Thinking about Growth

When we have numbers we can quantify things and compare them. In the 1960s growth in South Korea was 7 per cent per annum and in India around 4 per cent. These numbers allow us to quantify that the Korean economy grew nearly twice as fast as that of India and would lead to the Korean economy doubling in size every decade. Sometimes it is relatively easy to attach numbers (such as numbers of teachers or output of steel) but very often far more difficult (such as the extent of liberalization or democracy or the quality of education). The most important numbers in economics are those for measuring the total size or growth of the economy: gross domestic product (GDP) and sometimes gross national product (GNP). This chapter first shows how economists have tried to measure total GDP and GNP and the problems they have encountered in doing so, then assesses the three main ways of thinking about growth: as a process of change, as progress towards an ideal end-state and as an assumption of progress. Growth gives us a sensation of relentless upward movement but this does not mean that all good things go together in a growing economy. The broader concepts of the good society or well-being require us to think about how economic growth interacts with, causes and in turn is influenced by phenomena such as poverty, inequality, nutritional status and environmental quality.