Как изменить экономический рост

По мнению экспертов Форума, чтобы выйти на темпы экономического роста выше 3%, нужны дополнительные меры и стимулы. Среди них — изменение качества производственного капитала и рабочих мест, поддержание доходов населения, увеличение инвестиций в основной капитал, вложений в «экономику знаний», развитие жилищного строительства и отечественного экспорта.

«Можно отметить, что меры, которые приняло правительство, уменьшили масштабы спада российской экономики в 2020 году, по нашей оценке, на 1,8%, — подчеркнул Андрей Клепач. — В реальные доходы населения они добавили более 3 процентных пунктов. Иначе мы получили бы падение не около 5%, а 7-8%».

Главный экономист ВЭБ РФ отметил, что прекращение действия большинства мер в конце 2020 года и ограниченный эффект бюджетного правила будут препятствовать V-образному отскоку экономики в 2021 году и сдержат рост ВВП в 2021-2024 годах.

По словам эксперта, чтобы выйти на темпы роста выше 3%, нужны дополнительные социальные и секторальные меры, в том числе — для поддержания доходов населения.

«Ситуация с доходами населения, как мы видим за последние 7 лет, является крайне болевой точкой, серьезным социальным вызовом и ограничением для экономического роста», — отметил Андрей Клепач.

Президент ВЭО России и Международного Союза экономистов Сергей Бодрунов напомнил, что основной целью модернизации не только социальной, но в целом экономической политики является устойчивое повышение уровня и качества жизни населения, именно на это должны быть направлены все преобразования.

«Оценка всех проводимых реформ должна проводиться именно через призму роста благосостояния россиян и уровня их жизни», — процитировал Сергей Бодрунов академика Леонида Абалкина.

Директор Института народнохозяйственного прогнозирования РАН, член Правления ВЭО России Александр Широв отметил, что главная проблема — в социальной сфере.

«Наша экономика — это на 50% потребительский спрос, — уверен Александр Широв. — Понятно, что ни уровень, ни качество жизни, ни та оплата труда, которую получают большая часть работников, нас устроить не могут. — отметил ученый. — Нужно изменить качество производственного капитала, тех рабочих мест, которые у нас сейчас есть, потому что когда 30% рабочих мест являются низкотехнологичными и малооплачиваемыми, трудно ожидать высокий уровень доходов населения в этих секторах».

«Перед экономикой стоят фундаментальные вызовы и главный из них — это повышение уровня жизни и доходов населения, — поддержал коллег президент ИМЭМО имени Е.М. Примакова РАН, вице-президент ВЭО России Александр Дынкин. — Есть два взаимосвязанных пути — экономический рост и инновационная экономика. И здесь нет того звена, потянув за которое, можно вытащить всю цепь, нет одного волшебного рецепта».

По словам академика Дынкина, пространство инновационной конкуренции в экономике ограничивает значительная доля госсектора. «Тиражирование инноваций означает способность создавать на своей территории высокую добавленную стоимость, — отметил Александр Дынкин. — Если это происходит, значит доля высококвалифицированного труда в национальной экономике растет и соответственно растет уровень жизни. Какие ресурсы можно использовать? Хотел бы отметить, что в странах инновационных лидерах госсобственность составляет 5-10%. Китай демонстрирует блестящие инновационные достижения при доле госпредприятий в выпуске ВВП порядка 30%.У нас, по скромным оценкам,государственная собственность составляет 45-50%».

«В России слабы институты защиты интеллектуальной собственности, высоки риски венчурных инвестиций, мы по-прежнему ориентируемся на линейные и вертикально интегрированные инновационные модели, в то время ка весь мир перешел к нелинейным, плоским структурам, -добавил Александр Дынкин. При определении посткризисной стратегии эти обстоятельства стоит учитывать».

Академик Абел Аганбегян назвал четыре главных драйвера экономического роста:инвестиции в основной капитал, вложения в «экономику знаний», жилищное строительство и развитие экспорта.

«Нам нужен финансовый форсаж — следует перейти с 2021 года на 10-14% рост этих драйверов, — уверен Абел Аганбегян. — У нас огромные внутренние резервы. В этом году они впервые перевалили за 600 млрд долларов».

По словам Абела Аганбегяна, переход к стимулированию экономического роста требует изменения бюджетного правила и «распечатывания» резервов. Эти средства, используя долгосрочные низкопроцентные инвестиционные кредиты, следует направить на технологическое перевооружение, создание новой транспортно-логистической инфраструктуры, введение новых мощностей высокотехнологичных отраслей.

Заведующий отделом международных рынков капитала ИМЭМО имени Е.М. Примакова РАН, член Правления ВЭО России Яков Миркин согласился с необходимостью использовать до 30-40% резервов для стимулирования инвестиций внутри страны, в том числе на закупки технологий и оборудования.

Ученый привел формулу сверхбыстрого роста экономики, которая включает умеренный, осторожный финансовый форсаж, рост монетизации, насыщенности кредитами и финансовыми инструментами при значимом сокращении процента и инфляции,регулирование счета капитала рыночными методами, снижение налоговой нагрузки до 31-32% ВВП и введение максимум стимулов для прямых иностранных долгосрочных портфельных инвестиций.

По словам Якова Миркина, необходим взвешенный рост торгового протекционизма, который через торговые и неторговые барьеры стимулирует перемещение в Россию производства, а также программа дешевой ипотеки и программа инвестиций для выравнивания уровня жизни для 15-20 регионов, являющихся зонами национального бедствия.

Все эти меры, по словам ученого, дадут 4-5% рост российского ВВП и масштабную реструктуризацию экономики, создадут основы для массовых прямых иностранных инвестиций и трансфертов технологий из-за рубежа.

По итогам форума будут подготовлены и направлены в органы государственного управления экспертные предложения в «Единый план достижения национальных целей до 2030 года».

Трудно не заметить, что еще пять лет назад, а то и год, многие товары стоили существенно дешевле. В ликбезе мы расскажем об основных типах инфляции, ее причинах и о том, как сохранить сбережения

Что такое инфляция?

Инфляция — это темп устойчивого повышения общего уровня цен на товары и услуги за определенный промежуток времени, также инфляция показывает степень обесценивания денег. Чаще всего инфляцию принято указывать в годовом выражении, или, как еще говорят, год к году. Так, если инфляция в годовом выражении составила 8,4%, то имеют в виду, что набор одних и тех же товаров, который год назад стоил 100 рублей, сейчас стоит 108,4 рубля. Соответственно, 100 рублей обесценились или потеряли покупательную способность на 8,4%. Это и есть инфляция. В России помимо годовой инфляции Росстат измеряет еженедельную и ежемесячную.

Конкретное и единое численное обозначение нормы инфляции не существует. Это связано с тем, что «нормальность» уровня инфляции зависит от множества факторов и условий для каждой конкретной страны или рынка, а также от цели определения нормы инфляции. В целом, оптимальным, комфортным считается тот уровень инфляции, при котором продолжается, а не замедляется, экономический рост и при этом сохраняется низкий уровень безработицы.

«Строго говоря, согласно выводам теоретической экономики и различных равновесных моделей, идеальным значением инфляции является ноль, что соответствует стабильному/неизменному уровню цен, — рассказал эксперт института «Центр развития НИУ ВШЭ» Игорь Сафонов. — Однако на практике центральные банки различных стран все же стремятся поддерживать темп прироста общего уровня цен на товары и услуги (т. е. инфляцию) на небольшом положительном уровне. Главной причиной этого является непропорциональный рост издержек на борьбу с инфляцией по мере приближения к нулевому значению, в связи с чем оптимальным является удержание темпов прироста цен в пределах некоторой величины больше нуля. Также в условиях умеренного роста цен ряд поведенческих факторов и особенностей реального производства могут оказывать стимулирующий эффект для экономического развития».

Сочетание высокой инфляции, которая сопровождается ослаблением экономики и ростом безработицы, называется стагфляцией.

Виды инфляции

Виды инфляции по темпам роста

• Низкая (ползучая) инфляция — до 5-6% в год.
• Умеренная — до 10% в год.
• Высокая (галопирующая) — до 50% в год.
• Гиперинфляция — свыше 50% в месяц. В Германии в начале 1920-х годов инфляция достигла 30 000% в месяц. В Зимбабве ежемесячный рост цен в ноябре 2008 года достиг примерно 79 600 000 000%.
• Дефляция — отрицательная инфляция, которая характеризуется повышением покупательной способности денег на фоне устойчивого снижения общего уровня цен. На 100 рублей можно купить больше, чем раньше.
• Дезинфляция — это замедление темпов инфляции. Например, когда говорят, что уровень инфляции снизился с 8,4% до 6%, это означает что общий уровень цен продолжает расти, но более медленными темпами, чем раньше.

В экономическом смысле дефляцию — устойчивое снижение общего уровня цен на товары и услуги, следует отличать от кратковременного снижения уровня цен, вызванного сезонными факторами, а также снижения цен на отдельные товары и услуги, вызванного, например, техническим прогрессом в указанной области, рассказал эксперт института «Центр развития НИУ ВШЭ» Игорь Сафонов. «Выгоды от нее [дефляции], несмотря на видимую привлекательность ситуации, обычно оказываются краткосрочными и заключаются в возможности приобретения потребителями товаров по более низкой, чем раньше цене. Однако, стремление подождать удешевления товаров приводит к сокращению текущего спроса и, как следствие, производства. При этом компании начинают испытывать сложности с обслуживанием кредитных обязательств, а также сокращать
инвестиции 
, издержки и персонал, его заработную плату в связи со снижением уровня выпуска. Рост безработицы и проблемы с обслуживанием кредитов предприятиями реального сектора снижают финансовую устойчивость банков и создают риски для сбережений, которые формировало население для приобретения товаров в будущем. Сомнения в надежности банковского сектора приводят к изъятию населением денег из него, что лишь усугубляет проблему. Сбережения при этом часто реинвестируются в более надежные финансовые инструменты других стран. Спираль сокращения потребления, производства, инвестиций и занятости/зарплат, как показывает практика, может иметь устойчивый долговременный характер, с которым очень тяжело бороться», — отметил эксперт.

Виды инфляции по управляемости

• Открытая инфляция — не сдерживаемая инфляция, показывающая реальное повышение цен без скрытых факторов и давления. Открытая инфляция адекватно отражает происходящие в рыночной экономике изменения, рост или падение спроса и предложения.
• Скрытая (подавленная) инфляция — регулируемая государством инфляция. Замораживание цен, установление их максимальных порогов (лимитов), максимальных надбавок и тому подобные меры ведут к появлению дисбаланса на рынке между спросом и предложением. Кроме того, регулирование цен государством замедляет выход на рынок новых товаров, технологически более высокого качества. У производителя нет стимула и экономической выгоды представлять новый продукт, если его придется продавать по заранее известной цене.
• Таргетируемая инфляция — центральным банком страны (регулятором) устанавливается конкретная цель (таргет, целевой уровень) или допустимый диапазон инфляции. Меры регуляции начинают применяться государством при отклонении от целевого уровня. Для разных стран таргеты инфляции различаются. Несмотря на то, что четкого понятия оптимальной инфляции в экономической науке не существует, исторические данные свидетельствуют, что страны с развитой экономикой чаще всего устанавливают таргет по инфляции на уровне 2%, а страны с формирующимся рынком — от 3% и выше. Таргетируемая инфляция положительно влияет на экономику, если она предсказуема и долгосрочна, когда все участники экономики понимают, чего ждать от политики государства в плане экономического развития.

Как рассчитывается инфляция

Для расчета индекса инфляции существуют формулы Ласпейреса, Пааше и Фишера. Чаще всего страны, в том числе Россия, используют формулу Ласпейреса, которая выявляет удорожание или удешевление стоимости потребительской корзины на текущий период и на базисный период.

Индекс инфляции общепринято указывать по формуле «Инфляция = Индекс потребительских цен — 100%». Индекс потребительских цен (ИПЦ) отражает изменение стоимости набора определенных товаров и услуг. Значения выше 100% показывают уровень инфляции, ниже — дефляции.

Например, сообщение Росстата о величине индекса потребительских цен на уровне 108,4% за 2021 год свидетельствует о темпе роста инфляции на 8,4% за период с конца декабря 2020 года на конец декабря 2021 года.

Индекс потребительских цен рассчитывается на основе статистических данных об уровне цен на определенное количество товаров и услуг, так называемой потребительской корзины. Корзина не содержит все товары или услуги в стране, но она дает достаточно полное представление как о типах товаров, так и об их количестве, которые обычно потребляют домохозяйства.

В России с 2022 года в «корзину» товаров и услуг включено 558 наименований. В список отслеживаемых Росстатом товаров и услуг попадают те траты, на которые приходится больше 0,1% расходов домашних хозяйств. Замеры проводятся в 282 российских городах. На основе полученных данных высчитывается индекс потребительских цен (ИПЦ).

Инфляция потребительских цен в зоне евро ежемесячно рассчитывается Евростатом. Гармонизированный индекс потребительских цен (HICP) охватывает в среднем около 700 товаров и услуг. Он отражает средние расходы домохозяйств в зоне евро на корзину продуктов. Замеры проводятся почти в 1600 городах по всей зоне евро.

В США ежемесячно сообщает об ИПЦ Бюро статистики труда США (BLS) на основе регистрации цен на около 80 000 наименований товаров и услуг.

Помимо индекса потребительских цен при расчете инфляции также используются:

• индекс оптовых цен — следит за изменением цен на товары до их попадания в розницу, используется компаниями и государствами для фиксации в договорах гарантий стоимости;
• индекс цен производителей — следит за отпускными ценами промышленных и сельскохозяйственных товаров, а также стоимостью грузовых транспортных перевозок;
• индекс цен на импорт/экспорт — измеряет цены на ввозимые из-за рубежа товары и вывозимые.

Дополнительные индексы применяются, когда необходимо конкретизировать и проследить определенный аспект инфляции.

Нетрадиционные (альтернативные) способы расчета инфляции

Для решения задач, которые не удовлетворяются стандартными индексами от госстатистики, применяются альтернативные методики отслеживания инфляции.

Например, в магазинах торговой сети «Пятерочка» подсчитывают стоимость условного продовольственного набора по средним/минимальным ценам и публикуют индекс «Пятерочки».

Сбербанк рассчитывает индекс потребительских расходов, который в полной мере нельзя считать аналогом индекса потребительских цен, но тем не менее он отражает в некоторой степени скорость инфляции со стороны потребителя. Банк ВТБ совместно с РАНХиГС собирает собственную базу данных по ценам крупнейших магазинов.

Экономист из РАНХиГС Александр Абрамов рассчитывает «индекс мармеладных мишек», в который включены цены на импортные мишки-конфеты для учета обменного курса, а также еще 11 основных продуктов, таких как хлеб, молоко и куриное мясо. По индексу Абрамова инфляция в ноябре 2021 года достигла 26,1%, в то время как данные Росстата показывали рост 8,4%.

Российский Росстат ситуативно рассчитывает индексы салатов оливье и сельди под шубой (в преддверии Нового года), Банк России — индекс блинов (перед Масленицей), исследователи Сбербанка — индекс шашлыка (перед майскими праздниками). Также известен индекс биг-мака, который был придуман авторами журнала The Economist и отражает относительную стоимость товаров и услуг в разных странах. Индекс биг-мака используется для оценки покупательной способности различных валют, исходя из гипотезы, что составляющие данного блюда должны одинаково стоить во всех странах.

Отдельно экономисты указывают на существование понятия личной (персональной) инфляции, которая отражает разность оценки инфляции различными домохозяйствами из-за несовпадения их корзины товаров и услуг и средней корзины индекса потребительских цен. Условно говоря, семья Ивановых может посчитать инфляцию в своей отдельно взятой ячейке, и она окажется 20%, а в семье Сидоровых — 35% из-за того, что они покупают разные товары.

Например: если цены на бензин растут намного больше, чем цены на другие товары и услуги, люди, часто пользующиеся автомобилем, могут «почувствовать» уровень инфляции, превышающий ИПЦ, потому что их личные расходы на бензин выше среднего. Напротив, у тех, кто ездит на машине редко или вообще не ездит, будет наблюдаться более низкий «личный» уровень инфляции. Кроме того, в оценке личной инфляции играет роль тот факт, что люди склонны сравнивать цены не год к году, как это делают официальные ведомства, а, допустим, в январе 2022 года вспоминать, сколько стоили яйца в 2009 году. Так как в течение длительного времени цены имеют тенденцию к существенному росту, то даже при низком годовом уровне инфляции рост окажется внушительным.

Причины инфляции

Причины инфляции описывают две наиболее влиятельные школы — это кейнсианская и монетаристская экономические теории.

Кейнсианские экономисты утверждают, что инфляция является результатом экономического давления, такого как рост себестоимости продукции, и рассматривают вмешательство государства как решение. Кейнсианская школа различает два основных типа инфляции: инфляцию издержек и инфляцию спроса.

• Инфляция издержек — это общее увеличение стоимости факторов производства. Эти факторы, в том числе, капитал, земля, труд и предпринимательство, являются необходимыми условиями для производства товаров и услуг. Когда стоимость этих факторов возрастает, производители, желающие сохранить свою норму прибыли, повышают цены на свои товары и услуги. Когда эти производственные издержки растут на уровне всей экономики, это может привести к росту потребительских цен во всей экономике, поскольку производители перекладывают свои возросшие издержки на потребителей.
• Инфляция спроса — это превышение совокупного спроса над совокупным предложением. Например, если спрос на популярный продукт выше, чем его предложение, то цена на него вырастет. Теория инфляции спроса заключается в том, что если совокупный спрос превышает совокупное предложение, то цены будут расти в масштабах всей экономики.

Экономисты-монетаристы считают, что инфляция связана с расширением денежной массы и что центральные банки должны поддерживать стабильный рост денежной массы в соответствии с ростом валового внутреннего продукта (ВВП). В противном случае, чем больше печатается денег, необеспеченных реальным увеличением производства товаров и услуг, которые можно купить на эту напечатанную сумму, тем быстрее будет разгоняться инфляция.

Последствия инфляции

Инфляция может быть истолкована как положительно так и отрицательно, в зависимости от того, на чьей стороне и как быстро происходят изменения.

Общий рост экономики

Умеренная инфляция рассматривается экономистами как драйвер роста экономики.

Инфляция создает мотивацию для формирования сбережений, без которых, в свою очередь, невозможны инвестиции как для расширения производства, так и для внедрения новых технологий — здесь инвестиции, инфляция и сбережения становятся перекрестно взаимосвязаны между собой, объясняет Игорь Сафонов.

