There is a psychological effect. People want to feel that they are making progress, that it is getting better. Whoever has a job wants to see his salary rise after a while. If the level of prosperity increases for almost everyone – which is only possible with steady economic growth – then the feeling of satisfaction and happiness in society also increases, “Harvard economist Benjamin Friedman stated in his 2006 book” The Moral Consequences of Economic Growth. He went one step further. Economic growth makes societies more tolerant and makes them more open to democracy.

What Are The Effects Of Economic Growth?

Economic growth makes societies more tolerant and makes them more open to democracy.

Economic growth is also a condition for the affordability of basic social services in developed economies. Due to the aging of the population, for example, the costs for pensions and health care are increasing. In order to be able to bear this without having to cut heavy spending on other expenditures, economic growth is needed that will generate extra tax revenue for the government.

Economic growth is not only the result of government policy, but also of innovation and of productivity

Improvements in industrial companies, service companies and government administration. If economic growth is slowed down or stopped, the stimuli for technological progress will largely disappear. Both processes interact and propel each other. “Our economic system is inextricably linked to growth,” observes French Harvard professor Philippe Aghion, who works a lot on economic growth.

Economic growth brings stability to the economic and political system. That growth is desirable and necessary. But that fits perfectly with the question that it must also be balanced and sustainable.