Understanding the variables of economic growth can help understand its impact and consequences

4 min readSep 25, 2022
Photo by Toomas Tartes on Unsplash

Economic growth is defined as an increase in the production of goods and services from one time to another. In the typical capitalistic world, economic growth is normalised as always good. In reality, this economic growth “at any cost” is not healthy; hence, we are experiencing consequences such as climate catastrophes.

Let’s take a step back and see how economic growth happens and why it is essential. Economic growth means the economy is expanding or growing, and an economy is defined as an area of production, distribution and consumption of goods and services. This area could be a state, territory, country, region, or the world. So if economic growth happens, that means the production of goods and services in that area increases.

Economic growth is not a simple phenomenon; for example, say there is a country which only provides IT services to the world, that is all. So improvements in technology, improvements in unemployment, improvements in education, improvements in infrastructure, improvements in financial institutions, and political stability all of these variables influence economic growth. But it is also essential to identify the cause and effect side of it. For example, someone could say economic growth happened because of the improvements in the education system, and someone could say that the education system improved because of the push for growth.

Think of more variables, say we improved in technology, now we need more energy to run systems, so the country burns more fuel, higher carbon footprint, need more land to build data warehouses, so they clear more land, cut down more trees. This is just a simple example of a service industry; feel free to consider the variables in the production industry, such as natural resources used in production.

I only mentioned a few variables; there are more variables from monetary policies, from interest rates to taxes, to stimulate or hinder economic growth.

Okay, let again look at the big picture. We are looking for economic growth; hence we increase the production of goods and services. Then the result is more income due to the increase in production. That means people have more disposable income, which means more consumption. More consumption. Better quality of life. More consumption also creates momentum for more economic growth and demand for more innovation and production. The above concept is called consumerism.

In economics (well, macroeconomics), an economy is measured by a metric called Gross Domestic Product (GDP), so economic growth is an increase in GDP. So, countries with a high GDP mean the country’s economy is large, which means the value of the goods and services produced in that country is significant. When GDP grows, it’s a boom; when it declines (consecutively for two quarters), it’s a recession.

I hope you understand why economic growth is promoted in most scenarios, especially in capitalism (economic growth at any cost). People could argue that with innovation, any problems arising due to an increase in production capacity and high consumption levels can be solved and always try to pass the responsibility to more innovation.

I will try to draw my conclusions from here before I try to make this an economics book. So, we discussed economic growth, what it is, why it is essential, and how it is related to increased income and spending.

So now what’s the problem? Economic growth is needed, or the world will not move forward, the quality of life will decrease, and humankind will not grow. But the problem is unsustainable growth, pushing economic growth at any cost, not thinking about the variables connected to increases in production of whichever goods and services and not considering the consequences of the changes to these variables.

Then what is the solution? Sustainable growth, but that’s only a fancy word. To me, sustainable growth means understanding as many as possible variables influenced by stimulating growth and understanding the consequences and pace of these variables, e.g., natural resources usage, speed of renewal and effects of use.

While I was talking about economics, this principle also applies to any growth, whether personal or business growth. If you understand the variables being influenced better and respect them, you will be more sustainable and prosperous. Yes, I realise that technology is increasing at a dramatic rate. Still, chill patience and proper long-term gradual growth will bring better results to the economy, your business, your finances, your education, your health and your life.




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