«Необходимость формировать сбережения и в то же время поддерживать уровень потребления, в свою очередь, формирует мотивацию к повышению отдачи от имеющихся факторов производства — главным образом, труда, но также и земли, капитала, предпринимательских способностей, что положительно сказывается на экономическом росте.

Определенного ответа на вопрос относительно конкретного числового значения инфляции, при котором сохраняются положительные эффекты, не существует, в том числе потому, что величину данных эффектов в реальной экономике выделить и посчитать практически невозможно. Тем не менее, очевидно, что по сравнению со стимулирующими сторонами негативные последствия инфляции являются существенно более тяжелыми, в связи с чем регуляторы стараются постепенно снизить её до как можно меньшего стабильного уровня», — заключил эксперт.

Снижение реальных доходов населения

Для людей, чьи пенсии или доходы фиксированы в номинальном выражении, рост цен подрывает реальную покупательную способность этих доходов и пенсий. Даже если рабочие получают повышение заработной платы в соответствии с инфляцией, то и уплачиваемый налог с зарплаты (НДФЛ) также увеличивается. Тем более, что зарплата и пенсии, как правило, повышаются уже постфактум, а не на опережение инфляции. В итоге доходы после уплаты налогов не поспевают за более высокими ценами.

Поощрение трат, инвестиций

Инфляция вызывает рост трат — люди торопятся купить товары по старой цене, пока она не выросла еще больше, в этот период доля сбережений и инвестиций может падать. Однако, в то же время при повышении ключевой ставки на фоне высокой инфляции, население переходит обратно к поведению накопления, стараясь повысить доходность консервативных инвестиций.

Ускорение инфляции

Инфляция раскручивает маховик роста цен или создает потенциально катастрофическую петлю обратной связи. Чем больше и быстрее люди и предприятия тратят деньги, пытаясь избавиться от обесценивающейся валюты, тем больше в экономике оказывается наличных. В результате предложение денег превышает спрос, и цена денег — покупательная способность валюты — падает все более быстрыми темпами.

Повышение стоимости кредитов и доходности вкладов

Для сдерживания инфляции государства повышают ключевые ставки. Соответственно, повышаются ставки на кредиты для населения и бизнеса. Дорогие кредиты снижают возможности начать свой бизнес, получить образование, нанять новых работников или модернизировать производство. Высокие ставки дестимулируют расходы и инвестиции, что, в свою очередь, обычно охлаждает инфляцию.

Одновременно с этим, коммерческие банки повышают ставки по вкладам. Это заставляет людей вместо трат вернуться к поведению накопления, чтобы заработать на процентах. Уменьшение в обороте денег увеличивает их стоимость.

Безработица

Безработица может как расти, так и падать при инфляции. Так, инфляция, которая стимулирует экономический рост подразумевает тенденцию нанимать больше людей на работу, но она сохраняется только до определенного момента.

Если рассматривать инфляцию и безработицу в краткосрочной перспективе, то между ними существует явная отрицательная взаимосвязь, известная как кривая Филлипса, объясняет профессор Российской экономической школы Валерий Черноокий. «В периоды повышенного спроса, бурного экономического роста и низкой безработицы, компании часто сталкиваются с дефицитом работников и вынуждены предлагать более высокую заработную плату. Рост издержек на труд в свою очередь заставляет фирмы повышать свои цены, что отражается в увеличении темпов инфляции. Однако, эта взаимосвязь не является устойчивой. Со временем высокая инфляция вызывает рост инфляционных ожиданий, и дальнейшее стимулирование спроса только усиливает инфляционное давление без какого-либо положительного влияния на занятость. Кроме того, различные экономические шоки со стороны предложения, такие как рост цен на энергоносители, техногенные катастрофы или нарушение логистических цепочек могут вызывать одновременно и рост инфляции, и рост безработицы, искажая кривую Филлипса даже в краткосрочном плане», — отметил эксперт.

Ослабляет или укрепляет валюту

Высокая инфляция может вызвать падение курса национальной валюты. Хотя обычно все наоборот- слабая валюта ведет к инфляции. Страны, которые импортируют значительные объемы товаров и услуг вынуждены платить больше за этот импорт в местной валюте, когда их валюты падают по отношению к валютам их торговых партнеров.

Укрепление валюты на фоне инфляции может произойти в ситуации, когда деньги какой-то страны начинают выглядеть более привлекательны, чем другие. Например, после победы Трампа курс доллара относительно валют других развитых стран рос. Причина заключалась в том, что процентные ставки в других странах были крайне низкими, а инфляционные ожидания в США повысились на фоне прогнозов скорого экономического роста.

Инфляция в России

Официально в СССР индекс инфляции не рассчитывался. Рост экономики достигался директивными методами плановой экономики. При этом люди были склонны к долгосрочным накоплениям и цены на большую часть товаров не менялись годами и десятилетиями. При переходе России на рыночную экономику с 1991 года начал рассчитываться индекс инфляции. Исторический максимум значения инфляции в РФ был зафиксирован в 1992 году на уровне 2508,8% годовых. Исторический минимум был в 2017 году, когда инфляция в России составила по итогам года 2,5%.

С ноября 2014 года Банк России установил целевой уровень по инфляции на уровне 4%, с тех пор он неизменен, в том числе, и на 2022 год.

Обоснования оптимальности инфляции в России на уровне 4% не существует, говорит Игорь Сафонов. «Как показывает практика мирового инфляционного таргетирования оно находится ближе в середине между целевыми значениями, принятыми в развитых странах (чаще всего около 2%) и в развивающихся (наиболее часто 6%). Слишком низко установленная цель (ближе к нулевой отметке) может потребовать значительного ограничения экономической активности и спровоцировать дефляцию и
экономический спад 
в отдельных отраслях экономики, не говоря уже о значительном падении доверия к ЦБ в случае её недостижения. В то же время центральные банки, ставящие целевое значение слишком высоко, гораздо чаще допускают выход инфляции за его пределы как в целом, так и в отдельных отраслях и также испытывают проблемы с доверием населения к проводимой политике из-за недостаточных по его мнению усилий по борьбе с ростом цен», — заключил эксперт.

В 2022 году на уровень инфляции в России будут влиять те же факторы, что и в прошлом году, рассказал главный экономист SberCIB Investment Research Антон Струченевский.

Проинфляционными факторами, по мнению эксперта, остаются:

• глобальная инфляция на рынке товаров;
• рост внутреннего спроса под влиянием растущего кредитования;
• ограничения на путешествия россиян за границу из-за пандемии, что разогревает внутренний туристический рынок;
• ассиметричное восстановление на рынке труда в условиях ограниченной миграции, что привело к резкому росту зарплат в ряде сегментов (сельское хозяйство, курьерские службы, строительство, гостиничный бизнес) и, соответственно, цен.

Меры борьбы с инфляцией

Таргетирование инфляции

Установка таргета — это один из способов держать инфляцию на оптимальном уровне, при котором сохраняется положительный эффект от нее без снижения роста экономики.

Центральные банки чутко следят за тем, чтобы ситуация не скатилась к дефляции. При таргетировании инфляции важнейшими условиями являются ее предсказуемость на долгосрочном периоде. В таком случае все экономические агенты могут спокойно прогнозировать свои собственные расходы и находить способы увеличения доходов, накоплений и инвестиций, не переживая за их непредсказуемое обесценение. Кроме того, достижение целевых показателей по уровню инфляции способствует формированию более низких ставок в экономике и повышает доступность кредитов.

Контроль денежной массы

Вливание в экономику денег, необеспеченных реальными товарами и услугами, ведет к их обесцениванию и, соответственно, разгону инфляции. Именно это произошло, когда Германия для выплат по репарации за Первую мировую войну запустила печатные станки, и когда слитки ацтеков и инков наводнили Испанию в 16-ом веке.

В современных условиях для повышения ставок центральные банки увеличивают выпуск государственных ценных бумаг и забирают выручку от денежной массы. По мере того, как денежная масса уменьшается, снижается и уровень инфляции. Обратной формой является количественное смягчение, при которой центральный банк покупает долгосрочные ценные бумаги на открытом рынке, чтобы увеличить денежную массу и стимулировать кредитование и инвестиции. Покупка ценных бумаг добавляет новые деньги в экономику, а также служит для снижения процентных ставок за счет повышения цен на
ценные бумаги 
с фиксированным доходом. Количественное смягчение обычно применяется, когда процентные ставки уже близки к нулю, потому что в этот момент у центральных банков меньше инструментов для влияния на экономический рост.

Текущая высокая инфляция является результатом целого ряда причин, говорит главный исполнительный директор ВТБ Капитал Инвестиции, старший вице-президент ВТБ Владимир Потапов. По его мнению, это структурное изменение спроса — люди стали меньше денег тратить на услуги и больше на товары длительного пользования, проблемы с цепочками поставок — недостаточное количество рабочих, локдауны и ограничения в работе транспортных хабов, масштабные бюджетные и монетарные стимулы — поддержали совокупный спрос и доходы людей.

«Для снижения «спросовой» стороны инфляции необходимы нормализация бюджетной политики и ужесточение денежно-кредитных условий, которые уже наблюдаются по всему миру. Однако для полного возврата инфляционного давления к норме необходимо увидеть улучшение эпидемиологической ситуации в мире, ослабление карантинных ограничений и, в результате, нормализацию цепочек поставок», — заключил Потапов.

Валерий Черноокий обращает внимание то, что в настоящее время высокая инфляция связана с комбинацией факторов со стороны спроса и предложения.

«С одной стороны, масштабные программы поддержки экономики во время пандемии, сверхмягкая денежная политика в развитых странах и отложенный потребительский и инвестиционный спрос вызвали быстрый рост мировой экономики, восстановление рынков труда и повышение инфляции. С другой стороны, эти же факторы привели к буму на рынках сырьевых товаров и значительному росту цен на продовольствие и энергоносители. Вкупе с нарушением логистических и транспортных цепочек поставок эти шоки предложения не только сдерживают полное восстановление мировой экономики, но и усиливают инфляционное давление.

Для борьбы с шоками предложения инструменты денежно-кредитной политики практически бесполезны, и связанная с ними инфляция будет ослабляться только вслед за исправлением вызвавших их причин, например, вслед за восстановлением международных цепочек поставок или увеличением производства сырья», — отметил эксперт.

Эффективность мер кредитно-денежной политики в борьбе с инфляцией сильно отличается от страны к стране, добавил Валерий Черноокий. В развитых странах, где значительно ниже доля продовольствия и энергоресурсов в потребительской корзине, где прочнее заякорены инфляционные ожидания и где сильнее развиты финансовые рынки, небольшое повышение ставки процента может оказать более значимое влияние на спрос и инфляцию, чем в странах с развивающимися рынками. На эффективность денежно-кредитной политики влияют также открытость экономики, доля импорта в потреблении и промежуточных затратах фирм, используемый режим валютного курса, степень монополизации экономики и многие другие факторы.

Можно ли защитить свои доходы от инфляции

Для потребителей инфляция может означать в лучшем случае увеличение номинальной зарплаты, но инвесторы могут использовать ее для получения прибыли, главное, правильно выбрать активы.

Недвижимость

Рост цен на недвижимость со временем увеличивает стоимость собственности при перепродаже, кроме того, недвижимость можно использовать для получения дохода от аренды. При этом стоимость арендной платы также растет с инфляцией. Это позволяет владельцу получать доход за счет инвестиционной собственности и помогает ему идти в ногу с общим ростом цен в экономике. Инвестиции в недвижимость включают прямое владение недвижимостью и косвенные инвестиции в ценные бумаги, такие как инвестиционный фонд недвижимости (REIT).

Товары

Когда у валюты возникают проблемы инвесторы могут обратиться к материальным активам. На протяжении многих лет традиционным убежищем считалось золото и другие драгоценные металлы. На данный момент эта догма подвергается сомнению, тем не менее классические долгосрочные инвесторы не скидывают его со счетов. Помимо прямых покупок физического золота, можно инвестировать в акции компании, занимающейся добычей золота или в биржевой фонд (
ETF 
), который специализируется на золоте.

Среди товаров, которые могут рассматриваться как средство хеджирования или защиты от инфляции также относят нефть. Цена на нее перетекает в цену бензина, а затем в цену каждого потребительского товара, перевозимого или производимого. Поскольку современное общество не может пока функционировать без топлива для движения транспортных средств, нефть имеет сильную привлекательность для инвесторов, когда цены растут.

Облигации

Инвестиции в облигации могут показаться нелогичными, поскольку инфляция губительна для любого инструмента с фиксированным доходом. Однако, на фондовом рынке существуют
облигации 
, доходность которых привязана к индексу потребительских цен.

«Для защиты от инфляции в рублевых активах инвесторы могут рассмотреть облигации с плавающим купоном (флоатеры) или облигации, номинал которых индексируется на величину роста инфляции (линкеры), например, ОФЗ-ИН, — говорит Дмитрий Макаров, стратег по рынку акций SberCIB. — От долларовой инфляции можно спастись в TIPS — «трежерис» казначейства США, которые индексируются с учетом инфляции. Интересной выглядит стратегия по покупке долларов на бирже и вложении их в короткие еврооблигации надежных
эмитентов 
и ETF на казначейские облигации с защитой от инфляции. Среди таких фондов VTIP US (только для квалифицированных инвесторов) и FXIP, который торгуется на МосБирже и доступен неквалифицированным инвесторам».

Акции

У акций есть шансы идти в ногу с инфляцией, но не все акции одинаково полезны в качестве защитного инструмента. Например, акции, приносящие высокие
дивиденды 
, как и облигации с фиксированной процентной ставкой, имеют тенденцию падать во времена инфляции. Выигрывают, как правило, те компании, которые могут переложить на клиентов свои растущие затраты на продукцию, например, в секторе потребительских товаров.

Плюсы и минусы инвестирования в инфляцию

У каждого типа инвестиционного хеджирования есть свои плюсы и минусы, так же как и у любого вида инвестиций есть плюсы и минусы.

Основное преимущество инвестирования во время инфляции — это сохранение покупательной способности портфеля. При более удачном варианте сбережения вырастут. Для достижения этих целей инвестиционные консультанты рекомендуют диверсифицировать портфель. Распределение риска между различными активами — проверенный временем способ борьбы с инфляцией.

Плюсы

• Сохранение стоимости портфеля
• Диверсификация активов
• Сохранение покупательной способности дохода

Минусы

• Увеличение потенциального риска
• Изменение долгосрочных целей
• Перегрузка портфеля в некоторых классах

Традиционно защитой от высокой инфляции принято считать сырьевой сектор, говорит Владимир Потапов. «Инвесторы могут увеличить экспозицию портфеля на золото и другие сырьевые товары — нефть, газ, металлы и т. д. напрямую или через релевантные инструменты, например, акции сырьевых компаний. Тем не менее, стоит учитывать, что позиционирование в сторону высокой инфляции началось еще в середине 2021 года, поэтому котировки на эти инструменты во многом уже закладывают инфляционный сценарий, а значит для их существенного роста необходимо увидеть новую волну заметного ускорения инфляции, что сейчас не выглядит самым вероятным сценарием», — заключил эксперт.

Больше новостей об инвестициях вы найдете в нашем телеграм-канале «Сам ты инвестор!»

Биржевой фонд, вкладывающий средства участников в акции по определенному принципу: например, в индекс, отрасль или регион. Помимо акций в состав фонда могут входить и другие инструменты: бонды, товары и пр.

Макроэкономический термин, обозначающий значительное снижение экономической активности. Главный показатель рецессии – снижение ВВП два квартала подряд.

Лицо, выпускающее ценные бумаги. Эмитентом может быть как физическое лицо, так и юридическое (компании, органы исполнительной власти или местного самоуправления).

Финансовый инстурмент, используемый для привлечения капитала. Основные типы ценных бумаг: акции (предоставляет владельцу право собственности), облигации (долговая ценная бумага) и их производные.
Подробнее

Долговая ценная бумага, владелец которой имеет право получить от выпустившего облигацию лица, ее номинальную стоимость в оговоренный срок. Помимо этого облигация предполагает право владельца получать процент от ее номинальной стоимости либо иные имущественные права.

Облигации являются эквивалентом займа и по своему принципу схожи с процессом кредитования. Выпускать облигации могут как государства, так и частные компании.

Инвестиции — это вложение денежных средств для получения дохода или сохранения капитала. Различают финансовые инвестиции (покупка ценных бумаг) и реальные (инвестиции в промышленность, строительство и так далее). В широком смысле инвестиции делятся на множество подвидов: частные или государственные, спекулятивные или венчурные и прочие.
Подробнее

Дивиденды — это часть прибыли или свободного денежного потока (FCF), которую компания выплачивает акционерам. Сумма выплат зависит от дивидендной политики. Там же прописана их периодичность — раз в год, каждое полугодие или квартал. Есть компании, которые не платят дивиденды, а направляют прибыль на развитие бизнеса или просто не имеют возможности из-за слабых результатов.

Акции дивидендных компаний чаще всего интересны инвесторам, которые хотят добиться финансовой независимости или обеспечить себе достойный уровень жизни на пенсии. При помощи дивидендов они создают себе источник пассивного дохода.
Подробнее

За три месяца, прошедших с момента появления программы Столыпинского клуба «Экономика роста», разрослась настоящая экономическая дискуссия. В этой связи стоит вспомнить высказывание Махатмы Ганди: «Сначала над тобой смеются, затем с тобой спорят, потом ты побеждаешь». Задачу номер один мы выполнили: прошли период насмешек, расшевелили спящее аморфное общество — заставили его задуматься о стратегиях, программах, о будущем.

Задача номер два — выиграть теоретический спор разных экономических концепций. Стране нужен дополнительный источник роста, помимо нефтегазового сектора. Им может стать только внутреннее производство, МСБ, экспорт продуктов  глубокой переработки сырья, импортозамещение. Однако принять столь необходимые шаги мешает  инертность мышления Центробанка и экономического блока правительства. Ей на руку играет обскурантизм ряда дворцовых экономических экспертов. Конечно, мы спорим не с огульной (каковой больше всего), а с умной критикой от профессиональных апологетов экономического догмата, главенствующего в стране уже 25 лет. Она требует ответа.

Надо понимать, что наши оппоненты не совсем либералы. Той экономике, которую начали строить в начале 2000-х, «рентной» экономике, основанной на доходах от экспорта природных ресурсов, нужна была соответствующая политика, препятствующая попыткам все раздать и украсть, то есть политика эффективного казначейства, или «копилки». Ей нужно было теоретическое обоснование, например в духе «монетаризма» Милтона Фридмана, основанного на утверждении о товарной природе денег.

