Understanding economic growth takes more work than opening a dictionary to “E”, and flipping to “Economic Growth.” What you would likely find in those dusty pages is an unimaginative picture of the grand idea that is economic growth. Economic growth is effectively a school of thought and theory. Beyond asking “what is economic growth,” it is also beneficial to know how to recognize economic growth inside your business.
Economic Growth Definition
Economic growth is an increase, or growth, of an amount of money or goods over time.
This can be anything from a one-person company all the way to the global economy. The metrics for tracking economic growth, of course, will vary depending on the industry or size of the subject being measured. But the important part is that economic growth must be reliably and repeatedly measurable. This means that economic growth can only be calculated by taking the difference between the two metrics. Companies with stockholders generally reveal their earnings quarterly. This means that if a company earned more money in Q4 than in Q3, it experienced a quarter of economic growth.
Economic growth is most frequently measured as a numerical cash value. This is because growth can only be measured by taking a starting value and comparing it to another. There are, however, abstract means to measure growth outside of money. Economic growth can be measured by an increase or decrease in access to employees or active workers. A company’s ability to use new machines can also contribute to its economic growth. This, however, only counts when factoring in the value of those machines. Obtaining new machines or technology is an example of economic development.
Economic Growth Examples
Because economic growth can happen on such a wide scale, it pays to have meaningful examples of growth on each level. Our first economic growth example is a one-person business. Economic growth is simple to track for a business this small. This is because the business owner’s economic growth is based on the amount of money they have. If that business owner made more money in sales in one month over the next, they experienced economic growth.
Consider, then, a company with more than 1,000 employees. A business like this likely produces enough products where income alone does not show if they are having economic growth. Companies with robust portfolios and international offices have financial value in a soft sense. Even though those assets are not money, they still count toward economic growth. This is because large assets like inventory and stocks can be used as collateral. So, they ought to be measured with economic growth. So, imagine a company makes the same amount of money, but the value of their stocks and assets increases on the international market. This would still count as economic growth. All assets of a business must be considered in an earnest attempt to understand if that business underwent economic growth.
Lastly, think about an entire nation. Countries will indeed publish gross domestic product (GDP) data annually or quarterly. But this is only one of the thousands of factors to consider when weighing whether or not a national economy grew or shrunk. It is possible during a recession or depression for the GDP of a country to decrease due to inflation or a decrease in currency value. This means that a country can experience a GDP dip but have economic growth. This can happen when a new style of economic regulation reduces the overall output of a business. But those regulations, however, may improve investment in the country itself. This means that
Approaching Economic Growth from All Angles
Economic growth is complex when considering the multitude of ways that a business can expand and develop. It is not simply a monetary calculation that proves whether or not a business is experiencing economic growth. Growth must always be measured as a number. The scope of economic consideration ought to be weighed in coordination with the size of the business being evaluated.