What are the fundamental drivers of economic growth?
Too often, when speaking of economic growth, the emphasis is on figures and technical explanations. Yet it is worth taking the time to explain the fundamental principles behind this. Here, then, are three basic motors of economic growth:
- The protection of private property and the guarantee, from existing institutions and authorities, that such property will not be confiscated in an excessive or arbitrary manner. In this way, workers have an interest in working, savers and investors feel that they can safely preserve their capital in the jurisdiction and are motivated to do so, and entrepreneurs know that it’s worth it to take risks and try to build an organization for the long term. This interaction between workers, investors, and entrepreneurs creates a virtuous cycle that favours strong and sustainable economic growth. Let me specify moreover that my observations in no way exclude a role for government. On the contrary, it can and must play a stabilizing role.
- A sound and stimulating environment for innovators. Indeed, when a society encourages and celebrates innovation across the board, whether social, economic, technical, or managerial, we all benefit. Concretely, this means tolerating dissent, and even radical nonconformity, as well as the right to be wrong and to fail. Such an environment almost invariably generates better economic growth than a more authoritarian, centralized environment, all else being equal.
- A well-funded, high-quality educational system that encourages freedom of choice for parents and students on the one hand, and competition between schools on the other. Such a system does not only encourage university studies, but also technical and professional training, trade schools, continuing education, etc. After all, an educated, competent workforce, equipped with a good capacity to adapt to the ups and downs of economic life, is clearly a pillar of economic growth.