Можно соглашаться с этой теорией или нет, но она не о том. Практика сильно отличалась от всех либеральных теорий, в том числе — от монетаристской. Нам предложили жесточайшую финансовую политику, бескомпромиссную централизацию ресурсов у государства, денежное иссушение рынка (политика высокой процентной ставки) и при этом дали полную валютную свободу спекулятивному капиталу, что привело к процветанию сarry trade и невероятной популярности этой политики среди портфельных инвестиционных фондов.

Между тем именно Милтон Фридман, вместе  с Анной  Шварц, писал в «Монетарной истории Соединенных Штатов, 1867—1960» следующее: «Нехватка денег выступает главной причиной возникновения депрессии. Исходя из этого, монетаристы полагают, что государство должно обеспечить постоянную денежную эмиссию, величина которой будет соответствовать темпу прироста общественного продукта». 

На практике проведение в России жесткой денежно-кредитной и ограничительной бюджетной политики на фоне крайне либерального валютного законодательства способствует, с одной стороны, закреплению высоких процентных ставок по кредитам, порождает недостаток денег в экономике, сокращает инвестиции в реальном выражении, что отрицательно сказывается на темпах и качестве роста экономики России.

При этом мы должны признать, что для той, рентной модели экономики эта политика была весьма успешной, мы не разбрасывались ресурсами, скопили резервы, вот, правда, с инфляцией у нас по-прежнему не очень. Но для периода низких цен на сырье, когда надо учиться зарабатывать по-новому, такой курс уже не подходит. Финансово-экономический блок правительства должен теперь думать о том, как инвестировать в новые точки роста в новую современную экономику. А здесь уже нужен не жесткий финансовый директор, а менеджеры по развитию.

Так в чем же нас критикуют?

Главная претензия к нашей программе, которую не высказал только ленивый, – дополнительная эмиссия вызовет неконтролируемую инфляцию.

Тут наши экономисты красок не жалеют. Первую скрипку играет, конечно, Алексей Кудрин, который заявил, что реализация наших идей за два года разрушит экономику страны. Не менее пугающие прогнозы выдает и Сергей Алексашенко,  пообещавший нам Зимбабве с огромным количеством нулей на банкнотах. Такие прогнозы, безусловно, завораживают, но имеют мало общего с реальностью. Повышение денежного предложения, «количественное смягчение» в той или иной форме – путь, по которому идет сейчас весь мир, в том числе США, Европа, Япония и даже Китай.

Именно активная стимулирующая денежно-кредитная политика, активное опережающее предложение кредитных ресурсов в экономику стало ключом к успеху практических всех стран, совершивших экономическое чудо: Япония, Чили, Южная Корея, Сингапур и т. д.

Деньги – кровь экономики. И у России малокровие.

Коэффициент М2 (соотношение денежной массы к ВВП) у нас составляет 45%, для сравнения: в КНР – 195%. Сейчас же под лозунгами борьбы с инфляцией еще и началась политика искусственного сжатия денежной массы. Это весьма скоро приведет к дефициту оборотных средств и кризису неплатежей. У предприятий не будет денег для закупки сырья, для выплаты заработных плат и т. д. Вот где будет полноценное возвращение в 1990-е годы.

Что характерно, несмотря на таргетирование ЦБ, инфляция меньше не становится. И понятно почему. Инфляция в России связана не с количеством денег в экономике, а с зависимостью рынка от импорта,  ростом тарифов, недостаточным предложением товаров и услуг, отсутствием конкуренции в ряде отраслей. Это немонетарная инфляция. Увеличение денежной массы не приведет к ее росту, а сжатие – к снижению, что мы и видим.

Кроме того, мы предлагаем всю возможную эмиссию  направить в производство. Речь идет о целевой связанной эмиссии, которая создаст опережающее предложение денег в реальном секторе. Финансовые ресурсы будут направляться на инвестиционные проекты, в модернизацию и  расширение существующих производственных мощностей и в инфраструктуру (транспорт, энергетика и др.). Сам механизм такой эмиссии исключает возможность направления средств куда-либо еще.

Тут уместно упомянуть второй бросаемый нам упрек, а именно то, что эмитированные деньги хлынут на валютный рынок. Главред «Финансовой газеты» Николай Вардуль пишет: «Искушение, получив деньги по сверхнизкой ставке, уйти в валюту настолько велико, что все запреты будут обходиться».

Искушение велико, но механизм который мы предлагаем, исключает такую возможность.

Мы подразумеваем рефинансирование ЦБ коммерческих банков и/или капитализация институтов развития для финансирования частных производственных проектов  под залог проектных облигаций и/или выкупа проектных облигаций компаний-инвестиционных агентов (специальных обществ проектного финансирования СОПФ). Это вполне принятая и весьма распространенная в мире практика финансирования.

Деньги будут выдаваться только проектам, прошедшим независимый аудит, и софинансируемым инвестором, коммерческим банком, и рефинансируемым ЦБ только на часть общего объема. Все это снимает риски.

Много упрекают нас и в отсутствии должного числа проектов, которые смогут освоить эмиссионные деньги.

Вот как поэтично описывает это Вячеслав Иноземцев в своей колонке на Slon.ru: «Отличие наших экономик состоит в том, что в России «производственный сектор» просто отсутствует. Это как полить водой пересохшую землю – вода в нее впитается, появятся ростки. Почему не получится у нас? Потому что вместо земли у нас покрытый лаком паркетный пол, в который ничего не впитается».

Определенная правда в этих словах есть. Действительно, Россия сильно деиндустриализировалась. Число промышленных предприятий у нас невелико и продолжает, к сожалению, сокращаться. Так это и подтверждение того, что у нас большой потенциал, если, конечно, изменить экономическую политику. Это показывает работа Фонда развития промышленности Минпромторга. Средства фонда — это возвратные деньги, выдаваемые под 5% годовых сроком до 5 лет. И есть существенные ограничения по финансированию по направлениям и возможностям использования средств. На 2016 год получено 1282 заявок на сумму 449 млрд рублей, по состоянию на конец декабря 531 заявка на сумму 141 млрд рублей прошла экспертную оценку фонда. В бюджете на фонд предусмотрено, к сожалению, только 20 млрд рублей, недавно президент объявил о докапитализации еще на 20 млрд. Результаты первого года работы ФПИ показывают, что большинство одобренных проектов имеют прибыль даже больше запланированных, что позволяет надеяться на  успешное масштабирование этого опыта.

Недавно было совещание у председателя правительства, где мы дали наш взгляд на возможные точки роста. Мы считаем, что их вполне достаточно, чтобы мы могли расти и 5%, и 6% в год, а если сложится благоприятная конъюнктура — то и все 10%, как в 2000 году.

У страны много точек роста и без нефти, мы можем сегодня предложить много проектов. Главное, чтобы эти проекты опять не стали неэффективными монстрами по отмыванию средств, связанными с государством структурами,  а были реализованы многочисленными частными предприятиями, жили бы в конкурентной среде.

В этой связи нельзя пройти мимо обвинений от целого ряда политиков и экономистов левого толка, которые считают, что наша программа носит исключительно лоббистский характер и направлена только на интересы бизнеса. Об этом же говорит и первый проректор НИУ ВШЭ Лев Якобсон, хотя он и подчеркивает, что вкладывает в понятие «лоббизм» положительный смысл. Вынужден не согласиться. Да, «экономика роста» — это про бизнес, про МСП и промышленные предприятия. Но именно они выполняют главную социальную задачу: они создают рабочие места и выплачивают налоги! Если у нас будет политика экономического роста, то инструменты для развития и возможности для процветания будут даны не только частному бизнесу, но и всем людям «дела», и предпринимателям, и ученым, врачам и военным и рабочим. Всем тем, кто не хочет прозябать, а стремится к развитию, росту – своему, своей семьи, росту страны.

Вызывает опасения и наше предложение создать систему управления реформами.

Если отмести высказанные в наш адрес бредовые обвинения в желании возродить Госплан (тут людям надо просто почитать, что такое индикативное планирование), то суть основных претензий в том, что это вызовет рост бюрократического аппарата. Так, по мнению Андрея Мовчана, создание Администрации развития — это «откровенное и кардинальное увеличение числа чиновников».

В бизнесе очень хорошо знают, что такое проектное управление и что “project management” всегда должен быть отделен от управления «текущим состоянием» или “run management”.

Весь опыт успешных государств говорит об этом, в каждой из них управление развитием было выделено в отдельную структуру. Для всех экономик, которые осуществляют догоняющее развитие, исключений нет: КНР, Корея, Сингапур, Таиланд, Малайзия, Индонезия и т. д.

Что касается дополнительной численности Администрации развития, мы предлагаем: во-первых, сократить, прежде всего, число чиновников, отвечающих за развитие в существующих ведомствах, за ненадобностью. Во-вторых, значительного персонала вообще не потребуется, это должна быть мобильная оперативная группа, но с особыми полномочиями и прямым подчинением президенту страны. В-третьих, все это окупится сторицей и, что немаловажно, можно будет сэкономить на похоронах (шутка).

И в завершении надо сказать еще об одном, но очень важном, на самом деле, главном аргументе наших критиков: никакие экономические реформы у нас в стране невозможны в принципе, пока не будут проведены политические и институциональные реформы – реформы правоохранительных органов, независимого суда и т. д. Конечно, и политическая конкуренция, и правовое государство — важнейшие составляющие успешных стран. А для бизнеса, особенно малого и среднего, независимый суд просто необходим. Но как показывает мировой опыт, создание таких институтов, во-первых, заняло не один десяток лет, а кроме того, шло не впереди, а за экономическими реформами. Ведь спрос рождает предложение – пока рынок слабый, любые институты или простаивают, или ими манипулируют. Как только появится спрос со стороны бизнеса, все начнет развиваться. Сначала — развитие рынка, увеличение числа и силы его субъектов, а уже потом, в ходе развития экономики — политические и институциональные реформы.

Поэтому задача номер три – выиграть – создать новую экономику России.

Реализация нашей программы даст возможность гражданам достойно зарабатывать, а пенсионерам — достойно жить на пенсию и сбережения. Если же сейчас ничего не менять, а только ждать, когда же снова вырастет нефть, нас всех ждет прозябание на задворках, или, что еще хуже, изоляция – возврат в СССР. Молодая, образованная и активная часть населения эмигрирует, бизнес уйдет в тень, работу найти будет все сложнее, и у государства будет все меньше средств для выполнения социальных обязательств

Да, риски реформ высоки, нужна решимость и даже отвага. Но риски ничего не делать для страны значительно выше.

Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of increase in the real gross domestic product, or real GDP.^[1]

Growth is usually calculated in real terms – i.e., inflation-adjusted terms – to eliminate the distorting effect of inflation on the prices of goods produced. Measurement of economic growth uses national income accounting.^[2] Since economic growth is measured as the annual percent change of gross domestic product (GDP), it has all the advantages and drawbacks of that measure. The economic growth-rates of countries are commonly compared using the ratio of the GDP to population (per-capita income).^[3]

The «rate of economic growth» refers to the geometric annual rate of growth in GDP between the first and the last year over a period of time. This growth rate represents the trend in the average level of GDP over the period, and ignores any fluctuations in the GDP around this trend.

Economists refer to economic growth caused by more efficient use of inputs (increased productivity of labor, of physical capital, of energy or of materials) as intensive growth. In contrast, GDP growth caused only by increases in the amount of inputs available for use (increased population, for example, or new territory) counts as extensive growth.^[4]

Development of new goods and services also generates economic growth.^[5] As it so happens, in the U.S. about 60% of consumer spending in 2013 went on goods and services that did not exist in 1869.^[6]

Measurement[edit]

The economic growth rate is calculated from data on GDP estimated by countries’ statistical agencies. The rate of growth of GDP per capita is calculated from data on GDP and people for the initial and final periods included in the analysis of the analyst.

Long-term growth[edit]

Living standards vary widely from country to country, and furthermore, the change in living standards over time varies widely from country to country. Below is a table which shows GDP per person and annualized per person GDP growth for a selection of countries over a period of about 100 years. The GDP per person data are adjusted for inflation, hence they are «real». GDP per person (more commonly called «per capita» GDP) is the GDP of the entire country divided by the number of people in the country; GDP per person is conceptually analogous to «average income».

Seemingly small differences in yearly GDP growth lead to large changes in GDP when compounded over time. For instance, in the above table, GDP per person in the United Kingdom in the year 1870 was $4,808. At the same time in the United States, GDP per person was $4,007, lower than the UK by about 20%. However, in 2008 the positions were reversed: GDP per person was $36,130 in the United Kingdom and $46,970 in the United States, i.e. GDP per person in the US was 30% more than it was in the UK. As the above table shows, this means that GDP per person grew, on average, by 1.80% per year in the US and by 1.47% in the UK. Thus, a difference in GDP growth by only a few tenths of a percent per year results in large differences in outcomes when the growth is persistent over a generation. This and other observations have led some economists to view GDP growth as the most important part of the field of macroeconomics:

…if we can learn about government policy options that have even small effects on long-term growth rates, we can contribute much more to improvements in standards of living than has been provided by the entire history of macroeconomic analysis of countercyclical policy and fine-tuning. Economic growth [is] the part of macroeconomics that really matters.^[8]

Growth and innovation[edit]

It has been observed that GDP growth is influenced by the size of the economy. The relation between GDP growth and GDP across the countries at a particular point of time is convex. Growth increases as GDP reaches its maximum and then begins to decline. There exists some extremum value. This is not exactly middle-income trap. It is observed for both developed and developing economies. Actually, countries having this property belong to conventional growth domain. However, the extremum could be extended by technological and policy innovations and some countries move into innovative growth domain with higher limiting values.^[9]

Determinants of per capita GDP growth[edit]

In national income accounting, per capita output can be calculated using the following factors: output per unit of labor input (labor productivity), hours worked (intensity), the percentage of the working-age population actually working (participation rate) and the proportion of the working-age population to the total population (demographics). «The rate of change of GDP/population is the sum of the rates of change of these four variables plus their cross products.»^[10]

Economists distinguish between long-run economic growth and short-run economic changes in production. Short-run variation in economic growth is termed the business cycle. Generally, economists attribute the ups and downs in the business cycle to fluctuations in aggregate demand. In contrast, economic growth is concerned with the long-run trend in production due to structural causes such as technological growth and factor accumulation.

Productivity[edit]

Increases in labor productivity (the ratio of the value of output to labor input) have historically been the most important source of real per capita economic growth.^{[11][12][13][14][15]} In a famous estimate, MIT Professor Robert Solow concluded that technological progress has accounted for 80 percent of the long-term rise in U.S. per capita income, with increased investment in capital explaining only the remaining 20 percent.^[16]

Increases in productivity lower the real cost of goods. Over the 20th century the real price of many goods fell by over 90%.^[17]

Economic growth has traditionally been attributed to the accumulation of human and physical capital and the increase in productivity and creation of new goods arising from technological innovation.^[18] Further division of labour (specialization) is also fundamental to rising productivity.^[19]

Before industrialization technological progress resulted in an increase in the population, which was kept in check by food supply and other resources, which acted to limit per capita income, a condition known as the Malthusian trap.^[20][21] The rapid economic growth that occurred during the Industrial Revolution was remarkable because it was in excess of population growth, providing an escape from the Malthusian trap.^[22] Countries that industrialized eventually saw their population growth slow down, a phenomenon known as the demographic transition.

Increases in productivity are the major factor responsible for per capita economic growth—this has been especially evident since the mid-19th century. Most of the economic growth in the 20th century was due to increased output per unit of labor, materials, energy, and land (less input per widget). The balance of the growth in output has come from using more inputs. Both of these changes increase output. The increased output included more of the same goods produced previously and new goods and services.^[23]

During the Industrial Revolution, mechanization began to replace hand methods in manufacturing, and new processes streamlined production of chemicals, iron, steel, and other products.^[24] Machine tools made the economical production of metal parts possible, so that parts could be interchangeable.^[25] (See: Interchangeable parts.)

During the Second Industrial Revolution, a major factor of productivity growth was the substitution of inanimate power for human and animal labor. Also there was a great increase in power as steam-powered electricity generation and internal combustion supplanted limited wind and water power.^[24] Since that replacement, the great expansion of total power was driven by continuous improvements in energy conversion efficiency.^[26] Other major historical sources of productivity were automation, transportation infrastructures (canals, railroads, and highways),^[27][28] new materials (steel) and power, which includes steam and internal combustion engines and electricity. Other productivity improvements included mechanized agriculture and scientific agriculture including chemical fertilizers and livestock and poultry management, and the Green Revolution. Interchangeable parts made with machine tools powered by electric motors evolved into mass production, which is universally used today.^[25]

Great sources of productivity improvement in the late 19th century were railroads, steam ships, horse-pulled reapers and combine harvesters, and steam-powered factories.^[29][30] The invention of processes for making cheap steel were important for many forms of mechanization and transportation. By the late 19th century both prices and weekly work hours fell because less labor, materials, and energy were required to produce and transport goods. However, real wages rose, allowing workers to improve their diet, buy consumer goods and afford better housing.^[29]

Mass production of the 1920s created overproduction, which was arguably one of several causes of the Great Depression of the 1930s.^[31] Following the Great Depression, economic growth resumed, aided in part by increased demand for existing goods and services, such as automobiles, telephones, radios, electricity and household appliances. New goods and services included television, air conditioning and commercial aviation (after 1950), creating enough new demand to stabilize the work week.^[32] The building of highway infrastructures also contributed to post-World War II growth, as did capital investments in manufacturing and chemical industries.^[33] The post-World War II economy also benefited from the discovery of vast amounts of oil around the world, particularly in the Middle East. By John W. Kendrick’s estimate, three-quarters of increase in U.S. per capita GDP from 1889 to 1957 was due to increased productivity.^[15]

Economic growth in the United States slowed down after 1973.^[34] In contrast, growth in Asia has been strong since then, starting with Japan and spreading to Four Asian Tigers, China, Southeast Asia, the Indian subcontinent and Asia Pacific.^[35] In 1957 South Korea had a lower per capita GDP than Ghana,^[36] and by 2008 it was 17 times as high as Ghana’s.^[37] The Japanese economic growth has slackened considerably since the late 1980s.

