials that are produced by countries in Sub-Saharan Africa thus leading to expansion of Gross Domestic Product.
• China’s Economic Growth Since 1978 The article by Wang and Yao, however, sought to use data of China’s human capital stock to analyze the economic growth of the country. China’s involvement in the global economy subjected it to the effects […]
• Relationship between Economic Growth and Nation’s Health Ascertaining the influence of economic growth in health care is necessary for policy makers since such an intimate understanding of the relationship between economic growth and population health will enable them to formulate astute policies […]
• External Financing and Economic Growth The main reason why investors may decide to pull out of a country in the course of their stay is loss of faith in that country’s economy.
• Kenya’s Economic Growth The level of increase in output of services and goods is used as a measure of economic growth. Kenya’s government has been trying to be ahead of population growth, and this has been favored by […]
• Economic Growth and Crises in Historical Perspective Describing the concepts history, contributors and the how the changes occurred in the economic history In line with the World of Economics, economic thought began with the onset of industrialization.
• Colombia’s Improved Business Climate: Foreign Investment and Economic Growth Political instability in the country can be traced to the middle of the twentieth century after the assassination of the country’s president in the year 1948.
• Rapid Economic Growth and Industrialization in Japan In Asia, Japan was the first country to exhibit a marked positive growth after the damage caused to the nation following the world war.
• Key Drivers of China’s Rapid Economic Growth and the Global Impacts The resulting graduates therefore worked in the manufacturing sectors of the economy and thus led to the improvement of the quantity and quality of outputs.
• Is China’s Economy Another Bubble? The fact that China is expected to contribute to about a third of the world’s growth this year makes the issue a global concern.
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U.S. economic growth revised up to solid 3 percent annual rate for second quarter of 2024

WASHINGTON (AP) — The U.S. economy grew last quarter at a healthy 3 percent annual pace, fueled by strong consumer spending and business investment, the government said Thursday in an upgrade of its initial assessment.

The Commerce Department had previously estimated that the nation’s gross domestic product — the total output of goods and services — expanded at a 2.8 percent rate from April through June.

The second-quarter growth marked a sharp acceleration from a sluggish 1.4 percent growth rate in the first three months of 2024.

Consumer spending, which accounts for about 70 percent of U.S. economic activity, rose at a 2.9 percent annual rate last quarter. That was up from 2.3 percent in the government’s initial estimate. Business investment expanded at a 7.5 percent rate, led by a 10.8 percent jump in investment in equipment.

Thursday’s report reflected an economy that remains resilient despite the pressure of continued high interest rates. The state of the economy is weighing heavily on voters ahead of the November presidential election. Many Americans remain exasperated by high prices even though inflation has plummeted since peaking at a four-decade high in mid-2022.

READ MORE: ‘The time has come’ for the Federal Reserve to soon begin reducing interest rates, Powell says

But measures of consumers’ spirits by the Conference Board and the University of Michigan have shown a recent uptick in confidence in the economy.

“The GDP revisions show the U.S. economy was in good shape in mid-2024,’’ said Bill Adams, chief economist at Comerica Bank. “Solid growth of consumer spending propelled the economy forward in the second quarter, and the increase of consumer confidence in July suggests it will propel growth in the second half of the year as well.’’

The latest GDP estimate for the April-June quarter included figures that showed that inflation continues to ease while remaining just above the Federal Reserve’s 2 percent target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5 percent annual rate last quarter, down from 3.4 percent in the first quarter of the year. And excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.7 percent pace, down from 3.2 percent from January through March.

Both the PCE inflation numbers issued Thursday marked a slight improvement on the government’s first estimate.

A GDP category that measures the economy’s underlying strength rose at a healthy 2.9 percent annual rate, up from 2.6 percent in the first quarter. This category includes consumer spending and private investment but excludes volatile items such as exports, inventories and government spending.

To fight spiking prices, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, lifting it to a 23-year high and helping shrink annual inflation from a peak of 9.1 percent to 2.9 percent as of last month. The much higher borrowing costs for consumers and businesses that resulted had been widely expected to cause a recession. Yet the economy has kept growing and employers have kept hiring.

