Reasons Why Economic Growth Is Needed
In many political agreements, economic growth is seen as the central solution to social, economic and also certain ecological problems. Growth is considered to be suitable for curbing unwanted side effects of a market economy.
Growth increases prosperity
Real GDP growth means that the value of a country’s production of goods and services increases. Growth enables people to better meet their material needs. Material goods are indispensable for basic needs such as food, and housing and are crucial for people’s physiological well-being. Building on the assumption that people increase their utility by increasing their consumption, increasing disposable income or GDP per capita is an attractive goal for mainstream economists. The basic idea is that the higher the GDP, the better off the inhabitants of a country are, at least as far as economic prosperity is concerned.
Growth in increases employment and reduces unemployment
Economic growth is crucial for employment and unemployment. This economic principle is also strongly represented in politics. The link between growth and employment can be described in terms of economic factors. Employment increases when economic growth is higher than the increase in labour productivity. Labour productivity increases when the same output can be achieved with fewer hours worked. Unemployment is less affected by economic growth than employment. Labour market policy and demographic influences play a major role here.
Growth increases productivity and creates a head start in system competition
Economic growth is an important motor for technical progress. It is often argued that economic growth leads to higher productivity due to increasing returns to scale.
Specializing in the production of export goods, for example, can increase both productivity and skill levels in the export sector. This can result in resources flowing from less efficient sectors to the export sector. As a result, prices fall, goods become more competitive and exports increase. Thus, productivity increases can also lead to economic growth.
Growth in the economy and business insurance is perceived as progress
For some, economic growth is synonymous with progress. The reason is that gross domestic product is used as an indicator of progress. Success in the economy means that businesses can contact business insurance brokers perth regarding their company’s insurance easily.