Productivity in the United States grew at an increasing rate throughout the 19th century and was most rapid in the early to middle decades of the 20th century.^{[38][39][40][41][42]} U.S. productivity growth spiked towards the end of the century in 1996–2004, due to an acceleration in the rate of technological innovation known as Moore’s law.^{[43][44][45][46]} After 2004 U.S. productivity growth returned to the low levels of 1972–96.^[43]

Factor accumulation[edit]

Capital in economics ordinarily refers to physical capital, which consists of structures (largest component of physical capital) and equipment used in business (machinery, factory equipment, computers and office equipment, construction equipment, business vehicles, medical equipment, etc.).^[2] Up to a point increases in the amount of capital per worker are an important cause of economic output growth. Capital is subject to diminishing returns because of the amount that can be effectively invested and because of the growing burden of depreciation. In the development of economic theory, the distribution of income was considered to be between labor and the owners of land and capital.^[47] In recent decades there have been several Asian countries with high rates of economic growth driven by capital investment.^[48]

The work week declined considerably over the 19th century.^[49][50] By the 1920s the average work week in the U.S. was 49 hours, but the work week was reduced to 40 hours (after which overtime premium was applied) as part of the National Industrial Recovery Act of 1933.

Demographic factors may influence growth by changing the employment to population ratio and the labor force participation rate.^[11] Industrialization creates a demographic transition in which birth rates decline and the average age of the population increases.

Women with fewer children and better access to market employment tend to join the labor force in higher percentages. There is a reduced demand for child labor and children spend more years in school. The increase in the percentage of women in the labor force in the U.S. contributed to economic growth, as did the entrance of the baby boomers into the workforce.^[11]

See: Spending wave

Other factors affecting growth[edit]

Human capital[edit]

Many theoretical and empirical analyses of economic growth attribute a major role to a country’s level of human capital, defined as the skills of the population or the work force. Human capital has been included in both neoclassical and endogenous growth models.^[51][52][53]

A country’s level of human capital is difficult to measure since it is created at home, at school, and on the job. Economists have attempted to measure human capital using numerous proxies, including the population’s level of literacy, its level of numeracy, its level of book production/capita, its average level of formal schooling, its average test score on international tests, and its cumulative depreciated investment in formal schooling. The most commonly-used measure of human capital is the level (average years) of school attainment in a country, building upon the data development of Robert Barro and Jong-Wha Lee.^[54] This measure is widely used because Barro and Lee provide data for numerous countries in five-year intervals for a long period of time.

One problem with the schooling attainment measure is that the amount of human capital acquired in a year of schooling is not the same at all levels of schooling and is not the same in all countries. This measure also presumes that human capital is only developed in formal schooling, contrary to the extensive evidence that families, neighborhoods, peers, and health also contribute to the development of human capital. Despite these potential limitations, Theodore Breton has shown that this measure can represent human capital in log-linear growth models because across countries GDP/adult has a log-linear relationship to average years of schooling, which is consistent with the log-linear relationship between workers’ personal incomes and years of schooling in the Mincer model.^[55]

Eric Hanushek and Dennis Kimko introduced measures of students’ mathematics and science skills from international assessments into growth analysis.^[56] They found that this measure of human capital was very significantly related to economic growth. Eric Hanushek and Ludger Wößmann have extended this analysis.^[57][58] Theodore Breton shows that the correlation between economic growth and students’ average test scores in Hanushek and Wößmann’s analyses is actually due to the relationship in countries with less than eight years of schooling. He shows that economic growth is not correlated with average scores in more educated countries.^[55] Hanushek and Wößmann further investigate whether the relationship of knowledge capital to economic growth is causal. They show that the level of students’ cognitive skills can explain the slow growth in Latin America and the rapid growth in East Asia.^[59]

Joerg Baten and Jan Luiten van Zanden employ book production per capita as a proxy for sophisticated literacy capabilities and find that «Countries with high levels of human capital formation in the 18th century initiated or participated in the industrialization process of the 19th century, whereas countries with low levels of human capital formation were unable to do so, among them many of today’s Less Developed Countries such as India, Indonesia, and China.»^[60]

Health[edit]

Here, health is approached as a functioning from Amartya Sen and Martha Nussbaum’s Capability Approach that an individual has to realise the achievements like economic success. Thus health in a broader sense is not the absence of illness, but the opportunity for people to biologically develop to their full potential their entire lives ^[61] It is established that human capital is an important asset for economic growth, however, it can only be so if that population is healthy and well-nourished. One of the most important aspects of health is the mortality rate and how the rise or decline can affect the labour supply predominant in a developing economy.^[62] Mortality decline triggers greater investments in individual human capital and an increase in economic growth. Matteo Cervellati and Uwe Sunde^[63] and Rodrigo.R Soares^[64] consider frameworks in which mortality decline has an influence on parents to have fewer children and to provide quality education for those children, as a result instituting an economic-demographic transition.

The relationship between health and economic growth is further nuanced by distinguishing the influence of specific diseases on GDP per capita from that of aggregate measures of health, such as life expectancy^[65] Thus, investing in health is warranted both from the growth and equity perspectives, given the important role played by health in the economy. Protecting health assets from the impact of systemic transitional costs on economic reforms, pandemics, economic crises and natural disasters is also crucial. Protection from the shocks produced by illness and death, are usually taken care of within a country’s social insurance system. In areas such as Sub-Saharan Africa, where the prevalence of HIV and AIDS, has a comparative negative impact on economical development. It will be interesting to see how research in the areas of health in near future uncover how the world will be performing living with the SARS-CoV-2, especially looking at the economic impacts it already has in a space of two years. Ultimately, when people live longer on average, human capital expenditures are more likely to pay off, and all of these mechanisms center around the complementarity of longevity, health, and education, for which there is ample empirical evidence.^{[65][61][63][64][62]}

Political institutions[edit]

“As institutions influence behavior and incentives in real life, they forge the success or failure of nations.”^[66]

In economics and economic history, the transition to capitalism from earlier economic systems was enabled by the adoption of government policies that facilitated commerce and gave individuals more personal and economic freedom. These included new laws favorable to the establishment of business, including contract law and laws providing for the protection of private property, and the abolishment of anti-usury laws.^[67][68]

Much of this literature was built on the success story of the British state after the Glorious Revolution of 1688, in which high fiscal capacity combined with constraints on the power of the king generated some respect for the rule of law.^{[69][70][71][66]} However, others have questioned that this institutional formula is not so easily replicable elsewhere as a change in the Constitution—and the type of institutions created by that change—does not necessarily create a change in political power if the economic powers of that society are not aligned with the new set of rule of law institutions.^[72] In England, a dramatic increase in the state’s fiscal capacity followed the creation of constraints on the crown, but elsewhere in Europe increases in state capacity happened before major rule of law reforms.^[73]

There are many different ways through which states achieved state (fiscal) capacity and this different capacity accelerated or hindered their economic development. Thanks to the underlying homogeneity of its land and people, England was able to achieve a unified legal and fiscal system since the Middle Ages that enabled it to substantially increase the taxes it raised after 1689.^[73] On the other hand, the French experience of state building faced much stronger resistance from local feudal powers keeping it legally and fiscally fragmented until the French Revolution despite significant increases in state capacity during the seventeenth century.^[74][75] Furthermore, Prussia and the Habsburg empire—much more heterogeneous states than England—were able to increase state capacity during the eighteenth century without constraining the powers of the executive.^[73] Nevertheless, it is unlikely that a country will generate institutions that respect property rights and the rule of law without having had first intermediate fiscal and political institutions that create incentives for elites to support them. Many of these intermediate level institutions relied on informal private-order arrangements that combined with public-order institutions associated with states, to lay the foundations of modern rule of law states.^[73]

In many poor and developing countries much land and housing are held outside the formal or legal property ownership registration system. In many urban areas the poor «invade» private or government land to build their houses, so they do not hold title to these properties. Much unregistered property is held in informal form through various property associations and other arrangements. Reasons for extra-legal ownership include excessive bureaucratic red tape in buying property and building. In some countries, it can take over 200 steps and up to 14 years to build on government land. Other causes of extra-legal property are failures to notarize transaction documents or having documents notarized but failing to have them recorded with the official agency.^[76]

Not having clear legal title to property limits its potential to be used as collateral to secure loans, depriving many poor countries of one of their most important potential sources of capital. Unregistered businesses and lack of accepted accounting methods are other factors that limit potential capital.^[76]

Businesses and individuals participating in unreported business activity and owners of unregistered property face costs such as bribes and pay-offs that offset much of any taxes avoided.^[76]

«Democracy Does Cause Growth», according to Acemoglu et al. Specifically, «democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public goods provision, and reducing social unrest.»^[77] UNESCO and the United Nations also consider that cultural property protection, high-quality education, cultural diversity and social cohesion in armed conflicts are particularly necessary for qualitative growth.^[78]

According to Daron Acemoglu, Simon Johnson and James Robinson, the positive correlation between high income and cold climate is a by-product of history. Europeans adopted very different colonization policies in different colonies, with different associated institutions. In places where these colonizers faced high mortality rates (e.g., due to the presence of tropical diseases), they could not settle permanently, and they were thus more likely to establish extractive institutions, which persisted after independence; in places where they could settle permanently (e.g. those with temperate climates), they established institutions with this objective in mind and modeled them after those in their European homelands. In these ‘neo-Europes’ better institutions in turn produced better development outcomes. Thus, although other economists focus on the identity or type of legal system of the colonizers to explain institutions, these authors look at the environmental conditions in the colonies to explain institutions. For instance, former colonies have inherited corrupt governments and geopolitical boundaries (set by the colonizers) that are not properly placed regarding the geographical locations of different ethnic groups, creating internal disputes and conflicts that hinder development. In another example, societies that emerged in colonies without solid native populations established better property rights and incentives for long-term investment than those where native populations were large.^[79]

In Why Nations Fail, Acemoglu and Robinson said that the English in North America started by trying to repeat the success of the Spanish Conquistadors in extracting wealth (especially gold and silver) from the countries they had conquered. This system repeatedly failed for the English . Their successes rested on giving land and a voice in the government to every male settler to incentivize productive labor. In Virginia it took twelve years and many deaths from starvation before the governor decided to try democracy.^[80]

Entrepreneurs and new products[edit]

Policymakers and scholars frequently emphasize the importance of entrepreneurship for economic growth. However, surprisingly few research empirically examine and quantify entrepreneurship’s impact on growth. This is due to endogeneity—forces that drive economic growth also drive entrepreneurship. In other words, the empirical analysis of the impact of entrepreneurship on growth is difficult because of the joint determination of entrepreneurship and economic growth. A few papers use quasi-experimental designs, and have found that entrepreneurship and the density of small businesses indeed have a causal impact on regional growth.^[81][82]

Another major cause of economic growth is the introduction of new products and services and the improvement of existing products. New products create demand, which is necessary to offset the decline in employment that occurs through labor-saving technology (and to a lesser extent employment declines due to savings in energy and materials).^[44][83] In the U.S. by 2013 about 60% of consumer spending was for goods and services that did not exist in 1869. Also, the creation of new services has been more important than invention of new goods.^[84]

Structural change[edit]

Economic growth in the U.S. and other developed countries went through phases that affected growth through changes in the labor force participation rate and the relative sizes of economic sectors. The transition from an agricultural economy to manufacturing increased the size of the sector with high output per hour (the high-productivity manufacturing sector), while reducing the size of the sector with lower output per hour (the lower productivity agricultural sector). Eventually high productivity growth in manufacturing reduced the sector size, as prices fell and employment shrank relative to other sectors.^[85][86] The service and government sectors, where output per hour and productivity growth is low, saw increases in their shares of the economy and employment during the 1990s.^[11] The public sector has since contracted, while the service economy expanded in the 2000s.

The structural change could also be viewed from another angle. It is possible to divide real economic growth into two components: an indicator of extensive economic growth—the ‘quantitative’ GDP—and an indicator of the improvement of the quality of goods and services—the ‘qualitative’ GDP.^[87]

Growth theories [edit]

Adam Smith[edit]

Adam Smith pioneered modern economic growth and performance theory in his book The Wealth of Nations, first published in 1776. For Smith, the main factors of economic growth are division of labour and capital accumulation. However, these are conditioned by what he calls «the extent of the market». This is conditioned notably by geographic factors but also institutional ones such as the political-legal environment.^[88]

Malthusian theory[edit]

Malthusianism is the idea that population growth is potentially exponential while the growth of the food supply or other resources is linear, which eventually reduces living standards to the point of triggering a population die off. The Malthusian theory also proposes that over most of human history technological progress caused larger population growth but had no impact on income per capita in the long run. According to the theory, while technologically advanced economies over this epoch were characterized by higher population density, their level of income per capita was not different from those among technologically regressed society.

The conceptual foundations of the Malthusian theory were formed by Thomas Malthus,^[89] and a modern representation of these approach is provided by Ashraf and Galor.^[90] In line with the predictions of the Malthusian theory, a cross-country analysis finds a significant positive effect of the technological level on population density and an insignificant effect on income per capita significantly over the years 1–1500.^[90]

Classical growth theory[edit]

In classical (Ricardian) economics, the theory of production and the theory of growth are based on the theory of sustainability and law of variable proportions, whereby increasing either of the factors of production (labor or capital), while holding the other constant and assuming no technological change, will increase output, but at a diminishing rate that eventually will approach zero. These concepts have their origins in Thomas Malthus’s theorizing about agriculture. Malthus’s examples included the number of seeds harvested relative to the number of seeds planted (capital) on a plot of land and the size of the harvest from a plot of land versus the number of workers employed.^[91] (See also Diminishing returns)

Criticisms of classical growth theory are that technology, an important factor in economic growth, is held constant and that economies of scale are ignored.^[92]

One popular theory in the 1940s was the big push model, which suggested that countries needed to jump from one stage of development to another through a virtuous cycle, in which large investments in infrastructure and education coupled with private investments would move the economy to a more productive stage, breaking free from economic paradigms appropriate to a lower productivity stage.^[93] The idea was revived and formulated rigorously, in the late 1980s by Kevin Murphy, Andrei Shleifer and Robert Vishny.^[94]

Solow–Swan model[edit]

Robert Solow and Trevor Swan developed what eventually became the main model used in growth economics in the 1950s.^[95][96] This model assumes that there are diminishing returns to capital and labor. Capital accumulates through investment, but its level or stock continually decreases due to depreciation. Due to the diminishing returns to capital, with increases in capital/worker and absent technological progress, economic output/worker eventually reaches a point where capital per worker and economic output/worker remain constant because annual investment in capital equals annual depreciation. This condition is called the ‘steady state’.

In the Solow–Swan model if productivity increases through technological progress, then output/worker increases even when the economy is in the steady state. If productivity increases at a constant rate, output/worker also increases at a related steady-state rate. As a consequence, growth in the model can occur either by increasing the share of GDP invested or through technological progress. But at whatever share of GDP invested, capital/worker eventually converges on the steady state, leaving the growth rate of output/worker determined only by the rate of technological progress. As a consequence, with world technology available to all and progressing at a constant rate, all countries have the same steady state rate of growth. Each country has a different level of GDP/worker determined by the share of GDP it invests, but all countries have the same rate of economic growth. Implicitly in this model rich countries are those that have invested a high share of GDP for a long time. Poor countries can become rich by increasing the share of GDP they invest. One important prediction of the model, mostly borne out by the data, is that of conditional convergence; the idea that poor countries will grow faster and catch up with rich countries as long as they have similar investment (and saving) rates and access to the same technology.

The Solow–Swan model is considered an «exogenous» growth model because it does not explain why countries invest different shares of GDP in capital nor why technology improves over time. Instead, the rate of investment and the rate of technological progress are exogenous. The value of the model is that it predicts the pattern of economic growth once these two rates are specified. Its failure to explain the determinants of these rates is one of its limitations.

Although the rate of investment in the model is exogenous, under certain conditions the model implicitly predicts convergence in the rates of investment across countries. In a global economy with a global financial capital market, financial capital flows to the countries with the highest return on investment. In the Solow-Swan model countries with less capital/worker (poor countries) have a higher return on investment due to the diminishing returns to capital. As a consequence, capital/worker and output/worker in a global financial capital market should converge to the same level in all countries.^[97] Since historically financial capital has not flowed to the countries with less capital/worker, the basic Solow–Swan model has a conceptual flaw. Beginning in the 1990s, this flaw has been addressed by adding additional variables to the model that can explain why some countries are less productive than others and, therefore, do not attract flows of global financial capital even though they have less (physical) capital/worker.

In practice, convergence was rarely achieved. In 1957, Solow applied his model to data from the U.S. gross national product to estimate contributions. This showed that the increase in capital and labor stock only accounted for about half of the output, while the population increase adjustments to capital explained eighth. This remaining unaccounted growth output is known as the Solow Residual. Here the A of (t) «technical progress» was the reason for increased output. Nevertheless, the model still had flaws. It gave no room for policy to influence the growth rate. Few attempts were also made by the RAND Corporation the non-profit think tank and frequently visiting economist Kenneth Arrow to work out the kinks in the model. They suggested that new knowledge was indivisible and that it is endogenous with a certain fixed cost. Arrow’s further explained that new knowledge obtained by firms comes from practice and built a model that «knowledge» accumulated through experience.^[98]

According to Harrod, the natural growth rate is the maximum rate of growth allowed by the increase of variables like population growth, technological improvement and growth in natural resources.

In fact, the natural growth rate is the highest attainable growth rate which would bring about the fullest possible employment of the resources existing in the economy.