Now, with inflation hovering only slightly above the Fed’s 2 percent target level and likely slowing further, Chair Jerome Powell has essentially declared victory over inflation. As a result, the Fed is poised to start cutting its benchmark interest rate when it next meets in mid-September.

A sustained period of lower Fed rates would be intended to achieve a “soft landing,” whereby the central bank manages to curb inflation, maintain a healthy job market and avoid triggering a recession. Lower rates for auto loans, mortgages and other forms of consumer borrowing would likely follow.

The central bank has recently become more concerned about supporting the job market, which has been gradually weakening, than about continuing to fight inflation. The unemployment rate has risen for four straight months, to 4.3 percent, still low by historical standards. Job openings and the pace of hiring have also dropped, though they remain at relatively solid levels.

Thursday’s report was the Commerce Department’s second estimate of GDP growth in the April-June quarter. It will issue its final estimate late next month.

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US economic growth for last quarter is revised up to a solid 3% annual rate

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WASHINGTON (AP) — The U.S. economy grew last quarter at a healthy 3% annual pace, fueled by strong consumer spending and business investment, the government said Thursday in an upgrade of its initial assessment.

The Commerce Department had previously estimated that the nation’s gross domestic product — the total output of goods and services — expanded at a 2.8% rate from April through June.

The second-quarter growth marked a sharp acceleration from a sluggish 1.4% growth rate in the first three months of 2024.

Consumer spending, which accounts for about 70% of U.S. economic activity, rose at a 2.9% annual rate last quarter. That was up from 2.3% in the government’s initial estimate. Business investment expanded at a 7.5% rate, led by a 10.8% jump in investment in equipment.

Thursday’s report reflected an economy that remains resilient despite the pressure of continued high interest rates. The state of the economy is weighing heavily on voters ahead of the November presidential election. Many Americans remain exasperated by high prices even though inflation has plummeted since peaking at a four-decade high in mid-2022.

But measures of consumers’ spirits by the Conference Board and the University of Michigan have shown a recent uptick in confidence in the economy.

“The GDP revisions show the U.S. economy was in good shape in mid-2024,’’ said Bill Adams, chief economist at Comerica Bank. “Solid growth of consumer spending propelled the economy forward in the second quarter, and the increase of consumer confidence in July suggests it will propel growth in the second half of the year as well.’’

The latest GDP estimate for the April-June quarter included figures that showed that inflation continues to ease while remaining just above the Federal Reserve’s 2% target. The central bank’s favored inflation gauge — the personal consumption expenditures index, or PCE — rose at a 2.5% annual rate last quarter, down from 3.4% in the first quarter of the year. And excluding volatile food and energy prices, so-called core PCE inflation grew at a 2.7% pace, down from 3.2% from January through March.

Both the PCE inflation numbers issued Thursday marked a slight improvement on the government’s first estimate.

A GDP category that measures the economy’s underlying strength rose at a healthy 2.9% annual rate, up from 2.6% in the first quarter. This category includes consumer spending and private investment but excludes volatile items such as exports, inventories and government spending.

To fight spiking prices, the Fed raised its benchmark interest rate 11 times in 2022 and 2023, lifting it to a 23-year high and helping shrink annual inflation from a peak of 9.1% to 2.9% as of last month. The much higher borrowing costs for consumers and businesses that resulted had been widely expected to cause a recession. Yet the economy has kept growing and employers have kept hiring.

Now, with inflation hovering only slightly above the Fed’s 2% target level and likely slowing further, Chair Jerome Powell has essentially declared victory over inflation . As a result, the Fed is poised to start cutting its benchmark interest rate when it next meets in mid-September.

A sustained period of lower Fed rates would be intended to achieve a “soft landing,” whereby the central bank manages to curb inflation, maintain a healthy job market and avoid triggering a recession. Lower rates for auto loans, mortgages and other forms of consumer borrowing would likely follow.

The central bank has recently become more concerned about supporting the job market, which has been gradually weakening, than about continuing to fight inflation. The unemployment rate has risen for four straight months, to 4.3%, still low by historical standards. Job openings and the pace of hiring have also dropped, though they remain at relatively solid levels.

