Everything gets better with growth

Growth matters for two reasons. Firstly, there are many statistically significant concurrences, but by far the most significant … is that almost all policy makers’ objectives are achieved in rich countries. The evidence suggests that countries become richer faster if their governments implement high growth policies, that is, policies that characterise high growth countries. Secondly, few people realise how much faster countries become much wealthier if they achieve just slightly higher growth rates…

The overwhelming coincidence between growth and most policy objectives suggests that growth is both an effect and a cause. Factors that are good for growth are likely to be factors that are also good, for example, for savings, investment, job creation and competitiveness. Additionally, high growth means more wealth and coincides with more and better education, health care, infrastructure, security, safe water and clean air.

High growth tends to follow the implementation of the specific policies identified in [this] research. Those policies also appear to be good for almost everything else that policy makers desire.

It is commonly assumed that ‘society’ and ‘the planet’ endure massive impacts as side-effects of economic growth, that growth promotes social tensions and class conflict, causes resource-depletion, destroys the environment, endangers species, pollutes rivers and oceans, and much more. The reality is much more satisfactory. Almost every indicator of human and environmental well-being is much better in rich than in poor countries, and, instead of causing problems such as social or environmental damage, these indicators improve rapidly at high growth rates…

There are hundreds of published indicators of conditions generally regarded as preferable. Most refer to the human condition and a growing number are concerned with the environment. More wealth, democracy and press freedom; less crime, unemployment, discrimination and inflation; higher life expectancy and literacy rates; cleaner air, less endangered species and a stable climate; better respect for human rights, and so on, are generally regarded as preferable. Exceptions to the general rule that everything is better in wealthier societies are hard to find.

AUTHOR Leon Louw is the Executive Director of the Free Market Foundation. This article is an excerpt from the book Habits of Highly Effective Countries – Lessons for South Africa published by the FMF and may be published without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Policy Bulletin / 22 May 2012

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