Endogenous growth theory[edit]

Unsatisfied with the assumption of exogenous technological progress in the Solow–Swan model, economists worked to «endogenize» (i.e., explain it «from within» the models) productivity growth in the 1980s; the resulting endogenous growth theory, most notably advanced by Robert Lucas, Jr. and his student Paul Romer, includes a mathematical explanation of technological advancement.^[18][99] This model also incorporated a new concept of human capital, the skills and knowledge that make workers productive. Unlike physical capital, human capital has increasing rates of return. Research done in this area has focused on what increases human capital (e.g. education) or technological change (e.g. innovation).^[100] The quantity theory of endogenous productivity growth was proposed by Russian economist Vladimir Pokrovskii. The theory explains growth as a consequence of the dynamics of three factors, among them a technological chracteristis of production equipment, without any arbitrary parameters, which makes it possible to reproduce historical rates of economic growth with considerable precision.^{[101][102][103]}

On Memorial Day weekend in 1988, a conference in Buffalo brought together the great minds in economics the idea was to evaluate the conflicting theories of growth. Romer, Krugman, Barro, Becker were in attendance along with many other rising stars and high profiled economists of the time. Amongst many papers that day the one that stood out was Romer’s «Micro Foundations for Aggregate Technological Change.» The Micro Foundation claimed that endogenous technological change had the concept of Intellectual Property imbedded and that knowledge is an input and output of production. Romer argued that outcomes to the national growth rates were significantly affected by public policy, trade activity, and intellectual property. He stressed that cumulative capital and specialization were key, and that not only population growth can increase capital of knowledge, it was human capital that is specifically trained in harvesting new ideas.^[104]

While intellectual property may be important, Baker (2016) cites multiple sources claiming that «stronger patent protection seems to be associated with slower growth». That’s particularly true for patents in the ethical health care industry. In effect taxpayers pay twice for new drugs and diagnostic procedures: First in tax subsidies and second for the high prices of diagnostic procedures treatments. If the results of research paid by taxpayers were placed in the public domain, Baker claims that people everywhere would be healthier, because better diagnoses and treatment would be more affordable the world over.^[105]

One branch of endogenous growth theory was developed on the foundations of the Schumpeterian theory, named after the 20th-century Austrian economist Joseph Schumpeter.^[106] The approach explains growth as a consequence of innovation and a process of creative destruction that captures the dual nature of technological progress: in terms of creation, entrepreneurs introduce new products or processes in the hope that they will enjoy temporary monopoly-like profits as they capture markets. In doing so, they make old technologies or products obsolete. This can be seen as an annulment of previous technologies, which makes them obsolete, and «destroys the rents generated by previous innovations».^{[107]: 855 [108]} A major model that illustrates Schumpeterian growth is the Aghion–Howitt model [ru].^[109][107]

Unified growth theory[edit]

Unified growth theory was developed by Oded Galor and his co-authors to address the inability of endogenous growth theory to explain key empirical regularities in the growth processes of individual economies and the world economy as a whole.^[110][111] Unlike endogenous growth theory that focuses entirely on the modern growth regime and is therefore unable to explain the roots of inequality across nations, unified growth theory captures in a single framework the fundamental phases of the process of development in the course of human history: (i) the Malthusian epoch that was prevalent over most of human history, (ii) the escape from the Malthusian trap, (iii) the emergence of human capital as a central element in the growth process, (iv) the onset of the fertility decline, (v) the origins of the modern era of sustained economic growth, and (vi) the roots of divergence in income per capita across nations in the past two centuries. The theory suggests that during most of human existence, technological progress was offset by population growth, and living standards were near subsistence across time and space. However, the reinforcing interaction between the rate of technological progress and the size and composition of the population has gradually increased the pace of technological progress, enhancing the importance of education in the ability of individuals to adapt to the changing technological environment. The rise in the allocation of resources towards education triggered a fertility decline enabling economies to allocate a larger share of the fruits of technological progress to a steady increase in income per capita, rather than towards the growth of population, paving the way for the emergence of sustained economic growth. The theory further suggests that variations in biogeographical characteristics, as well as cultural and institutional characteristics, have generated a differential pace of transition from stagnation to growth across countries and consequently divergence in their income per capita over the past two centuries.^[110][111]

Inequality and growth[edit]

Theories[edit]

The prevailing views about the role of inequality in the growth process has radically shifted in the past century.^[112]

The classical perspective, as expressed by Adam Smith, and others, suggests that inequality fosters the growth process.^[113][114] Specifically, since the aggregate saving increases with inequality due to higher property to save among the wealthy, the classical viewpoint suggests that inequality stimulates capital accumulation and therefore economic growth.^[115]

The Neoclassical perspective that is based on representative agent approach denies the role of inequality in the growth process. It suggests that while the growth process may affect inequality, income distribution has no impact on the growth process.

The modern perspective which has emerged in the late 1980s suggests, in contrast, that income distribution has a significant impact on the growth process. The modern perspective, originated by Galor and Zeira,^[116][117] highlights the important role of heterogeneity in the determination of aggregate economic activity, and economic growth. In particular, Galor and Zeira argue that since credit markets are imperfect, inequality has an enduring impact on human capital formation, the level of income per capita, and the growth process.^[118] In contrast to the classical paradigm, which underlined the positive implications of inequality for capital formation and economic growth, Galor and Zeira argue that inequality has an adverse effect on human capital formation and the development process, in all but the very poor economies.

Later theoretical developments have reinforced the view that inequality has an adverse effect on the growth process. Specifically, Alesina and Rodrik and Persson and Tabellini advance a political economy mechanism and argue that inequality has a negative impact on economic development since it creates a pressure for distortionary redistributive policies that have an adverse effect on investment and economic growth.^[119][120]

In accordance with the credit market imperfection approach, a study by Roberto Perotti showed that inequality is associated with lower level of human capital formation (education, experience, apprenticeship) and higher level of fertility, while lower level of human capital is associated with lower growth and lower levels of economic growth. In contrast, his examination of the political economy channel found no support for the political economy mechanism.^[121] Consequently, the political economy perspective on the relationship between inequality and growth have been revised and later studies have established that inequality may provide an incentive for the elite to block redistributive policies and institutional changes. In particular, inequality in the distribution of land ownership provides the landed elite with an incentive to limit the mobility of rural workers by depriving them from education and by blocking the development of the industrial sector.^[122]

A unified theory of inequality and growth that captures that changing role of inequality in the growth process offers a reconciliation between the conflicting predictions of classical viewpoint that maintained that inequality is beneficial for growth and the modern viewpoint that suggests that in the presence of credit market imperfections, inequality predominantly results in underinvestment in human capital and lower economic growth. This unified theory of inequality and growth, developed by Oded Galor and Omer Moav,^[123] suggests that the effect of inequality on the growth process has been reversed as human capital has replaced physical capital as the main engine of economic growth. In the initial phases of industrialization, when physical capital accumulation was the dominating source of economic growth, inequality boosted the development process by directing resources toward individuals with higher propensity to save. However, in later phases, as human capital become the main engine of economic growth, more equal distribution of income, in the presence of credit constraints, stimulated investment in human capital and economic growth.

In 2013, French economist Thomas Piketty postulated that in periods when the average annual rate on return on investment in capital (r) exceeds the average annual growth in economic output (g), the rate of inequality will increase.^[124] According to Piketty, this is the case because wealth that is already held or inherited, which is expected to grow at the rate r, will grow at a rate faster than wealth accumulated through labor, which is more closely tied to g. An advocate of reducing inequality levels, Piketty suggests levying a global wealth tax in order to reduce the divergence in wealth caused by inequality.

Evidence: reduced form[edit]

The reduced form empirical relationship between inequality and growth was studied by Alberto Alesina and Dani Rodrik, and Torsten Persson and Guido Tabellini.^[119][120] They find that inequality is negatively associated with economic growth in a cross-country analysis.

Robert Barro reexamined the reduced form relationship between inequality on economic growth in a panel of countries.^[125] He argues that there is «little overall relation between income inequality and rates of growth and investment». However, his empirical strategy limits its applicability to the understanding of the relationship between inequality and growth for several reasons. First, his regression analysis control for education, fertility, investment, and it therefore excludes, by construction, the important effect of inequality on growth via education, fertility, and investment. His findings simply imply that inequality has no direct effect on growth beyond the important indirect effects through the main channels proposed in the literature. Second, his study analyzes the effect of inequality on the average growth rate in the following 10 years. However, existing theories suggest that the effect of inequality will be observed much later, as is the case in human capital formation, for instance. Third, the empirical analysis does not account for biases that are generated by reverse causality and omitted variables.

Recent papers based on superior data, find negative relationship between inequality and growth. Andrew Berg and Jonathan Ostry of the International Monetary Fund, find that «lower net inequality is robustly correlated with faster and more durable growth, controlling for the level of redistribution».^[126] Likewise, Dierk Herzer and Sebastian Vollmer find that increased income inequality reduces economic growth.^[127]

Evidence: mechanisms[edit]

The Galor and Zeira’s model predicts that the effect of rising inequality on GDP per capita is negative in relatively rich countries but positive in poor countries.^[116][117] These testable predictions have been examined and confirmed empirically in recent studies.^[128][129] In particular, Brückner and Lederman test the prediction of the model by in the panel of countries during the period 1970–2010, by considering the impact of the interaction between the level of income inequality and the initial level of GDP per capita. In line with the predictions of the model, they find that at the 25th percentile of initial income in the world sample, a 1 percentage point increase in the Gini coefficient increases income per capita by 2.3%, whereas at the 75th percentile of initial income a 1 percentage point increase in the Gini coefficient decreases income per capita by -5.3%. Moreover, the proposed human capital mechanism that mediates the effect of inequality on growth in the Galor-Zeira model is also confirmed. Increases in income inequality increase human capital in poor countries but reduce it in high and middle-income countries.

This recent support for the predictions of the Galor-Zeira model is in line with earlier findings. Roberto Perotti showed that in accordance with the credit market imperfection approach, developed by Galor and Zeira, inequality is associated with lower level of human capital formation (education, experience, apprenticeship) and higher level of fertility, while lower level of human capital is associated with lower levels of economic growth.^[121] Princeton economist Roland Benabou’s finds that the growth process of Korea and the Philippines «are broadly consistent with the credit-constrained human-capital accumulation hypothesis».^[130] In addition, Andrew Berg and Jonathan Ostry^[126] suggest that inequality seems to affect growth through human capital accumulation and fertility channels.

In contrast, Perotti argues that the political economy mechanism is not supported empirically. Inequality is associated with lower redistribution, and lower redistribution (under-investment in education and infrastructure) is associated with lower economic growth.^[121]

Importance of long-run growth[edit]

Over long periods of time, even small rates of growth, such as a 2% annual increase, have large effects. For example, the United Kingdom experienced a 1.97% average annual increase in its inflation-adjusted GDP between 1830 and 2008.^[131] In 1830, the GDP was 41,373 million pounds. It grew to 1,330,088 million pounds by 2008. A growth rate that averaged 1.97% over 178 years resulted in a 32-fold increase in GDP by 2008.

The large impact of a relatively small growth rate over a long period of time is due to the power of exponential growth. The rule of 72, a mathematical result, states that if something grows at the rate of x% per year, then its level will double every 72/x years. For example, a growth rate of 2.5% per annum leads to a doubling of the GDP within 28.8 years, whilst a growth rate of 8% per year leads to a doubling of GDP within nine years. Thus, a small difference in economic growth rates between countries can result in very different standards of living for their populations if this small difference continues for many years.

Quality of life[edit]

One theory that relates economic growth with quality of life is the «Threshold Hypothesis», which states that economic growth up to a point brings with it an increase in quality of life. But at that point – called the threshold point – further economic growth can bring with it a deterioration in quality of life.^[132] This results in an upside-down-U-shaped curve, where the vertex of the curve represents the level of growth that should be targeted. Happiness has been shown to increase with GDP per capita, at least up to a level of $15,000 per person.^[133]

Economic growth has the indirect potential to alleviate poverty, as a result of a simultaneous increase in employment opportunities and increased labor productivity.^[134] A study by researchers at the Overseas Development Institute (ODI) of 24 countries that experienced growth found that in 18 cases, poverty was alleviated.^[134]

In some instances, quality of life factors such as healthcare outcomes and educational attainment, as well as social and political liberties, do not improve as economic growth occurs.^{[135][dubious – discuss]}

Productivity increases do not always lead to increased wages, as can be seen in the United States, where the gap between productivity and wages has been rising since the 1980s.^[134]

Equitable growth[edit]

While acknowledging the central role economic growth can potentially play in human development, poverty reduction and the achievement of the Millennium Development Goals, it is becoming widely understood amongst the development community that special efforts must be made to ensure poorer sections of society are able to participate in economic growth.^{[136][137][138]} The effect of economic growth on poverty reduction – the growth elasticity of poverty – can depend on the existing level of inequality.^[139][140] For instance, with low inequality a country with a growth rate of 2% per head and 40% of its population living in poverty, can halve poverty in ten years, but a country with high inequality would take nearly 60 years to achieve the same reduction.^[141][142] In the words of the Secretary General of the United Nations Ban Ki-Moon: «While economic growth is necessary, it is not sufficient for progress on reducing poverty.»^[136]

Environmental impact[edit]

Critics such as the Club of Rome argue that a narrow view of economic growth, combined with globalization, is creating a scenario where we could see a systemic collapse of our planet’s natural resources.^[143][144]

Concerns about negative environmental effects of growth have prompted some people to advocate lower levels of growth, or the abandoning of growth altogether. In academia, concepts like uneconomic growth, steady-state economy and degrowth have been developed in order to achieve this and to overcome possible growth imperatives. In politics, green parties embrace the Global Greens Charter, recognising that «… the dogma of economic growth at any cost and the excessive and wasteful use of natural resources without considering Earth’s carrying capacity, are causing extreme deterioration in the environment and a massive extinction of species.»^[145]: 2

The 2019 Global Assessment Report on Biodiversity and Ecosystem Services published by the United Nations’ Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services warned that given the substantial loss of biodiversity, society should not focus solely on economic growth.^[146][147] Anthropologist Eduardo S. Brondizio, one of the co-chairs of the report, said «We need to change our narratives. Both our individual narratives that associate wasteful consumption with quality of life and with status, and the narratives of the economic systems that still consider that environmental degradation and social inequality are inevitable outcomes of economic growth. Economic growth is a means and not an end. We need to look for the quality of life of the planet.»^[148]

Those more optimistic about the environmental impacts of growth believe that, though localized environmental effects may occur, large-scale ecological effects are minor. The argument, as stated by commentator Julian Lincoln Simon, states that if these global-scale ecological effects exist, human ingenuity will find ways to adapt to them.^[149] Conversely Partha Dasgupta, in a 2021 report on the economics of biodiversity commissioned by the British Treasury, argues that biodiversity is collapsing faster than at any time in human history as a result of the demands of contemporary human civilization, which «far exceed nature’s capacity to supply us with the goods and services we all rely on. We would require 1.6 Earths to maintain the world’s current living standards.» He says that major transformative changes will be needed «akin to, or even greater than, those of the Marshall Plan,» including abandoning GDP as a measure of economic success and societal progress.^[150]

In 2019, a warning on climate change signed by 11,000 scientists from over 150 nations said economic growth is the driving force behind the «excessive extraction of materials and overexploitation of ecosystems» and that this «must be quickly curtailed to maintain long-term sustainability of the biosphere.» They add that «our goals need to shift from GDP growth and the pursuit of affluence toward sustaining ecosystems and improving human well-being by prioritizing basic needs and reducing inequality.»^[151][152] A 2021 paper authored by top scientists in Frontiers in Conservation Science posited that given the environmental crises including biodiversity loss and climate change, and possible «ghastly future» facing humanity, there must be «fundamental changes to global capitalism,» including the «abolition of perpetual economic growth.»^{[153][154][155]}

Global warming[edit]

Up to the present, there is a close correlation between economic growth and the rate of carbon dioxide emissions across nations, although there is also a considerable divergence in carbon intensity (carbon emissions per GDP).^[156] Up to the present, there is also a direct relation between global economic wealth and the rate of global emissions.^[157] The Stern Review notes that the prediction that, «Under business as usual, global emissions will be sufficient to propel greenhouse gas concentrations to over 550 ppm CO₂ by 2050 and over 650–700 ppm by the end of this century is robust to a wide range of changes in model assumptions.» The scientific consensus is that planetary ecosystem functioning without incurring dangerous risks requires stabilization at 450–550 ppm.^[158]

As a consequence, growth-oriented environmental economists propose government intervention into switching sources of energy production, favouring wind, solar, hydroelectric, and nuclear. This would largely confine use of fossil fuels to either domestic cooking needs (such as for kerosene burners) or where carbon capture and storage technology can be cost-effective and reliable.^[159] The Stern Review, published by the United Kingdom Government in 2006, concluded that an investment of 1% of GDP (later changed to 2%) would be sufficient to avoid the worst effects of climate change, and that failure to do so could risk climate-related costs equal to 20% of GDP. Because carbon capture and storage are as yet widely unproven, and its long term effectiveness (such as in containing carbon dioxide ‘leaks’) unknown, and because of current costs of alternative fuels, these policy responses largely rest on faith of technological change.

British conservative politician and journalist Nigel Lawson has deemed carbon emission trading an ‘inefficient system of rationing’. Instead, he favours carbon taxes to make full use of the efficiency of the market. However, in order to avoid the migration of energy-intensive industries, the whole world should impose such a tax, not just Britain, Lawson pointed out. There is no point in taking the lead if nobody follows suit.^[160]

Resource constraint[edit]

Many earlier predictions of resource depletion, such as Thomas Malthus’ 1798 predictions about approaching famines in Europe, The Population Bomb,^[161][162] and the Simon–Ehrlich wager (1980)^[163] have not materialized. Diminished production of most resources has not occurred so far, one reason being that advancements in technology and science have allowed some previously unavailable resources to be produced.^[163] In some cases, substitution of more abundant materials, such as plastics for cast metals, lowered growth of usage for some metals. In the case of the limited resource of land, famine was relieved firstly by the revolution in transportation caused by railroads and steam ships, and later by the Green Revolution and chemical fertilizers, especially the Haber process for ammonia synthesis.^[164][165]

Resource quality is composed of a variety of factors including ore grades, location, altitude above or below sea level, proximity to railroads, highways, water supply and climate. These factors affect the capital and operating cost of extracting resources. In the case of minerals, lower grades of mineral resources are being extracted, requiring higher inputs of capital and energy for both extraction and processing. Copper ore grades have declined significantly over the last century.^[166][167] Another example is natural gas from shale and other low permeability rock, whose extraction requires much higher inputs of energy, capital, and materials than conventional gas in previous decades. Offshore oil and gas have exponentially increased cost as water depth increases.

Some physical scientists like Sanyam Mittal regard continuous economic growth as unsustainable.^[168][169] Several factors may constrain economic growth – for example: finite, peaked, or depleted resources.