Thursday’s report was the Commerce Department’s second estimate of GDP growth in the April-June quarter. It will issue its final estimate late next month.

Causes of economic growth

• Economic growth means an increase in real GDP. Economic growth means there is an increase in national output and national income.
• An increase in aggregate demand (AD)
• An increase in aggregate supply (productive capacity)

See latest stats on economic growth

Demand-side causes

In the short term, economic growth is caused by an increase in aggregate demand (AD). If there is spare capacity in the economy, then an increase in AD will cause a higher level of real GDP.

AD= C + I + G + X- M

• C= Consumer spending
• I = Investment (gross fixed capital investment)
• G = Government spending
• X = Exports
• M = Imports

Graph showing increase in AD

1. Factors which affect AD

• Lower interest rates – Lower interest rates reduce the cost of borrowing and so encourages consumer spending and firms to invest. Lower interest rates also reduce mortgage payments and so increase the disposable income of consumers.
• Increased wages . Higher real wages increase disposable income and encourage consumer spending.
• Increased government spending (G). e.g. government investment on building new roads or increased spending on welfare benefits, which increase disposable income.
• Devaluation. A fall in the value of the exchange rate (e.g. Pound Sterling) makes exports cheaper and increases the quantity of exports (X).  A depreciation also makes imports more expensive, reducing quantity of imports and making domestic goods relatively more attractive.
• Confidence . Increased consumer confidence encourages households to spend by either running down savings or taking out more personal credit. It enables higher spending (C)., which encourages spending (C).
• Lower tax . Lower income tax will increase the disposable income of consumers and increases consumer spending (C).
• Rising house prices.  A rise in the price of houses creates a positive wealth effect. Homeowners who see a rise in the value of their houses will be more willing to spend (remortgaging house if necessary)
• Financial stability . If there is financial stability and banks are willing to lend, then firms will be more willing to invest and investment will increase aggregate demand.

2. Long-term economic growth

This requires an increase in the long-run aggregate supply (productive capacity) as well as AD.

Diagram showing long-run economic growth

LRAS or potential growth can increase for the following reasons:

• Increased capital . e.g. investment in new factories or investment in infrastructure, such as roads and telephones.
• Increase in working population , e.g. through immigration, higher birth rate.
• I ncrease in labour productivity , through better education and training or improved technology.

more on labour productivity

• Discovering new raw materials . For example, finding oil reserves will increase national output
• Technological improvements to improve the productivity of capital and labour e.g. Microcomputers and the internet have both contributed to increased economic growth. In the future, economic growth may come from new technology such as Artificial intelligence (AI) which enables robots to take the place of human workers.

Other factors affecting economic growth

• Economic and political stability. Stability is important for reassuring firms it is a good idea to invest in increasing capacity. If we see a rise in uncertainty, confidence tends to fall and this can cause firms to delay investment.
• Low inflation. Low inflation is a good climate for encouraging business investment. High inflation increases volatility.

Periods of economic growth in UK

In the 1980s, the UK achieved rapid rates of economic growth, this was caused by

• Cuts in income tax, increasing disposable income, leading to higher spending and thereby stimulating business investment
• Boom in house prices, which caused a positive wealth effect, equity withdrawal and higher consumer spending.
• Rise in confidence, especially amongst south
• Low real interest rates, which made mortgages cheaper.
• See: UK economy in the 1980s

Period of great moderation 1992-2007

The longest period of economic expansion on record was from 1992 – 2007. This period of economic growth was caused by:

• Low global inflation, which created a period of economic stability.
• A rise in house prices, which helped increase consumer spending.
• Growth in productivity, helped by supply-side reforms.
• Inward investment helped create new jobs and better labour relations.
• See: Great moderation

The great recession of 2008/09 caused by

• Credit crunch and fall in bank lending
• Rise in price of oil – reducing disposable income
• Fall in confidence
• Fall in house prices leading to the negative wealth effect.
• Global recession causing fall in export spending.
• Does economic growth bring increased living standards?
• Costs of economic growth
• Latest growth figures in the UK

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• What to make of America’s topsy-turvy economy

Don’t panic just yet

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D on’t blame American investors for feeling seasick. The past few weeks have brought a swirl of contradictory economic news: stock prices sank and then rebounded; jobs figures were weaker than predicted but retail sales were much stronger. Chatter about an immediate emergency interest-rate cut by the Federal Reserve built up and then died down. After the exuberance of the first half of 2024, economy-watchers are anxiously poring over each new data release. The utterances of Jerome Powell, the Fed’s chairman, at the Jackson Hole gathering of central bankers on August 23rd, after we published this, will be examined even more closely than usual.

