Economic Growth: An Impact-Focused Overview

Economic growth has transformed the world. Over the past two centuries, growth has been a driving force behind longer lives, improved health, better education, and countless innovations that have reshaped how we live and work. 

At its core, economic growth means that a country is producing more goods and services—things people value, like food, electricity, and healthcare. This comes alongside higher incomes and tax revenues, enabling individuals and governments to afford the essential resources that make life better.

The effects are staggering. In 1820, about 75% of the global population lived in extreme poverty, struggling to meet even basic needs. Today, that number is closer to 8.5%. These incredible results mean that far more people today are able to fulfill their basic needs like nutrition, shelter, and healthcare than ever before.

Because of its positive effects, economic growth is already a key priority for most governments and multilateral institutions. This makes growth a crowded field for people hoping to make an individual difference.

As a result, while the benefits of economic growth are undeniable, it may be challenging for individuals to find unique ways to make a meaningful impact in this area. That said, if you have a distinctive perspective or skills that position you to address neglected areas within economic growth, particularly within lower-income regions, there may still be promising opportunities to contribute.

Read on to explore why economic growth matters, what challenges it faces, and how you might make a difference in the field.

What is economic growth?

A country’s economy is, in short, the sum of all activities and goods it produces. Typically, an economy’s size is measured by something called Gross Domestic Product (GDP), which reflects the value of all goods and services produced within a country (though there are also other ways to measure it). It’s essentially the sum total of all the things that people value enough to pay money for. This includes essentials like food, water, electricity, education, healthcare, childcare, and transport. It also encompasses other things that, while not strictly necessary, still contribute meaningfully to our lives, like art, culture, and leisure.

When we talk about economic growth, what we mean is an increase in the quantity and value of all of these goods and services. In simple terms, when a country’s economy grows, there are more resources that can improve people’s lives.

A larger economy doesn’t necessarily mean that each individual within the economy has more access to goods and services, though. For instance, India’s economy is hundreds of times larger than Monaco’s, but the average Indian citizen is dramatically poorer. This, unsurprisingly, is because its population is nearly 40,000 times greater than Monaco’s. There’s more wealth to go around in India, but it’s spread over a much wider population.
A more helpful metric that takes this into account is GDP per capita—a country’s total GDP divided by its population. A higher GDP per capita indicates that, on average, people have more wealth and greater access to the things they want and need.

How important is economic growth?

The benefits of growth are enormous

Imagine we could reach back in time to 1820, pick a random person with an average amount of wealth, and transport them to today. How different would their life be?

The answer is extraordinarily different—and probably much better. The average person today is able to live a life significantly better than someone on a median income in 1820. This is because there’s a tight relationship between a society’s wealth, the amount of products and services its people are able to access, and their average levels of wellbeing.

Because of economic growth, the average person today is able to access far more, and far better goods and services than they could have two centuries ago. Though a median income today (around $8.25 per day as of 2024) is low by the standards of high-income countries, the time traveling citizen would feel rich by the standards of their time. For one, they’d be able to comfortably afford enough to eat and drink, and have better access to acceptable housing.

The kinds of products they’d have access to would change dramatically. Growth drives the introduction of new products, meaning that people today aren’t just able to consume more than they used to, but also that the products and services they have access to are very different (and often much better).

Even the world’s richest person in 1820 couldn’t have used antibiotics, drank a can of Coca-Cola, or traveled via train—let alone spend their journey listening to a podcast or playing a game on their smartphone.

The time traveler would also have access to all sorts of public goods that are more readily available in today’s society. Unlike in their own era, they could travel widely, all but guarantee education for their children, and be able to experience far more art, culture, and entertainment than they would have in the 19th century.

On top of this, they would almost certainly need to work less to live a much better life than they had in their own era. As productivity has increased, working hours have reduced substantially, with people in many developed economies working about half as many hours than they did in the 1870s.

Related to all the other benefits we’ve talked about, they could also expect to live a much longer life. Human life expectancy has more than doubled since 1820, rising from 29 years to over 73 years as of 2023.

In short, they’d have much more free time, more money to spend, better things to spend it on, and a longer life to enjoy all these improvements. This is thanks largely to growth.

Much of the world is still poor

However, there’s still a long way to go. Even though most of the world has benefited enormously from economic growth, many still struggle.

For one, nearly 700 million people still live in extreme poverty, on incomes less than $2.15 per day adjusted for purchasing power. Almost 2 billion people live on less than $3.65 a day, the threshold for poverty in low-and-middle-income countries. The share of people living in poverty has shrunk, but the absolute number of people struggling is still high.

In many countries, especially in Africa, life expectancy is far behind the global average. For example, according to 2023 data, Nigeria’s life expectancy is 54.5 years, and Chad’s is 55.1, lagging significantly behind the rest of the world.