In 1972, The Limits to Growth study modeled limitations to infinite growth; originally ridiculed,^{[161][162][170]} some of the predicted trends have materialized, raising concerns of an impending collapse or decline due to resource constraints.^{[171][172][173]}

Malthusians such as William R. Catton, Jr. are skeptical of technological advances that improve resource availability. Such advances and increases in efficiency, they suggest, merely accelerate the drawing down of finite resources. Catton claims that increasing rates of resource extraction are «…stealing ravenously from the future».^[174]

Energy[edit]

Further information on Energy role in economy: Econodynamics

Energy economic theories hold that rates of energy consumption and energy efficiency are linked causally to economic growth. The Garrett Relation holds that there has been a fixed relationship between current rates of global energy consumption and the historical accumulation of world GDP, independent of the year considered. It follows that economic growth, as represented by GDP growth, requires higher rates of energy consumption growth. Seemingly paradoxically, these are sustained through increases in energy efficiency.^[175] Increases in energy efficiency were a portion of the increase in Total factor productivity.^[15] Some of the most technologically important innovations in history involved increases in energy efficiency. These include the great improvements in efficiency of conversion of heat to work, the reuse of heat, the reduction in friction and the transmission of power, especially through electrification.^[176][177] There is a strong correlation between per capita electricity consumption and economic development.^[178][179]

Possibility of infinite economic growth[edit]

Ecological economics criticizes the possibility of infinite economic growth. Current economic models suggest the economy can grow continuously as a perpetual motion machine. However, according to the laws of thermodynamics, perpetual motion machines do not exist.^[180] Thus, no system can continue without inputs of new energy that exit as high entropy waste. Just as no animal can live on its own waste, no economy can recycle the waste it produces without the input of new energy to reproduce itself.^[180]

Matter and energy enter the economy in the form of low entropy natural capital, such as solar energy, oil wells, fisheries, and mines. These materials and energy are used by households and firms alike to create products and wealth. After the materials are used up, the energy and matter leaves the economy in the form of high entropy waste that is no longer valuable to the economy. The natural materials that power the motion of the economic system from the environment, and the waste must be absorbed by the larger ecosystem in which the economy exists.^[181]

It cannot be ignored that the economy intrinsically requires natural resources and the creation of waste that must be absorbed in some manner. The economy can only continue churning if it has matter and energy to power it and the ability to absorb the waste it creates. This matter and low entropy energy and the ability to absorb waste exists in a finite amount, and thus there is a finite amount of inputs to the flow and outputs of the flow that the environment can handle, implying there is a sustainable limit to motion, and therefore growth, of the economy.^[180] The Limits to Growth states that, due to those limits caused by thermodynamical laws, the availability of resources will decrease in a context of everlasting growth, leading to the increase of the prices of those resources, therefore to a decrease of the investment in industry. This decrease of industry will eventually lead to scarcity of goods and services that could eventually lead to a decrease of the living conditions and an increase of death rates all over the world. ^[182]

See also[edit]

References[edit]

Sources

• Acemoglu, Daron; Robinson, James A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Business division of Random House. ISBN 978-0-307-71922-5.
• Bjork, Gordon J. (1999). The Way It Worked and Why It Won’t: Structural Change and the Slowdown of U.S. Economic Growth. Westport, CT; London: Praeger. ISBN 978-0-275-96532-7.
• Clark, Gregory (2007). A Farewell to Alms: A Brief Economic History of the World. Princeton University Press. ISBN 978-0-691-12135-2.

Further reading[edit]

• Argyrous, G., Forstater, M and Mongiovi, G. (eds.) (2004) Growth, Distribution, And Effective Demand: Essays in Honor of Edward J. Nell. New York: M.E. Sharpe.
• Barro, Robert J. (1997) Determinants of Economic Growth: A Cross-Country Empirical Study. MIT Press: Cambridge, MA.
• Galor, O. (2005) From Stagnation to Growth: Unified Growth Theory. Handbook of Economic Growth, Elsevier.
• Halevi, Joseph; Laibman, David and Nell, Edward J. (eds.) (1992) Beyond the Steady State: Essays in the Revival of Growth Theory, edited with, London, UK:
• Hickel, Jason (2020). Less is More: How Degrowth Will Save the World. Penguin Random House. ISBN 9781785152498.
• Jones, Charles I. (2002) Introduction to Economic Growth 2nd ed. W. W. Norton & Company: New York, N.Y.
• Lucas, Robert E., Jr. (2003) The Industrial Revolution: Past and Future, Federal Reserve Bank of Minneapolis, Annual Report online edition
• Pokrovskii, Vladimir (2018). Econodynamics. The Theory of Social Production. Springer, Dordrecht-Heidelberg-London-New York.
• Schumpeter, Jospeph A. (1912) The Theory of Economic Development 1982 reprint, Transaction Publishers
• Weil, David N. (2008) Economic Growth 2nd ed. Addison Wesley.
• Wiedmann, Thomas; Lenzen, Manfred; Keyßer, Lorenz T.; Steinberger, Julia K. (2020). «Scientists’ warning on affluence». Nature Communications. 11 (1): 3107. Bibcode:2020NatCo..11.3107W. doi:10.1038/s41467-020-16941-y. ISSN 2041-1723. PMC 7305220. PMID 32561753.

External links[edit]

Articles and lectures[edit]

• «Economic growth.» Encyclopædia Britannic. 2007. Encyclopædia Britannica Online. 17 November 2007.
• Beyond Classical and Keynesian Macroeconomic Policy. Paul Romer’s plain-English explanation of endogenous growth theory.
• CEPR Economics Seminar Series Two seminars on the importance of growth with economists Dean Baker and Mark Weisbrot
• On global economic history by Jan Luiten van Zanden. Explores the idea of the inevitability of the Industrial Revolution.
• The Economist Has No Clothes – essay by Robert Nadeau in Scientific American on the basic assumptions behind current economic theory
• World Growth Institute. An organization dedicated to helping the developing world realize its full potential via economic growth.
• Why Does Growth Keep Slowing Down? St. Louis Federal Reserve Bank
• Are there limits to economic growth? It’s time to call time on a 50-year argument. Nature, 16 March 2022.

Data[edit]

• Angus Maddison’s Historical Dataseries – series for almost all countries on GDP, population and GDP per capita from the year 0 up to 2003.
• OECD economic growth statistics
• Multinational data sets — easy to use dataset showing GDP, per capita and population, by country and region, 1970 to 2008. Updated regularly.

Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of increase in the real gross domestic product, or real GDP.^[1]

Growth is usually calculated in real terms – i.e., inflation-adjusted terms – to eliminate the distorting effect of inflation on the prices of goods produced. Measurement of economic growth uses national income accounting.^[2] Since economic growth is measured as the annual percent change of gross domestic product (GDP), it has all the advantages and drawbacks of that measure. The economic growth-rates of countries are commonly compared using the ratio of the GDP to population (per-capita income).^[3]

The «rate of economic growth» refers to the geometric annual rate of growth in GDP between the first and the last year over a period of time. This growth rate represents the trend in the average level of GDP over the period, and ignores any fluctuations in the GDP around this trend.

Economists refer to economic growth caused by more efficient use of inputs (increased productivity of labor, of physical capital, of energy or of materials) as intensive growth. In contrast, GDP growth caused only by increases in the amount of inputs available for use (increased population, for example, or new territory) counts as extensive growth.^[4]

Development of new goods and services also generates economic growth.^[5] As it so happens, in the U.S. about 60% of consumer spending in 2013 went on goods and services that did not exist in 1869.^[6]

Measurement[edit]

The economic growth rate is calculated from data on GDP estimated by countries’ statistical agencies. The rate of growth of GDP per capita is calculated from data on GDP and people for the initial and final periods included in the analysis of the analyst.

Long-term growth[edit]

Living standards vary widely from country to country, and furthermore, the change in living standards over time varies widely from country to country. Below is a table which shows GDP per person and annualized per person GDP growth for a selection of countries over a period of about 100 years. The GDP per person data are adjusted for inflation, hence they are «real». GDP per person (more commonly called «per capita» GDP) is the GDP of the entire country divided by the number of people in the country; GDP per person is conceptually analogous to «average income».

Seemingly small differences in yearly GDP growth lead to large changes in GDP when compounded over time. For instance, in the above table, GDP per person in the United Kingdom in the year 1870 was $4,808. At the same time in the United States, GDP per person was $4,007, lower than the UK by about 20%. However, in 2008 the positions were reversed: GDP per person was $36,130 in the United Kingdom and $46,970 in the United States, i.e. GDP per person in the US was 30% more than it was in the UK. As the above table shows, this means that GDP per person grew, on average, by 1.80% per year in the US and by 1.47% in the UK. Thus, a difference in GDP growth by only a few tenths of a percent per year results in large differences in outcomes when the growth is persistent over a generation. This and other observations have led some economists to view GDP growth as the most important part of the field of macroeconomics:

…if we can learn about government policy options that have even small effects on long-term growth rates, we can contribute much more to improvements in standards of living than has been provided by the entire history of macroeconomic analysis of countercyclical policy and fine-tuning. Economic growth [is] the part of macroeconomics that really matters.^[8]

Growth and innovation[edit]

It has been observed that GDP growth is influenced by the size of the economy. The relation between GDP growth and GDP across the countries at a particular point of time is convex. Growth increases as GDP reaches its maximum and then begins to decline. There exists some extremum value. This is not exactly middle-income trap. It is observed for both developed and developing economies. Actually, countries having this property belong to conventional growth domain. However, the extremum could be extended by technological and policy innovations and some countries move into innovative growth domain with higher limiting values.^[9]

Determinants of per capita GDP growth[edit]

In national income accounting, per capita output can be calculated using the following factors: output per unit of labor input (labor productivity), hours worked (intensity), the percentage of the working-age population actually working (participation rate) and the proportion of the working-age population to the total population (demographics). «The rate of change of GDP/population is the sum of the rates of change of these four variables plus their cross products.»^[10]

Economists distinguish between long-run economic growth and short-run economic changes in production. Short-run variation in economic growth is termed the business cycle. Generally, economists attribute the ups and downs in the business cycle to fluctuations in aggregate demand. In contrast, economic growth is concerned with the long-run trend in production due to structural causes such as technological growth and factor accumulation.

Productivity[edit]

Increases in labor productivity (the ratio of the value of output to labor input) have historically been the most important source of real per capita economic growth.^{[11][12][13][14][15]} In a famous estimate, MIT Professor Robert Solow concluded that technological progress has accounted for 80 percent of the long-term rise in U.S. per capita income, with increased investment in capital explaining only the remaining 20 percent.^[16]

Increases in productivity lower the real cost of goods. Over the 20th century the real price of many goods fell by over 90%.^[17]

Economic growth has traditionally been attributed to the accumulation of human and physical capital and the increase in productivity and creation of new goods arising from technological innovation.^[18] Further division of labour (specialization) is also fundamental to rising productivity.^[19]

Before industrialization technological progress resulted in an increase in the population, which was kept in check by food supply and other resources, which acted to limit per capita income, a condition known as the Malthusian trap.^[20][21] The rapid economic growth that occurred during the Industrial Revolution was remarkable because it was in excess of population growth, providing an escape from the Malthusian trap.^[22] Countries that industrialized eventually saw their population growth slow down, a phenomenon known as the demographic transition.

Increases in productivity are the major factor responsible for per capita economic growth—this has been especially evident since the mid-19th century. Most of the economic growth in the 20th century was due to increased output per unit of labor, materials, energy, and land (less input per widget). The balance of the growth in output has come from using more inputs. Both of these changes increase output. The increased output included more of the same goods produced previously and new goods and services.^[23]

During the Industrial Revolution, mechanization began to replace hand methods in manufacturing, and new processes streamlined production of chemicals, iron, steel, and other products.^[24] Machine tools made the economical production of metal parts possible, so that parts could be interchangeable.^[25] (See: Interchangeable parts.)

During the Second Industrial Revolution, a major factor of productivity growth was the substitution of inanimate power for human and animal labor. Also there was a great increase in power as steam-powered electricity generation and internal combustion supplanted limited wind and water power.^[24] Since that replacement, the great expansion of total power was driven by continuous improvements in energy conversion efficiency.^[26] Other major historical sources of productivity were automation, transportation infrastructures (canals, railroads, and highways),^[27][28] new materials (steel) and power, which includes steam and internal combustion engines and electricity. Other productivity improvements included mechanized agriculture and scientific agriculture including chemical fertilizers and livestock and poultry management, and the Green Revolution. Interchangeable parts made with machine tools powered by electric motors evolved into mass production, which is universally used today.^[25]

Great sources of productivity improvement in the late 19th century were railroads, steam ships, horse-pulled reapers and combine harvesters, and steam-powered factories.^[29][30] The invention of processes for making cheap steel were important for many forms of mechanization and transportation. By the late 19th century both prices and weekly work hours fell because less labor, materials, and energy were required to produce and transport goods. However, real wages rose, allowing workers to improve their diet, buy consumer goods and afford better housing.^[29]

Mass production of the 1920s created overproduction, which was arguably one of several causes of the Great Depression of the 1930s.^[31] Following the Great Depression, economic growth resumed, aided in part by increased demand for existing goods and services, such as automobiles, telephones, radios, electricity and household appliances. New goods and services included television, air conditioning and commercial aviation (after 1950), creating enough new demand to stabilize the work week.^[32] The building of highway infrastructures also contributed to post-World War II growth, as did capital investments in manufacturing and chemical industries.^[33] The post-World War II economy also benefited from the discovery of vast amounts of oil around the world, particularly in the Middle East. By John W. Kendrick’s estimate, three-quarters of increase in U.S. per capita GDP from 1889 to 1957 was due to increased productivity.^[15]

Economic growth in the United States slowed down after 1973.^[34] In contrast, growth in Asia has been strong since then, starting with Japan and spreading to Four Asian Tigers, China, Southeast Asia, the Indian subcontinent and Asia Pacific.^[35] In 1957 South Korea had a lower per capita GDP than Ghana,^[36] and by 2008 it was 17 times as high as Ghana’s.^[37] The Japanese economic growth has slackened considerably since the late 1980s.

Productivity in the United States grew at an increasing rate throughout the 19th century and was most rapid in the early to middle decades of the 20th century.^{[38][39][40][41][42]} U.S. productivity growth spiked towards the end of the century in 1996–2004, due to an acceleration in the rate of technological innovation known as Moore’s law.^{[43][44][45][46]} After 2004 U.S. productivity growth returned to the low levels of 1972–96.^[43]

Factor accumulation[edit]

Capital in economics ordinarily refers to physical capital, which consists of structures (largest component of physical capital) and equipment used in business (machinery, factory equipment, computers and office equipment, construction equipment, business vehicles, medical equipment, etc.).^[2] Up to a point increases in the amount of capital per worker are an important cause of economic output growth. Capital is subject to diminishing returns because of the amount that can be effectively invested and because of the growing burden of depreciation. In the development of economic theory, the distribution of income was considered to be between labor and the owners of land and capital.^[47] In recent decades there have been several Asian countries with high rates of economic growth driven by capital investment.^[48]

The work week declined considerably over the 19th century.^[49][50] By the 1920s the average work week in the U.S. was 49 hours, but the work week was reduced to 40 hours (after which overtime premium was applied) as part of the National Industrial Recovery Act of 1933.

Demographic factors may influence growth by changing the employment to population ratio and the labor force participation rate.^[11] Industrialization creates a demographic transition in which birth rates decline and the average age of the population increases.

Women with fewer children and better access to market employment tend to join the labor force in higher percentages. There is a reduced demand for child labor and children spend more years in school. The increase in the percentage of women in the labor force in the U.S. contributed to economic growth, as did the entrance of the baby boomers into the workforce.^[11]

See: Spending wave

Other factors affecting growth[edit]

Human capital[edit]

Many theoretical and empirical analyses of economic growth attribute a major role to a country’s level of human capital, defined as the skills of the population or the work force. Human capital has been included in both neoclassical and endogenous growth models.^[51][52][53]

A country’s level of human capital is difficult to measure since it is created at home, at school, and on the job. Economists have attempted to measure human capital using numerous proxies, including the population’s level of literacy, its level of numeracy, its level of book production/capita, its average level of formal schooling, its average test score on international tests, and its cumulative depreciated investment in formal schooling. The most commonly-used measure of human capital is the level (average years) of school attainment in a country, building upon the data development of Robert Barro and Jong-Wha Lee.^[54] This measure is widely used because Barro and Lee provide data for numerous countries in five-year intervals for a long period of time.

One problem with the schooling attainment measure is that the amount of human capital acquired in a year of schooling is not the same at all levels of schooling and is not the same in all countries. This measure also presumes that human capital is only developed in formal schooling, contrary to the extensive evidence that families, neighborhoods, peers, and health also contribute to the development of human capital. Despite these potential limitations, Theodore Breton has shown that this measure can represent human capital in log-linear growth models because across countries GDP/adult has a log-linear relationship to average years of schooling, which is consistent with the log-linear relationship between workers’ personal incomes and years of schooling in the Mincer model.^[55]

Eric Hanushek and Dennis Kimko introduced measures of students’ mathematics and science skills from international assessments into growth analysis.^[56] They found that this measure of human capital was very significantly related to economic growth. Eric Hanushek and Ludger Wößmann have extended this analysis.^[57][58] Theodore Breton shows that the correlation between economic growth and students’ average test scores in Hanushek and Wößmann’s analyses is actually due to the relationship in countries with less than eight years of schooling. He shows that economic growth is not correlated with average scores in more educated countries.^[55] Hanushek and Wößmann further investigate whether the relationship of knowledge capital to economic growth is causal. They show that the level of students’ cognitive skills can explain the slow growth in Latin America and the rapid growth in East Asia.^[59]

Joerg Baten and Jan Luiten van Zanden employ book production per capita as a proxy for sophisticated literacy capabilities and find that «Countries with high levels of human capital formation in the 18th century initiated or participated in the industrialization process of the 19th century, whereas countries with low levels of human capital formation were unable to do so, among them many of today’s Less Developed Countries such as India, Indonesia, and China.»^[60]

Health[edit]

Here, health is approached as a functioning from Amartya Sen and Martha Nussbaum’s Capability Approach that an individual has to realise the achievements like economic success. Thus health in a broader sense is not the absence of illness, but the opportunity for people to biologically develop to their full potential their entire lives ^[61] It is established that human capital is an important asset for economic growth, however, it can only be so if that population is healthy and well-nourished. One of the most important aspects of health is the mortality rate and how the rise or decline can affect the labour supply predominant in a developing economy.^[62] Mortality decline triggers greater investments in individual human capital and an increase in economic growth. Matteo Cervellati and Uwe Sunde^[63] and Rodrigo.R Soares^[64] consider frameworks in which mortality decline has an influence on parents to have fewer children and to provide quality education for those children, as a result instituting an economic-demographic transition.