What is going on? Economic data can often be volatile around turning-points, and several oddities are obscuring the picture. Take a step back, though, and America’s economy seems poised for a gradual slowdown, not a crash.

The most marked area of weakness so far has been the labour market. Unemployment jumped to 4.3% in July, a big enough leap to invoke the Sahm Rule, an indicator based on the rise in joblessness that has identified every American recession since 1960 (but which has a patchier record in other countries). Another rule, which uses both unemployment and job-vacancy figures, implies that a recession might have begun as early as March. Markets nervously await the next jobs release on September 6th.

Dig into the data, though, and it looks as if this weakness may be overstated. Much of the rise in unemployment in the latest figures came from temporary lay-offs, which tend to be volatile. America’s recent surge in immigration might also be influencing the data; new migrants are often not in work until a little after their initial arrival. Some of the rise in unemployment, therefore, may be short-term.

History may also be muddling things. Investors may be so jittery because they have over-learned the lessons of the previous two big recessions: during the global financial crisis of 2007-09 and the covid crash. Both of those were faster and deeper than a typical downswing, amplified as they were by a fragile banking system and a pandemic, respectively. They may not be the best guide to what to expect today.

Conventional slowdowns are often stop-start and gradual. A better guide than 2008 or 2020 may be the more subdued environment of the 1990s and early 2000s. Another more recent precedent might be mid-2019, when the Fed smoothed over a growth hiccup by unwinding some previous interest-rate rises.

How, then, to describe the current state of the economy? It is certainly slowing, and likely to slow further. A peculiar feature of this cycle has been that tight monetary policy and loose fiscal policy have pulled in opposite directions. Thus far, the tug-of-war has left the economy expanding at a rapid clip; gdp growth was 3.1% over the past year. But a pace that speedy cannot be sustained for ever: most estimates put America’s long-run potential growth rate at closer to 1.5-2% a year.

A good measure of the overall thrust of the latest economic data is the Atlanta Fed’s “nowcast” of GDP growth, which draws on a wide swathe of data. That has fallen over the past two weeks—but to a still healthy 2%. Conditions could yet deteriorate further if the lagged effect of high interest rates starts to bite. Some households are already feeling a squeeze: the share of credit-card bills left unpaid has risen to a 13-year high.

It should help, though, that the economy is far better situated today than in 2019 in one crucial respect: there is plenty of room for the Fed to ease. Investors expect interest rates to fall from their current range of 5.25-5.50% by more than two percentage points in the next year. Those cuts are already reflected in lower long-term bond yields. But interest rates could comfortably fall further and faster if worse news on the economy demanded it. By contrast, a fall of two percentage points in 2019 would have returned rates all the way to zero.

How much of the fuel left in the Fed’s tank will be needed? At Jackson Hole last year, Mr Powell signalled his determination to raise rates until inflation was back at its 2% target. Today inflation is nearly back to where it needs to be and the growth outlook is shakier. An interest-rate cut of a quarter of a percentage point in September seems almost certain.

Powell, so confusing

But central bankers should beware of overreacting. Financial markets are still pricing in a one-in-three chance of a jumbo rate cut of half a percentage point. Unless further bad news arrives, such a sharp move could go too far. The Fed faces danger from two sides: if it cuts too much, it could risk another surge in inflation; if it cuts too little, growth could falter more. Mr Powell has made admirable progress fighting inflation so far. His reward is that he now faces a new enemy, even as the old one is not yet fully defeated. ■

Explore more

This article appeared in the Leaders section of the print edition under the headline “The topsy-turvy economy”

Leaders August 24th 2024

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Guest Essay

The China Hangover Is Here

By Michael Beckley

Mr. Beckley is the author of “Danger Zone: The Coming Conflict With China.”

