GLOBAL FINANCE
8
GLOBAL FINANCE
GROWTH
Every day we are exposed to the notion that growth is very important
and we could be forgiven for wondering why. While there may be
philosophical differences over the true value of growth (some people
may prefer to live simply, while others want everything they can get),
many misunderstandings arise because of confusion over the concept
of economic growth.
Economic growth is the increase in the total production output
of an economy. As long as output grows faster than the population,
the standard of living increases. Economic growth happens when an
economy either finds new resources or when it finds ways of producing
more using existing resources. Since the Industrial Revolution that
began around 250 years or so, much of the world has done both.
The population has increased dramatically (see Table 2.3), yet living
standards have, overall, gone up.
Table 2.3
Increasing agricultural production (corn and wheat) in the US:
19391995. (Source: US Department of Agriculture Statistics, 1992; Statistical
Abstract of the United States, 1996.)
Year
Corn
Wheat
Yield per
Labor hours
Yield per
Labor hours
Acre (BU)
per 100 BU
Acre (BU)
per 100 BU
1939
26.1
108
13.2
67
1949
36.1
53
16.9
34
1959
48.7
20
22.3
17
1969
78.5
7
27.5
11
1979
95.3
4
31.3
9
1985
107.2
3
36.9
7
1990
112.8
NA
38.0
NA
1995
120.6
NA
38.1
NA
In developed countries, agricultural productivity has greatly impro-
ved. For example, in the US, the productivity in corn and wheat have
grown massively since the 1930s, while the work needed to produce it
has dropped by over 90% (Fig. 2.1).