The relationship between health and economic growth is further nuanced by distinguishing the influence of specific diseases on GDP per capita from that of aggregate measures of health, such as life expectancy^[65] Thus, investing in health is warranted both from the growth and equity perspectives, given the important role played by health in the economy. Protecting health assets from the impact of systemic transitional costs on economic reforms, pandemics, economic crises and natural disasters is also crucial. Protection from the shocks produced by illness and death, are usually taken care of within a country’s social insurance system. In areas such as Sub-Saharan Africa, where the prevalence of HIV and AIDS, has a comparative negative impact on economical development. It will be interesting to see how research in the areas of health in near future uncover how the world will be performing living with the SARS-CoV-2, especially looking at the economic impacts it already has in a space of two years. Ultimately, when people live longer on average, human capital expenditures are more likely to pay off, and all of these mechanisms center around the complementarity of longevity, health, and education, for which there is ample empirical evidence.^{[65][61][63][64][62]}

Political institutions[edit]

“As institutions influence behavior and incentives in real life, they forge the success or failure of nations.”^[66]

In economics and economic history, the transition to capitalism from earlier economic systems was enabled by the adoption of government policies that facilitated commerce and gave individuals more personal and economic freedom. These included new laws favorable to the establishment of business, including contract law and laws providing for the protection of private property, and the abolishment of anti-usury laws.^[67][68]

Much of this literature was built on the success story of the British state after the Glorious Revolution of 1688, in which high fiscal capacity combined with constraints on the power of the king generated some respect for the rule of law.^{[69][70][71][66]} However, others have questioned that this institutional formula is not so easily replicable elsewhere as a change in the Constitution—and the type of institutions created by that change—does not necessarily create a change in political power if the economic powers of that society are not aligned with the new set of rule of law institutions.^[72] In England, a dramatic increase in the state’s fiscal capacity followed the creation of constraints on the crown, but elsewhere in Europe increases in state capacity happened before major rule of law reforms.^[73]

There are many different ways through which states achieved state (fiscal) capacity and this different capacity accelerated or hindered their economic development. Thanks to the underlying homogeneity of its land and people, England was able to achieve a unified legal and fiscal system since the Middle Ages that enabled it to substantially increase the taxes it raised after 1689.^[73] On the other hand, the French experience of state building faced much stronger resistance from local feudal powers keeping it legally and fiscally fragmented until the French Revolution despite significant increases in state capacity during the seventeenth century.^[74][75] Furthermore, Prussia and the Habsburg empire—much more heterogeneous states than England—were able to increase state capacity during the eighteenth century without constraining the powers of the executive.^[73] Nevertheless, it is unlikely that a country will generate institutions that respect property rights and the rule of law without having had first intermediate fiscal and political institutions that create incentives for elites to support them. Many of these intermediate level institutions relied on informal private-order arrangements that combined with public-order institutions associated with states, to lay the foundations of modern rule of law states.^[73]

In many poor and developing countries much land and housing are held outside the formal or legal property ownership registration system. In many urban areas the poor «invade» private or government land to build their houses, so they do not hold title to these properties. Much unregistered property is held in informal form through various property associations and other arrangements. Reasons for extra-legal ownership include excessive bureaucratic red tape in buying property and building. In some countries, it can take over 200 steps and up to 14 years to build on government land. Other causes of extra-legal property are failures to notarize transaction documents or having documents notarized but failing to have them recorded with the official agency.^[76]

Not having clear legal title to property limits its potential to be used as collateral to secure loans, depriving many poor countries of one of their most important potential sources of capital. Unregistered businesses and lack of accepted accounting methods are other factors that limit potential capital.^[76]

Businesses and individuals participating in unreported business activity and owners of unregistered property face costs such as bribes and pay-offs that offset much of any taxes avoided.^[76]

«Democracy Does Cause Growth», according to Acemoglu et al. Specifically, «democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public goods provision, and reducing social unrest.»^[77] UNESCO and the United Nations also consider that cultural property protection, high-quality education, cultural diversity and social cohesion in armed conflicts are particularly necessary for qualitative growth.^[78]

According to Daron Acemoglu, Simon Johnson and James Robinson, the positive correlation between high income and cold climate is a by-product of history. Europeans adopted very different colonization policies in different colonies, with different associated institutions. In places where these colonizers faced high mortality rates (e.g., due to the presence of tropical diseases), they could not settle permanently, and they were thus more likely to establish extractive institutions, which persisted after independence; in places where they could settle permanently (e.g. those with temperate climates), they established institutions with this objective in mind and modeled them after those in their European homelands. In these ‘neo-Europes’ better institutions in turn produced better development outcomes. Thus, although other economists focus on the identity or type of legal system of the colonizers to explain institutions, these authors look at the environmental conditions in the colonies to explain institutions. For instance, former colonies have inherited corrupt governments and geopolitical boundaries (set by the colonizers) that are not properly placed regarding the geographical locations of different ethnic groups, creating internal disputes and conflicts that hinder development. In another example, societies that emerged in colonies without solid native populations established better property rights and incentives for long-term investment than those where native populations were large.^[79]

In Why Nations Fail, Acemoglu and Robinson said that the English in North America started by trying to repeat the success of the Spanish Conquistadors in extracting wealth (especially gold and silver) from the countries they had conquered. This system repeatedly failed for the English . Their successes rested on giving land and a voice in the government to every male settler to incentivize productive labor. In Virginia it took twelve years and many deaths from starvation before the governor decided to try democracy.^[80]

Entrepreneurs and new products[edit]

Policymakers and scholars frequently emphasize the importance of entrepreneurship for economic growth. However, surprisingly few research empirically examine and quantify entrepreneurship’s impact on growth. This is due to endogeneity—forces that drive economic growth also drive entrepreneurship. In other words, the empirical analysis of the impact of entrepreneurship on growth is difficult because of the joint determination of entrepreneurship and economic growth. A few papers use quasi-experimental designs, and have found that entrepreneurship and the density of small businesses indeed have a causal impact on regional growth.^[81][82]

Another major cause of economic growth is the introduction of new products and services and the improvement of existing products. New products create demand, which is necessary to offset the decline in employment that occurs through labor-saving technology (and to a lesser extent employment declines due to savings in energy and materials).^[44][83] In the U.S. by 2013 about 60% of consumer spending was for goods and services that did not exist in 1869. Also, the creation of new services has been more important than invention of new goods.^[84]

Structural change[edit]

Economic growth in the U.S. and other developed countries went through phases that affected growth through changes in the labor force participation rate and the relative sizes of economic sectors. The transition from an agricultural economy to manufacturing increased the size of the sector with high output per hour (the high-productivity manufacturing sector), while reducing the size of the sector with lower output per hour (the lower productivity agricultural sector). Eventually high productivity growth in manufacturing reduced the sector size, as prices fell and employment shrank relative to other sectors.^[85][86] The service and government sectors, where output per hour and productivity growth is low, saw increases in their shares of the economy and employment during the 1990s.^[11] The public sector has since contracted, while the service economy expanded in the 2000s.

The structural change could also be viewed from another angle. It is possible to divide real economic growth into two components: an indicator of extensive economic growth—the ‘quantitative’ GDP—and an indicator of the improvement of the quality of goods and services—the ‘qualitative’ GDP.^[87]

Growth theories [edit]

Adam Smith[edit]

Adam Smith pioneered modern economic growth and performance theory in his book The Wealth of Nations, first published in 1776. For Smith, the main factors of economic growth are division of labour and capital accumulation. However, these are conditioned by what he calls «the extent of the market». This is conditioned notably by geographic factors but also institutional ones such as the political-legal environment.^[88]

Malthusian theory[edit]

Malthusianism is the idea that population growth is potentially exponential while the growth of the food supply or other resources is linear, which eventually reduces living standards to the point of triggering a population die off. The Malthusian theory also proposes that over most of human history technological progress caused larger population growth but had no impact on income per capita in the long run. According to the theory, while technologically advanced economies over this epoch were characterized by higher population density, their level of income per capita was not different from those among technologically regressed society.

The conceptual foundations of the Malthusian theory were formed by Thomas Malthus,^[89] and a modern representation of these approach is provided by Ashraf and Galor.^[90] In line with the predictions of the Malthusian theory, a cross-country analysis finds a significant positive effect of the technological level on population density and an insignificant effect on income per capita significantly over the years 1–1500.^[90]

Classical growth theory[edit]

In classical (Ricardian) economics, the theory of production and the theory of growth are based on the theory of sustainability and law of variable proportions, whereby increasing either of the factors of production (labor or capital), while holding the other constant and assuming no technological change, will increase output, but at a diminishing rate that eventually will approach zero. These concepts have their origins in Thomas Malthus’s theorizing about agriculture. Malthus’s examples included the number of seeds harvested relative to the number of seeds planted (capital) on a plot of land and the size of the harvest from a plot of land versus the number of workers employed.^[91] (See also Diminishing returns)

Criticisms of classical growth theory are that technology, an important factor in economic growth, is held constant and that economies of scale are ignored.^[92]

One popular theory in the 1940s was the big push model, which suggested that countries needed to jump from one stage of development to another through a virtuous cycle, in which large investments in infrastructure and education coupled with private investments would move the economy to a more productive stage, breaking free from economic paradigms appropriate to a lower productivity stage.^[93] The idea was revived and formulated rigorously, in the late 1980s by Kevin Murphy, Andrei Shleifer and Robert Vishny.^[94]

Solow–Swan model[edit]

Robert Solow and Trevor Swan developed what eventually became the main model used in growth economics in the 1950s.^[95][96] This model assumes that there are diminishing returns to capital and labor. Capital accumulates through investment, but its level or stock continually decreases due to depreciation. Due to the diminishing returns to capital, with increases in capital/worker and absent technological progress, economic output/worker eventually reaches a point where capital per worker and economic output/worker remain constant because annual investment in capital equals annual depreciation. This condition is called the ‘steady state’.

In the Solow–Swan model if productivity increases through technological progress, then output/worker increases even when the economy is in the steady state. If productivity increases at a constant rate, output/worker also increases at a related steady-state rate. As a consequence, growth in the model can occur either by increasing the share of GDP invested or through technological progress. But at whatever share of GDP invested, capital/worker eventually converges on the steady state, leaving the growth rate of output/worker determined only by the rate of technological progress. As a consequence, with world technology available to all and progressing at a constant rate, all countries have the same steady state rate of growth. Each country has a different level of GDP/worker determined by the share of GDP it invests, but all countries have the same rate of economic growth. Implicitly in this model rich countries are those that have invested a high share of GDP for a long time. Poor countries can become rich by increasing the share of GDP they invest. One important prediction of the model, mostly borne out by the data, is that of conditional convergence; the idea that poor countries will grow faster and catch up with rich countries as long as they have similar investment (and saving) rates and access to the same technology.

The Solow–Swan model is considered an «exogenous» growth model because it does not explain why countries invest different shares of GDP in capital nor why technology improves over time. Instead, the rate of investment and the rate of technological progress are exogenous. The value of the model is that it predicts the pattern of economic growth once these two rates are specified. Its failure to explain the determinants of these rates is one of its limitations.

Although the rate of investment in the model is exogenous, under certain conditions the model implicitly predicts convergence in the rates of investment across countries. In a global economy with a global financial capital market, financial capital flows to the countries with the highest return on investment. In the Solow-Swan model countries with less capital/worker (poor countries) have a higher return on investment due to the diminishing returns to capital. As a consequence, capital/worker and output/worker in a global financial capital market should converge to the same level in all countries.^[97] Since historically financial capital has not flowed to the countries with less capital/worker, the basic Solow–Swan model has a conceptual flaw. Beginning in the 1990s, this flaw has been addressed by adding additional variables to the model that can explain why some countries are less productive than others and, therefore, do not attract flows of global financial capital even though they have less (physical) capital/worker.

In practice, convergence was rarely achieved. In 1957, Solow applied his model to data from the U.S. gross national product to estimate contributions. This showed that the increase in capital and labor stock only accounted for about half of the output, while the population increase adjustments to capital explained eighth. This remaining unaccounted growth output is known as the Solow Residual. Here the A of (t) «technical progress» was the reason for increased output. Nevertheless, the model still had flaws. It gave no room for policy to influence the growth rate. Few attempts were also made by the RAND Corporation the non-profit think tank and frequently visiting economist Kenneth Arrow to work out the kinks in the model. They suggested that new knowledge was indivisible and that it is endogenous with a certain fixed cost. Arrow’s further explained that new knowledge obtained by firms comes from practice and built a model that «knowledge» accumulated through experience.^[98]

According to Harrod, the natural growth rate is the maximum rate of growth allowed by the increase of variables like population growth, technological improvement and growth in natural resources.

In fact, the natural growth rate is the highest attainable growth rate which would bring about the fullest possible employment of the resources existing in the economy.

Endogenous growth theory[edit]

Unsatisfied with the assumption of exogenous technological progress in the Solow–Swan model, economists worked to «endogenize» (i.e., explain it «from within» the models) productivity growth in the 1980s; the resulting endogenous growth theory, most notably advanced by Robert Lucas, Jr. and his student Paul Romer, includes a mathematical explanation of technological advancement.^[18][99] This model also incorporated a new concept of human capital, the skills and knowledge that make workers productive. Unlike physical capital, human capital has increasing rates of return. Research done in this area has focused on what increases human capital (e.g. education) or technological change (e.g. innovation).^[100] The quantity theory of endogenous productivity growth was proposed by Russian economist Vladimir Pokrovskii. The theory explains growth as a consequence of the dynamics of three factors, among them a technological chracteristis of production equipment, without any arbitrary parameters, which makes it possible to reproduce historical rates of economic growth with considerable precision.^{[101][102][103]}

On Memorial Day weekend in 1988, a conference in Buffalo brought together the great minds in economics the idea was to evaluate the conflicting theories of growth. Romer, Krugman, Barro, Becker were in attendance along with many other rising stars and high profiled economists of the time. Amongst many papers that day the one that stood out was Romer’s «Micro Foundations for Aggregate Technological Change.» The Micro Foundation claimed that endogenous technological change had the concept of Intellectual Property imbedded and that knowledge is an input and output of production. Romer argued that outcomes to the national growth rates were significantly affected by public policy, trade activity, and intellectual property. He stressed that cumulative capital and specialization were key, and that not only population growth can increase capital of knowledge, it was human capital that is specifically trained in harvesting new ideas.^[104]

While intellectual property may be important, Baker (2016) cites multiple sources claiming that «stronger patent protection seems to be associated with slower growth». That’s particularly true for patents in the ethical health care industry. In effect taxpayers pay twice for new drugs and diagnostic procedures: First in tax subsidies and second for the high prices of diagnostic procedures treatments. If the results of research paid by taxpayers were placed in the public domain, Baker claims that people everywhere would be healthier, because better diagnoses and treatment would be more affordable the world over.^[105]

One branch of endogenous growth theory was developed on the foundations of the Schumpeterian theory, named after the 20th-century Austrian economist Joseph Schumpeter.^[106] The approach explains growth as a consequence of innovation and a process of creative destruction that captures the dual nature of technological progress: in terms of creation, entrepreneurs introduce new products or processes in the hope that they will enjoy temporary monopoly-like profits as they capture markets. In doing so, they make old technologies or products obsolete. This can be seen as an annulment of previous technologies, which makes them obsolete, and «destroys the rents generated by previous innovations».^{[107]: 855 [108]} A major model that illustrates Schumpeterian growth is the Aghion–Howitt model [ru].^[109][107]

Unified growth theory[edit]

Unified growth theory was developed by Oded Galor and his co-authors to address the inability of endogenous growth theory to explain key empirical regularities in the growth processes of individual economies and the world economy as a whole.^[110][111] Unlike endogenous growth theory that focuses entirely on the modern growth regime and is therefore unable to explain the roots of inequality across nations, unified growth theory captures in a single framework the fundamental phases of the process of development in the course of human history: (i) the Malthusian epoch that was prevalent over most of human history, (ii) the escape from the Malthusian trap, (iii) the emergence of human capital as a central element in the growth process, (iv) the onset of the fertility decline, (v) the origins of the modern era of sustained economic growth, and (vi) the roots of divergence in income per capita across nations in the past two centuries. The theory suggests that during most of human existence, technological progress was offset by population growth, and living standards were near subsistence across time and space. However, the reinforcing interaction between the rate of technological progress and the size and composition of the population has gradually increased the pace of technological progress, enhancing the importance of education in the ability of individuals to adapt to the changing technological environment. The rise in the allocation of resources towards education triggered a fertility decline enabling economies to allocate a larger share of the fruits of technological progress to a steady increase in income per capita, rather than towards the growth of population, paving the way for the emergence of sustained economic growth. The theory further suggests that variations in biogeographical characteristics, as well as cultural and institutional characteristics, have generated a differential pace of transition from stagnation to growth across countries and consequently divergence in their income per capita over the past two centuries.^[110][111]

Inequality and growth[edit]

Theories[edit]

The prevailing views about the role of inequality in the growth process has radically shifted in the past century.^[112]

The classical perspective, as expressed by Adam Smith, and others, suggests that inequality fosters the growth process.^[113][114] Specifically, since the aggregate saving increases with inequality due to higher property to save among the wealthy, the classical viewpoint suggests that inequality stimulates capital accumulation and therefore economic growth.^[115]

The Neoclassical perspective that is based on representative agent approach denies the role of inequality in the growth process. It suggests that while the growth process may affect inequality, income distribution has no impact on the growth process.

The modern perspective which has emerged in the late 1980s suggests, in contrast, that income distribution has a significant impact on the growth process. The modern perspective, originated by Galor and Zeira,^[116][117] highlights the important role of heterogeneity in the determination of aggregate economic activity, and economic growth. In particular, Galor and Zeira argue that since credit markets are imperfect, inequality has an enduring impact on human capital formation, the level of income per capita, and the growth process.^[118] In contrast to the classical paradigm, which underlined the positive implications of inequality for capital formation and economic growth, Galor and Zeira argue that inequality has an adverse effect on human capital formation and the development process, in all but the very poor economies.

Later theoretical developments have reinforced the view that inequality has an adverse effect on the growth process. Specifically, Alesina and Rodrik and Persson and Tabellini advance a political economy mechanism and argue that inequality has a negative impact on economic development since it creates a pressure for distortionary redistributive policies that have an adverse effect on investment and economic growth.^[119][120]

In accordance with the credit market imperfection approach, a study by Roberto Perotti showed that inequality is associated with lower level of human capital formation (education, experience, apprenticeship) and higher level of fertility, while lower level of human capital is associated with lower growth and lower levels of economic growth. In contrast, his examination of the political economy channel found no support for the political economy mechanism.^[121] Consequently, the political economy perspective on the relationship between inequality and growth have been revised and later studies have established that inequality may provide an incentive for the elite to block redistributive policies and institutional changes. In particular, inequality in the distribution of land ownership provides the landed elite with an incentive to limit the mobility of rural workers by depriving them from education and by blocking the development of the industrial sector.^[122]

A unified theory of inequality and growth that captures that changing role of inequality in the growth process offers a reconciliation between the conflicting predictions of classical viewpoint that maintained that inequality is beneficial for growth and the modern viewpoint that suggests that in the presence of credit market imperfections, inequality predominantly results in underinvestment in human capital and lower economic growth. This unified theory of inequality and growth, developed by Oded Galor and Omer Moav,^[123] suggests that the effect of inequality on the growth process has been reversed as human capital has replaced physical capital as the main engine of economic growth. In the initial phases of industrialization, when physical capital accumulation was the dominating source of economic growth, inequality boosted the development process by directing resources toward individuals with higher propensity to save. However, in later phases, as human capital become the main engine of economic growth, more equal distribution of income, in the presence of credit constraints, stimulated investment in human capital and economic growth.