In the 2000s, former President Hugo Chávez of Venezuela bet his country’s economic future on a rising China, securing tens of billions of dollars in investments and loans-for-oil deals. It paid off at first. China voraciously consumed Venezuelan oil and financed infrastructure projects, such as a high-speed railway and power plants.

The 2010s brought a reckoning. Oil prices fell, and growth in Chinese oil demand slowed along with its economy. Venezuela’s oil export revenues plummeted, to $22 billion in 2016 from more than $73 billion in 2011. Misrule by Mr. Chávez and his handpicked successor, Nicolás Maduro, and myriad other domestic problems already had Venezuela on the brink; the gamble on China helped push it over the edge. In 2014, Venezuela’s economy collapsed. People scavenged for food in garbage dumps, hospitals were short of essential medicines and crime surged. Since then, nearly eight million people have fled the country. China largely cut Venezuela off from new credit and loans , leaving behind a slew of unfinished projects .

Venezuela’s over-dependence on China was an early warning that the world ignored. Dozens of other countries that rode China’s rise are now at serious risk of financial distress and debt default as the Chinese economy stagnates. Yet China refuses to offer meaningful foreign debt relief and is doubling down at home on its protectionist trade practices when it should be undertaking reforms to free up and restart its economy, the world’s second-largest and a crucial engine of global growth.

That is the flip side of China’s “miracle.” After the 2008 global financial crisis, the world needed an economic savior, and China filled that role. Starting in 2008, it pumped $29 trillion into its economy over nine years — equivalent to about one-third of global G.D.P. — to keep it going. The positive ripple effects were felt worldwide: From 2008 to 2021 China accounted for more than 40 percent of global growth . Developing countries eagerly attached themselves to what seemed like an unstoppable economic juggernaut, and China became the top trading partner for most of the world’s nations. Like Venezuela, many discovered that the booming Chinese economy was a lucrative new market for their commodity exports, and they leaned heavily into that, allowing other sectors of their economies to languish.

China also lent more than $1 trillion abroad, largely for infrastructure projects to be built by Chinese companies under its Belt and Road Initiative. Over the past two decades, one in three infrastructure projects in Africa was built by Chinese entities. The long-term debt risks for fragile developing economies were often ignored.

Chinese lending has slowed to a trickle

Annual foreign lending

$90 billion

$87 billion

Source: Boston University Global Development Policy Center

China’s economic growth has slowed sharply over the last few decades

China has consistently reported higher economic growth than outside sources estimate. While The Conference Board in recent years estimated numbers close to China’s, Rhodium Group estimated much smaller growth.

15% annual growth of G.D.P.

Reported by China

Estimated by

The Conference Board

Estimated by Rhodium Group

Sources: National Bureau of Statistics of China; The Conference Board; Rhodium Group

China is a major trading partner across the world

Share of total trade with China

10 percent or less

more than 10 percent

No recent data availabe

No recent data available

More than 10 percent

Source: United Nations Comtrade

Note: Trade data as of 2023. For countries where 2023 data is not available, the most recent year is used. Trade figures are reported annually from each nation and may still be incomplete.

China has been one of the world’s largest lenders to emerging markets

Aggregate external public debt owed by developing and emerging markets

$400 billion

International

Monetary Fund

Sources: Horn et al. (2021) “ China's Overseas Lending ,” Journal of International Economics; World Bank; Paris Club; International Monetary Fund

Note: Chart shows debt owed by developing and emerging markets included in the World Bank International Debt Statistics. Data on public debt owed to China is incomplete after 2017.

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Harvard’s Institute of Politics Announces Fall 2024 Resident Fellows

Introduction

CAMBRIDGE, MA - The Institute of Politics at Harvard Kennedy School today announced the appointment of six Resident Fellows who will join the IOP for the Fall 2024 semester. The fellows bring diverse experience in politics, elected office, polling, journalism, and economic development to address the challenges facing our country and world today.

