The world, and especially various individual countries in it, are in an economic mess. I have been meditating on this economic situation recently (honestly, on our own small part of it), and while I have come to new solutions or conclusions, I have had some thoughts to share with us–especially for how precisely the economic mess can be defined and thought of (for those of us who are not trained economists). Mostly, I’ve been thinking a lot about this because I was going through a lot of articles while taking three plane rides and during breaks between some mentally and emotionally intense meetings–I’ve had a lot of downtime to think and ponder, but not enough (until now) to write long form articles.
Economic growth, analysts tell us, is down. But what, precisely, does that mean? It sounds ominous. It sounds plain bad. Perhaps even apocalyptic: nation-shattering, or at the very least nation-changing.
Economic Growth is just that–the growth of an economy. It is generally measured as the increase of per capita (economic speak for “per person”) gross domestic product (that is, the value of what goods and services). It is a general measurement of the increase in people’s total income in any given year.
Let’s say, for example, you are a hawker selling meat buns on at a roadside stall. In a given day, you might earn the equivalent of US$5. If last year you earned about US$1500, and this year you earned US$2000, that is economic growth. Simple enough, right?
Now, economic growth in any population segment (a city, a state or province, or country, or region, or even the whole world) means that the aggregate of everyone’s revenues (not expenses, mind) increases over a period of time. That doesn’t necessarily mean it increases for everyone, but let’s skip that complexity for the moment.
It’s easy to see how an individual person’s economic growth can increase. You can sell more of your goods, change your job, lower your costs. But how does economic growth happen across an entire segment?
- Reduce costs. One way, sort of, is for per-person productivity to increase. Costs go down. You can afford to pay your workers more. This isn’t precisely economic growth, per se, for the company–they aren’t experiencing any additional revenue–but it would be for the workers, and so that could lead to economic growth.
- Sell More Stuff 1: through advertising or whatever, increase your market share by selling more stuff to your existing market. This only works until you have market penetration.
- Sell More Stuff 2: Sell the same stuff to new people. Another way is to sell more stuff to more people by entering new markets. Car company _X_ might sell cars only in their area, but then they start selling cars in another area (e.g. another country). Their market has grown, they are selling more cars, so their economic growth goes up. This works if you have something another market wants.
- Sell More Stuff 3: Sell New Stuff. Another way is to invent something new that everyone wants (like an iPad). This means selling new stuff to the same people.
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