In 2013, French economist Thomas Piketty postulated that in periods when the average annual rate on return on investment in capital (r) exceeds the average annual growth in economic output (g), the rate of inequality will increase.^[124] According to Piketty, this is the case because wealth that is already held or inherited, which is expected to grow at the rate r, will grow at a rate faster than wealth accumulated through labor, which is more closely tied to g. An advocate of reducing inequality levels, Piketty suggests levying a global wealth tax in order to reduce the divergence in wealth caused by inequality.

Evidence: reduced form[edit]

The reduced form empirical relationship between inequality and growth was studied by Alberto Alesina and Dani Rodrik, and Torsten Persson and Guido Tabellini.^[119][120] They find that inequality is negatively associated with economic growth in a cross-country analysis.

Robert Barro reexamined the reduced form relationship between inequality on economic growth in a panel of countries.^[125] He argues that there is «little overall relation between income inequality and rates of growth and investment». However, his empirical strategy limits its applicability to the understanding of the relationship between inequality and growth for several reasons. First, his regression analysis control for education, fertility, investment, and it therefore excludes, by construction, the important effect of inequality on growth via education, fertility, and investment. His findings simply imply that inequality has no direct effect on growth beyond the important indirect effects through the main channels proposed in the literature. Second, his study analyzes the effect of inequality on the average growth rate in the following 10 years. However, existing theories suggest that the effect of inequality will be observed much later, as is the case in human capital formation, for instance. Third, the empirical analysis does not account for biases that are generated by reverse causality and omitted variables.

Recent papers based on superior data, find negative relationship between inequality and growth. Andrew Berg and Jonathan Ostry of the International Monetary Fund, find that «lower net inequality is robustly correlated with faster and more durable growth, controlling for the level of redistribution».^[126] Likewise, Dierk Herzer and Sebastian Vollmer find that increased income inequality reduces economic growth.^[127]

Evidence: mechanisms[edit]

The Galor and Zeira’s model predicts that the effect of rising inequality on GDP per capita is negative in relatively rich countries but positive in poor countries.^[116][117] These testable predictions have been examined and confirmed empirically in recent studies.^[128][129] In particular, Brückner and Lederman test the prediction of the model by in the panel of countries during the period 1970–2010, by considering the impact of the interaction between the level of income inequality and the initial level of GDP per capita. In line with the predictions of the model, they find that at the 25th percentile of initial income in the world sample, a 1 percentage point increase in the Gini coefficient increases income per capita by 2.3%, whereas at the 75th percentile of initial income a 1 percentage point increase in the Gini coefficient decreases income per capita by -5.3%. Moreover, the proposed human capital mechanism that mediates the effect of inequality on growth in the Galor-Zeira model is also confirmed. Increases in income inequality increase human capital in poor countries but reduce it in high and middle-income countries.

This recent support for the predictions of the Galor-Zeira model is in line with earlier findings. Roberto Perotti showed that in accordance with the credit market imperfection approach, developed by Galor and Zeira, inequality is associated with lower level of human capital formation (education, experience, apprenticeship) and higher level of fertility, while lower level of human capital is associated with lower levels of economic growth.^[121] Princeton economist Roland Benabou’s finds that the growth process of Korea and the Philippines «are broadly consistent with the credit-constrained human-capital accumulation hypothesis».^[130] In addition, Andrew Berg and Jonathan Ostry^[126] suggest that inequality seems to affect growth through human capital accumulation and fertility channels.

In contrast, Perotti argues that the political economy mechanism is not supported empirically. Inequality is associated with lower redistribution, and lower redistribution (under-investment in education and infrastructure) is associated with lower economic growth.^[121]

Importance of long-run growth[edit]

Over long periods of time, even small rates of growth, such as a 2% annual increase, have large effects. For example, the United Kingdom experienced a 1.97% average annual increase in its inflation-adjusted GDP between 1830 and 2008.^[131] In 1830, the GDP was 41,373 million pounds. It grew to 1,330,088 million pounds by 2008. A growth rate that averaged 1.97% over 178 years resulted in a 32-fold increase in GDP by 2008.

The large impact of a relatively small growth rate over a long period of time is due to the power of exponential growth. The rule of 72, a mathematical result, states that if something grows at the rate of x% per year, then its level will double every 72/x years. For example, a growth rate of 2.5% per annum leads to a doubling of the GDP within 28.8 years, whilst a growth rate of 8% per year leads to a doubling of GDP within nine years. Thus, a small difference in economic growth rates between countries can result in very different standards of living for their populations if this small difference continues for many years.

Quality of life[edit]

One theory that relates economic growth with quality of life is the «Threshold Hypothesis», which states that economic growth up to a point brings with it an increase in quality of life. But at that point – called the threshold point – further economic growth can bring with it a deterioration in quality of life.^[132] This results in an upside-down-U-shaped curve, where the vertex of the curve represents the level of growth that should be targeted. Happiness has been shown to increase with GDP per capita, at least up to a level of $15,000 per person.^[133]

Economic growth has the indirect potential to alleviate poverty, as a result of a simultaneous increase in employment opportunities and increased labor productivity.^[134] A study by researchers at the Overseas Development Institute (ODI) of 24 countries that experienced growth found that in 18 cases, poverty was alleviated.^[134]

In some instances, quality of life factors such as healthcare outcomes and educational attainment, as well as social and political liberties, do not improve as economic growth occurs.^{[135][dubious – discuss]}

Productivity increases do not always lead to increased wages, as can be seen in the United States, where the gap between productivity and wages has been rising since the 1980s.^[134]

Equitable growth[edit]

While acknowledging the central role economic growth can potentially play in human development, poverty reduction and the achievement of the Millennium Development Goals, it is becoming widely understood amongst the development community that special efforts must be made to ensure poorer sections of society are able to participate in economic growth.^{[136][137][138]} The effect of economic growth on poverty reduction – the growth elasticity of poverty – can depend on the existing level of inequality.^[139][140] For instance, with low inequality a country with a growth rate of 2% per head and 40% of its population living in poverty, can halve poverty in ten years, but a country with high inequality would take nearly 60 years to achieve the same reduction.^[141][142] In the words of the Secretary General of the United Nations Ban Ki-Moon: «While economic growth is necessary, it is not sufficient for progress on reducing poverty.»^[136]

Environmental impact[edit]

Critics such as the Club of Rome argue that a narrow view of economic growth, combined with globalization, is creating a scenario where we could see a systemic collapse of our planet’s natural resources.^[143][144]

Concerns about negative environmental effects of growth have prompted some people to advocate lower levels of growth, or the abandoning of growth altogether. In academia, concepts like uneconomic growth, steady-state economy and degrowth have been developed in order to achieve this and to overcome possible growth imperatives. In politics, green parties embrace the Global Greens Charter, recognising that «… the dogma of economic growth at any cost and the excessive and wasteful use of natural resources without considering Earth’s carrying capacity, are causing extreme deterioration in the environment and a massive extinction of species.»^[145]: 2

The 2019 Global Assessment Report on Biodiversity and Ecosystem Services published by the United Nations’ Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services warned that given the substantial loss of biodiversity, society should not focus solely on economic growth.^[146][147] Anthropologist Eduardo S. Brondizio, one of the co-chairs of the report, said «We need to change our narratives. Both our individual narratives that associate wasteful consumption with quality of life and with status, and the narratives of the economic systems that still consider that environmental degradation and social inequality are inevitable outcomes of economic growth. Economic growth is a means and not an end. We need to look for the quality of life of the planet.»^[148]

Those more optimistic about the environmental impacts of growth believe that, though localized environmental effects may occur, large-scale ecological effects are minor. The argument, as stated by commentator Julian Lincoln Simon, states that if these global-scale ecological effects exist, human ingenuity will find ways to adapt to them.^[149] Conversely Partha Dasgupta, in a 2021 report on the economics of biodiversity commissioned by the British Treasury, argues that biodiversity is collapsing faster than at any time in human history as a result of the demands of contemporary human civilization, which «far exceed nature’s capacity to supply us with the goods and services we all rely on. We would require 1.6 Earths to maintain the world’s current living standards.» He says that major transformative changes will be needed «akin to, or even greater than, those of the Marshall Plan,» including abandoning GDP as a measure of economic success and societal progress.^[150]

In 2019, a warning on climate change signed by 11,000 scientists from over 150 nations said economic growth is the driving force behind the «excessive extraction of materials and overexploitation of ecosystems» and that this «must be quickly curtailed to maintain long-term sustainability of the biosphere.» They add that «our goals need to shift from GDP growth and the pursuit of affluence toward sustaining ecosystems and improving human well-being by prioritizing basic needs and reducing inequality.»^[151][152] A 2021 paper authored by top scientists in Frontiers in Conservation Science posited that given the environmental crises including biodiversity loss and climate change, and possible «ghastly future» facing humanity, there must be «fundamental changes to global capitalism,» including the «abolition of perpetual economic growth.»^{[153][154][155]}

Global warming[edit]

Up to the present, there is a close correlation between economic growth and the rate of carbon dioxide emissions across nations, although there is also a considerable divergence in carbon intensity (carbon emissions per GDP).^[156] Up to the present, there is also a direct relation between global economic wealth and the rate of global emissions.^[157] The Stern Review notes that the prediction that, «Under business as usual, global emissions will be sufficient to propel greenhouse gas concentrations to over 550 ppm CO₂ by 2050 and over 650–700 ppm by the end of this century is robust to a wide range of changes in model assumptions.» The scientific consensus is that planetary ecosystem functioning without incurring dangerous risks requires stabilization at 450–550 ppm.^[158]

As a consequence, growth-oriented environmental economists propose government intervention into switching sources of energy production, favouring wind, solar, hydroelectric, and nuclear. This would largely confine use of fossil fuels to either domestic cooking needs (such as for kerosene burners) or where carbon capture and storage technology can be cost-effective and reliable.^[159] The Stern Review, published by the United Kingdom Government in 2006, concluded that an investment of 1% of GDP (later changed to 2%) would be sufficient to avoid the worst effects of climate change, and that failure to do so could risk climate-related costs equal to 20% of GDP. Because carbon capture and storage are as yet widely unproven, and its long term effectiveness (such as in containing carbon dioxide ‘leaks’) unknown, and because of current costs of alternative fuels, these policy responses largely rest on faith of technological change.

British conservative politician and journalist Nigel Lawson has deemed carbon emission trading an ‘inefficient system of rationing’. Instead, he favours carbon taxes to make full use of the efficiency of the market. However, in order to avoid the migration of energy-intensive industries, the whole world should impose such a tax, not just Britain, Lawson pointed out. There is no point in taking the lead if nobody follows suit.^[160]

Resource constraint[edit]

Many earlier predictions of resource depletion, such as Thomas Malthus’ 1798 predictions about approaching famines in Europe, The Population Bomb,^[161][162] and the Simon–Ehrlich wager (1980)^[163] have not materialized. Diminished production of most resources has not occurred so far, one reason being that advancements in technology and science have allowed some previously unavailable resources to be produced.^[163] In some cases, substitution of more abundant materials, such as plastics for cast metals, lowered growth of usage for some metals. In the case of the limited resource of land, famine was relieved firstly by the revolution in transportation caused by railroads and steam ships, and later by the Green Revolution and chemical fertilizers, especially the Haber process for ammonia synthesis.^[164][165]

Resource quality is composed of a variety of factors including ore grades, location, altitude above or below sea level, proximity to railroads, highways, water supply and climate. These factors affect the capital and operating cost of extracting resources. In the case of minerals, lower grades of mineral resources are being extracted, requiring higher inputs of capital and energy for both extraction and processing. Copper ore grades have declined significantly over the last century.^[166][167] Another example is natural gas from shale and other low permeability rock, whose extraction requires much higher inputs of energy, capital, and materials than conventional gas in previous decades. Offshore oil and gas have exponentially increased cost as water depth increases.

Some physical scientists like Sanyam Mittal regard continuous economic growth as unsustainable.^[168][169] Several factors may constrain economic growth – for example: finite, peaked, or depleted resources.

In 1972, The Limits to Growth study modeled limitations to infinite growth; originally ridiculed,^{[161][162][170]} some of the predicted trends have materialized, raising concerns of an impending collapse or decline due to resource constraints.^{[171][172][173]}

Malthusians such as William R. Catton, Jr. are skeptical of technological advances that improve resource availability. Such advances and increases in efficiency, they suggest, merely accelerate the drawing down of finite resources. Catton claims that increasing rates of resource extraction are «…stealing ravenously from the future».^[174]

Energy[edit]

Further information on Energy role in economy: Econodynamics

Energy economic theories hold that rates of energy consumption and energy efficiency are linked causally to economic growth. The Garrett Relation holds that there has been a fixed relationship between current rates of global energy consumption and the historical accumulation of world GDP, independent of the year considered. It follows that economic growth, as represented by GDP growth, requires higher rates of energy consumption growth. Seemingly paradoxically, these are sustained through increases in energy efficiency.^[175] Increases in energy efficiency were a portion of the increase in Total factor productivity.^[15] Some of the most technologically important innovations in history involved increases in energy efficiency. These include the great improvements in efficiency of conversion of heat to work, the reuse of heat, the reduction in friction and the transmission of power, especially through electrification.^[176][177] There is a strong correlation between per capita electricity consumption and economic development.^[178][179]

Possibility of infinite economic growth[edit]

Ecological economics criticizes the possibility of infinite economic growth. Current economic models suggest the economy can grow continuously as a perpetual motion machine. However, according to the laws of thermodynamics, perpetual motion machines do not exist.^[180] Thus, no system can continue without inputs of new energy that exit as high entropy waste. Just as no animal can live on its own waste, no economy can recycle the waste it produces without the input of new energy to reproduce itself.^[180]

Matter and energy enter the economy in the form of low entropy natural capital, such as solar energy, oil wells, fisheries, and mines. These materials and energy are used by households and firms alike to create products and wealth. After the materials are used up, the energy and matter leaves the economy in the form of high entropy waste that is no longer valuable to the economy. The natural materials that power the motion of the economic system from the environment, and the waste must be absorbed by the larger ecosystem in which the economy exists.^[181]

It cannot be ignored that the economy intrinsically requires natural resources and the creation of waste that must be absorbed in some manner. The economy can only continue churning if it has matter and energy to power it and the ability to absorb the waste it creates. This matter and low entropy energy and the ability to absorb waste exists in a finite amount, and thus there is a finite amount of inputs to the flow and outputs of the flow that the environment can handle, implying there is a sustainable limit to motion, and therefore growth, of the economy.^[180] The Limits to Growth states that, due to those limits caused by thermodynamical laws, the availability of resources will decrease in a context of everlasting growth, leading to the increase of the prices of those resources, therefore to a decrease of the investment in industry. This decrease of industry will eventually lead to scarcity of goods and services that could eventually lead to a decrease of the living conditions and an increase of death rates all over the world. ^[182]

See also[edit]

References[edit]

Sources

• Acemoglu, Daron; Robinson, James A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Business division of Random House. ISBN 978-0-307-71922-5.
• Bjork, Gordon J. (1999). The Way It Worked and Why It Won’t: Structural Change and the Slowdown of U.S. Economic Growth. Westport, CT; London: Praeger. ISBN 978-0-275-96532-7.
• Clark, Gregory (2007). A Farewell to Alms: A Brief Economic History of the World. Princeton University Press. ISBN 978-0-691-12135-2.

Further reading[edit]

• Argyrous, G., Forstater, M and Mongiovi, G. (eds.) (2004) Growth, Distribution, And Effective Demand: Essays in Honor of Edward J. Nell. New York: M.E. Sharpe.
• Barro, Robert J. (1997) Determinants of Economic Growth: A Cross-Country Empirical Study. MIT Press: Cambridge, MA.
• Galor, O. (2005) From Stagnation to Growth: Unified Growth Theory. Handbook of Economic Growth, Elsevier.
• Halevi, Joseph; Laibman, David and Nell, Edward J. (eds.) (1992) Beyond the Steady State: Essays in the Revival of Growth Theory, edited with, London, UK:
• Hickel, Jason (2020). Less is More: How Degrowth Will Save the World. Penguin Random House. ISBN 9781785152498.
• Jones, Charles I. (2002) Introduction to Economic Growth 2nd ed. W. W. Norton & Company: New York, N.Y.
• Lucas, Robert E., Jr. (2003) The Industrial Revolution: Past and Future, Federal Reserve Bank of Minneapolis, Annual Report online edition
• Pokrovskii, Vladimir (2018). Econodynamics. The Theory of Social Production. Springer, Dordrecht-Heidelberg-London-New York.
• Schumpeter, Jospeph A. (1912) The Theory of Economic Development 1982 reprint, Transaction Publishers
• Weil, David N. (2008) Economic Growth 2nd ed. Addison Wesley.
• Wiedmann, Thomas; Lenzen, Manfred; Keyßer, Lorenz T.; Steinberger, Julia K. (2020). «Scientists’ warning on affluence». Nature Communications. 11 (1): 3107. Bibcode:2020NatCo..11.3107W. doi:10.1038/s41467-020-16941-y. ISSN 2041-1723. PMC 7305220. PMID 32561753.

External links[edit]

Articles and lectures[edit]

• «Economic growth.» Encyclopædia Britannic. 2007. Encyclopædia Britannica Online. 17 November 2007.
• Beyond Classical and Keynesian Macroeconomic Policy. Paul Romer’s plain-English explanation of endogenous growth theory.
• CEPR Economics Seminar Series Two seminars on the importance of growth with economists Dean Baker and Mark Weisbrot
• On global economic history by Jan Luiten van Zanden. Explores the idea of the inevitability of the Industrial Revolution.
• The Economist Has No Clothes – essay by Robert Nadeau in Scientific American on the basic assumptions behind current economic theory
• World Growth Institute. An organization dedicated to helping the developing world realize its full potential via economic growth.
• Why Does Growth Keep Slowing Down? St. Louis Federal Reserve Bank
• Are there limits to economic growth? It’s time to call time on a 50-year argument. Nature, 16 March 2022.

Data[edit]

• Angus Maddison’s Historical Dataseries – series for almost all countries on GDP, population and GDP per capita from the year 0 up to 2003.
• OECD economic growth statistics
• Multinational data sets — easy to use dataset showing GDP, per capita and population, by country and region, 1970 to 2008. Updated regularly.