"We are thrilled to welcome this Fall's cohort of Resident Fellows to Harvard to engage and collaborate with our students and community, and to get their thoughts and insight in the final few months of this year's historic election. Their diverse experiences will no doubt inspire our students to consider careers in public service and prepare them to provide essential political leadership in the months and years ahead," said IOP Director Setti Warren .

"We are excited to have such a remarkable group of Fellows at the IOP this Fall. They bring varied perspectives on how to best approach some of our country's most consequential challenges, and I am confident our students will gain important insight into the fields of politics, civic engagement, journalism, and more," said Michael Nutter , Chair of the Institute of Politics' Senior Advisory Committee, and former Mayor of Philadelphia.

"We are thrilled to welcome the incredibly accomplished members of the 2024 Fall Fellows Cohort as we begin the fall semester prior to the incredibly important U.S. election. As we close out the 'biggest election year in history,' our world remains in the throes of a major period of democratic backsliding. American voters, including many Harvard students, will once again face the possibility of reactionary backsliding and threats to fundamental rights. Closer to home, we are keenly aware of the threats to free speech on campus. While this semester will bring renewed challenges to and debates concerning those fundamental rights, we are hopeful that study groups will remain a source of vibrant, productive, and gratifying discussions on Harvard's campus. In that spirit, this semester's cohort of Fellows will bring in critical perspectives from the varied worlds of governing, policymaking, polling, reporting, and campaigning to equip students with the tools necessary to create a better tomorrow. We are confident that this cohort of Fellows will help this program to remain a bastion of freedom of speech and civil discourse on Harvard's campus," said Éamon ÓCearúil ‘25 and Summer Tan ‘26 , Co-Chairs of the Fellows and Study Groups Program at the Institute of Politics.

IOP Resident Fellows are fully engaged with the Harvard community. They reside on campus, mentor a cohort of undergraduate students, hold weekly office hours, and lead an eight-week, not-for-credit study group based on their experience and expertise.

Fall 2024 Resident Fellows:

• Betsy Ankney: Former Campaign Manager, Nikki Haley for President
• John Anzalone: One of the nation's top pollsters and strategists, and founder of Impact Research, a public opinion research and consulting firm
• Alejandra Y. Castillo: Former U.S. Assistant Secretary of Commerce for Economic Development
• Asa Hutchinson: Former Governor of Arkansas and 2024 Presidential Candidate
• Brett Rosenberg: Former Director for Strategic Planning, National Security Council and Deputy Special Coordinator for the Partnership for Global Infrastructure and Investment, Department of State
• Eugene Scott: Host at Axios Live, and former reporter who has spent two decades covering politics at the local, national and international level, including at the Washington Post and CNN

Brief bios and quotes can be found below. Headshots are available upon request.

Betsy Ankney Ankney is a political strategist with over 15 years of experience on tough campaigns. She has been involved in campaigns and Super PACs at the national and state level and played a role in some of the biggest upsets in Republican politics. She has been an advisor to Ambassador Nikki Haley since 2021, serving as Executive Director for Stand for America PAC and most recently as Campaign Manager for Nikki Haley for President. After starting with zero dollars in the bank and 2% in the polls, the campaign defied the odds, raised $80 million, and Nikki Haley emerged as the strongest challenger to Donald Trump. Ankney served as the Political Director of the National Republican Senatorial Committee for the 2020 cycle. She advised senate campaigns across the country, working directly with candidates and their campaigns on budgets, messaging, and fundraising. Prior to her work at the NRSC, Ankney managed multiple statewide campaigns, including Bruce Rauner for Governor in Illinois and Ron Johnson for Senate in Wisconsin. For her work on Ron Johnson’s race, she was named “Campaign Manager of the Year” by the American Association of Political Consultants for 2016. Ankney got her start in politics at the 2008 Republican National Convention and served in various roles at the Republican National Committee as well as on multiple campaigns and outside efforts. She serves on the boards of The Campaign School at Yale and The American Association of Political Consultants. She is from Toledo, Ohio and attended Vanderbilt University.

