Economic growth

Economic growth is understood as the positive evolution of the living standards of territory, usually countries, measured in terms of the productive capacity of its economy and its income within a specific period of time.

The strictest definition of economic growth is the one that indicates that there is an increase in terms of income or of the goods and services that the economy of a territory produces in a determined time generally measured in years.

The concept of income can include within this definition many other economic indicators of the welfare of any country or region. Aspects such as the level of savings or investment of its citizens and their trade balance are some that are commonly taken into account when studying economic growth. That said, the most commonly used meter to measure economic evolution is usually the fluctuations of GDP (gross domestic product) of the country analyzed.

Theory of economic growth

The economic studies that have tried to define this phenomenon are included in the theory of economic growth and focus on the study of the improvements experienced by economies in a given number of years, which usually extends to the long term. For the short term, there is a theory of the economic cycle.

Through the study of economic growth are observed many other aspects of the productive life of an economy, putting the focus on its productive level, the quality of education imparted to its citizens, its mortality and birth rates or the life expectancy in its region.

On the other hand, usually this type of growth is usually identified with success or not, as in the case of economic recessions (where there is a decrease in economic activity over a period of time) and economic policies practiced by countries of the world, based on the assumption that if the income of a country increases, so will the welfare of its citizens.

However, the distribution of the wealth of a country or the specific characteristics of its productive system may hide aspects that the measurement in terms of income can not explain in detail. The use of GDP as a meter helps to simplify reality when it comes to analyzing growth, even if it fails to explain with total clarity the true improvement of living conditions.

Factors of economic growth

In centuries of study of the economy different models have been developed on economic growth and its causes. These are simplifications of reality useful for seeking explanations about how economies grow and the reason for their changes. The general idea that can be drawn from them identifies certain factors as keys to economic growth:

• Investment in the capital: Key for workers to carry out their productive work in better conditions and with the help of more tools.
• Education: Or what is the same, the investment in human capital that gives the participants in the production process a preparation that helps them increase their production with the same resources and be more effective.
• Technology: Important in the sense that it facilitates evolution in work models, tools and means of production and research.

See conditions for economic growth

As a good indicator of the functioning of a country’s economy, next, we wanted to show how the first world powers occupy the first positions.