"I am honored to be a part of the fantastic program at the Harvard Institute of Politics. As we enter the final stretch of one of the wildest and most unpredictable election cycles in modern history, I look forward to having conversations in real time about our political process, what to look for, and why it matters." – Betsy Ankney

John Anzalone Anzalone is one of the nation’s top pollsters and messaging strategists. He has spent decades working on some of the toughest political campaigns in modern history and helping private-sector clients navigate complex challenges. He has polled for the past four presidential races, most recently serving as chief pollster for President Joe Biden’s 2020 campaign. In that role, he helped develop the messaging and strategy that drove paid communications, major policy rollouts, speeches, and convention thematics. He has also polled for the campaigns of President Obama and Hillary Clinton, and has helped elect U.S. senators, governors, and dozens of members of Congress. Anzalone works with governors across the country, including current Governors Gretchen Whitmer (MI) and Roy Cooper (NC). He polls regularly for the Democratic National Committee, the Democratic Senatorial Campaign Committee, the Democratic Congressional Campaign Committee, Senate Majority PAC, and AARP. With more than 30 years of experience in message development and strategic execution, he has been called on by key decision-makers, executives, and CEOs to provide counsel in a changing world and marketplace. He has extensive experience using research and data to break down complex subjects into digestible messages that resonate with target audiences. He grew up in St. Joseph, Michigan, and graduated from Kalamazoo College in Kalamazoo, Michigan. He is married and has four children, two dogs, and lives in Watercolor, Florida.

"After a 40-year career in politics I am so excited to give back by sharing and mentoring politically active and curious students, but also to have an opportunity to learn from them myself. During the next three months we will be living the 2024 elections together in real time. There is nothing more exciting than that regardless of your political identity." – John Anzalone

Alejandra Y. Castillo The Honorable Alejandra Y. Castillo was nominated by President Biden and sworn in as U.S. Assistant Secretary of Commerce for Economic Development on August 13, 2021, becoming the first women of color to hold this position. Ms. Castillo led the Economic Development Administration (EDA) between August 2021-2024 through an unprecedented moment of growth and opportunity. As the only federal agency focused exclusively on economic development, she guided EDA’s the implementation of over $6.8 billion dollars in federal funding, powering EDA and its mission to make transformational placed-based investments to support inclusive and equitable economic growth across America. Spanning over two decades of public service and non-profit work, she has served in three Presidential administrations --Biden, Obama and Clinton. Her career has also included a drive to shattering glass ceilings and providing inspiration to multiple generations of diverse leaders. Castillo is an active member in various civic and professional organizations, including the Hispanic National Bar Association, the American Constitution Society, as well as the Council on Foreign Relations. Castillo holds a B.A. in Economics and Political Science from the State University of New York at Stony Brook; a M.A. in Public Policy from the Lyndon B. Johnson School of Public Affairs, University of Texas at Austin; and a J.D. from American University, Washington College of Law. A native of Queens, NY., the daughter of immigrants from the Dominican Republic.

"I am excited to join this Fall semester IOP Fellowship class and have the opportunity to engage with students and faculty members across the University. The IOP fellowship presents a great forum to discuss and evaluate the future of U.S. industrial strategy and economic growth in light of the historic federal investments in place-based economic development during the last three years. I am honored to join my colleagues in making this an exciting and informative semester for students." – Alejandra Y. Castillo

Asa Hutchinson Governor Asa Hutchinson is a former Republican candidate for President of the United States. He served as the 46th Governor of the State of Arkansas and in his last election, he was re-elected with 65 percent of the vote, having received more votes than any other Republican candidate for governor in the State’s history. As a candidate for President, Hutchinson distinguished himself as an advocate for balancing the federal budget, energy production and enhanced border security. He also was a clear voice for the GOP to move away from the leadership of Donald Trump. Hutchinson’s time as governor is distinguished by his success in securing over $700 million per year in tax cuts, safeguarding the retirement pay of veterans from state income tax, shrinking the size of state government, creating over 100,000 new jobs and leading a national initiative to increase computer science education. The Governor’s career in public service began when President Ronald Reagan appointed him as the youngest U.S. Attorney in the nation for the Western District of Arkansas. In 1996, he won the first of three consecutive terms in the U.S. House of Representatives. During his third term in Congress, President George W. Bush appointed Governor Hutchinson to serve as Administrator of the Drug Enforcement Administration and later as the nation’s first Undersecretary of Homeland Security for Border Protection. He is a former Chairman of the National Governors. He grew up on a small farm near Gravette. He and his wife, Susan, have four children and seven grandchildren. Governor Hutchinson is currently CEO of Hutchinson Group LLC, a security consulting firm.

"After 8 years as Governor it is time to teach and mentor. I am honored to have the opportunity this fall to share my experiences and perspective but to also learn from the students and my colleagues who will also be resident fellows at the IOP. The timing is historic with our democracy facing a critical choice this fall as to the direction of our country." – Asa Hutchinson

Brett Rosenberg Rosenberg is a foreign policy expert who has served in the White House, Department of State, and Senate. During the Biden Administration, Rosenberg was the inaugural Deputy Special Coordinator for the Partnership for Global Infrastructure and Investment, President Biden’s and the G7’s flagship program designed to meet infrastructure needs in low- and middle-income countries. At the White House, Rosenberg served on the National Security Council as Director for Strategic Planning, working on shaping and realizing approaches to issues spanning from international economics to Western Hemisphere engagement, as well as helping to write the National Security Strategy. Prior to her service in the Biden administration, Rosenberg was Associate Director of Policy for National Security Action, where she remains a senior advisor. Rosenberg began her career in Washington as a legislative aide to then-Senator Kamala Harris, where she advised the senator on a range of domestic and economic policy issues. Rosenberg is a Nonresident Scholar at the Carnegie Endowment for International Peace, and her writing has appeared in outlets including Foreign Affairs, Foreign Policy, The New Republic, and McSweeneys. She received her A.B. in History from Harvard College and her PhD (DPhil) in International Relations from the University of Oxford, where she was a Rhodes Scholar.

"What a privilege it is to be part of this incredible community in this incredible moment. I can't wait to learn from the students, faculty, and other fellows as we dive in together to discuss some of the most pressing issues facing the United States and the world." – Brett Rosenberg

Eugene Scott Eugene Scott is a host at Axios Live, where he travels the country interviewing political and policy leaders. He was previously a senior political reporter for Axios covering 2024 swing voters and voting rights. An award-winning journalist, Scott has spent two decades covering politics at the local, national and international levels. He was recently a national political reporter at The Washington Post focused on identity politics and the 2022 midterm election. Following the 2020 presidential election, he hosted “The Next Four Years,” then Amazon’s top original podcast. He also contributed to “FOUR HUNDRED SOULS: A Community History of African America, 1619-2019,” which topped the New York Times’ bestseller list. In addition to writing, Scott has regularly provided political analysis on MSNBC, CBS and NPR. Scott was a Washington Correspondent for CNN Politics during the 2016 election. And he began his newspaper career at the Cape Argus in Cape Town, South Africa not long after beginning his journalism career with BET News’ “Teen Summit.” Scott received his master’s degree from Harvard University’s Kennedy School of Government and his bachelor’s from the University of North Carolina Hussman School of Journalism and Media. He is a D.C. native and continues to live in the Nation’s Capital.

"Learning from and with the professionals that visited the IOP during my time on campus was one of the highlights of my time at the Kennedy School. I am eager to help lead students in understanding the press and this country as we navigate the final weeks of arguably the most consequential election of our time." – Eugene Scott

Additional information can be found here .

About the Institute of Politics Fellows Program The Institute of Politics at Harvard Kennedy School was established in 1966 as a living memorial to President John F. Kennedy. The Institute’s mission is to unite and engage students, particularly undergraduates, with academics, politicians, activists, and policymakers on a non-partisan basis to inspire them to pursue pathways in politics and public service. The Institute blends the academic with practical politics and offers students the opportunity to engage in current events and to acquire skills and perspectives that will assist in their postgraduate pathways.

The Fellows Program has stood as the cornerstone of the IOP, encouraging student interest in public service and increasing the interaction between the academic and political communities. Through the Fellows Program, the Institute aims to provide students with the opportunity to learn from experienced public servants, the space to engage in civil discourse, and the chance to acquire a more holistic and pragmatic view of our political world.

For more information on the fellowship program, including a full list of former fellows, visit: iop.harvard.edu  

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