Clearly, there’s still a lot of improvement to be made in the world’s poorest regions. In these areas, economic growth is likely to bring disproportionately good incomes compared to further growth in high-income regions because of diminishing returns.

For instance, despite consistent economic growth, life expectancy in the US has remained essentially flat in recent years, whereas Africa’s average life expectancy increased by 5 years from 2010-2023.

Aside from the absolute improvements growth can bring to the world’s poor, a concern for inequality may also make growth in low-income areas look even more important. Though global wealth inequality overall is similar today to 1820, with a slight-to-moderate increase on some measurements, overall inequality is nonetheless extremely high.

Challenges and downsides to growth

Despite the undeniable and significant benefits of economic growth, it isn’t an unambiguous positive. Most prominently, economic growth exacerbates climate change. This is because economic growth requires energy to enable it, and much of the world’s energy supply comes from polluting fossil fuels. 

So, although economic growth raises the living standards of those who benefit from it, this comes with the tradeoff of making it harder to keep warming below reasonable limits.

This has led some climate activists to advocate for lower rates of economic growth, and sometimes even “de-growth”—a shrinking of the world’s economy to reduce our energy needs.

Thankfully, however, economic growth can be compatible with addressing climate change. Several countries have already shown this by maintaining growth while reducing emissions through shifting to cleaner energy sources. As the world pivots further towards clean energy, we can expect growth to become further uncoupled from greenhouse emissions.

The IPCC has also suggested limiting warming to below 2°C, a common target, is consistent with global GDP continuing to grow, falling only a few percent behind what it would be in 2050 if we failed to take further action.

Though there are indeed tradeoffs between climate change and economic growth, the climate-related downsides of growth thankfully aren’t as strong as many might expect.

Another concern about prioritizing economic growth is its potential impact on animal welfare. This is because higher wealth tends to lead to higher meat consumption. So, the wealthier the world gets, the more demand there will likely be for animals to be raised and killed for food.

This is a significant drawback. The vast majority of farmed animals today are kept in factory farms, a source of enormous suffering for the animals within them. This means that, as it stands, promoting economic growth also means indirectly promoting factory farming—an uncomfortable but important truth.

The extent to which this should lead us to de-prioritize economic growth depends on a few factors, such as how much we value the suffering of animals, the extent to which growth increases meat consumption, and how we weigh this increased suffering against the improvements to human lives that growth brings. Each of these is a complicated question open to disagreement, but the tradeoff between growth and animal welfare is one worth keeping in mind.

What can we do to improve economic growth?

By now, it seems clear that economic growth is something worth pursuing. But do we have effective ways to increase it?

One important thing to consider here is that, perhaps more so than most other cause areas, action taken to promote economic growth needs to be taken by governments and international institutions. The levers needed to promote economic growth usually require changes to the organization of capital, trade, and labor—typically under the purview of the government.

Countries’ growth trajectories also tend to follow similar trend lines. This could indicate that growth is driven by global events and forces more than countries’ individual policies.

Even though economic growth looks like a low-tractability area overall, this doesn’t apply equally across all regions. For instance, we’d expect promoting economic growth in low-and-middle-income countries to be more feasible than in higher-income nations. In these regions, there is likely to be more low-hanging fruit for policy interventions and best practices. Low-and-middle income countries have typically been able to achieve higher levels of growth than high-income countries in recent decades, likely in part for these reasons.

So, although there are effective levers to pull to increase economic growth, it’s tricky to both identify what these levers are in practice, as well as convince the relevant stakeholders to make the right decisions.

How neglected is economic growth?

The fewer resources like time and money directed towards solving a problem, the more room there often is to make a big difference yourself. With this in mind, how neglected is economic growth?

In short, economic growth is a highly crowded area. Because there are such strong incentives for governments to pursue economic growth, like greater tax revenues and favor with the public, it’s one of the main priorities for almost every government in the world.

It’s also a focus for tens of thousands of economists and policymakers across academia, development nonprofits, think tanks, and international institutions like the World Bank and International Monetary Fund.

This means there’s a lot of time, money, and labor already being poured into promoting economic growth, making it very difficult to move the needle as an individual focused narrowly on promoting economic growth. However, there may still be some smaller, targeted interventions that are neglected by mainstream policy and big institutions.

For instance, there may be niche opportunities that could have great positive effects but are likely to fail. These are less likely to be pursued by typically risk-averse institutions and foundations. Another strategy may be to focus on countries and regions that are disproportionately neglected by existing efforts.

Economic growth is also often a by-product of programs that are worth pursuing in their own right. For instance, the best educational interventions can significantly increase the lifetime earnings of those they help, and contribute toward a more productive, wealthier society. Effective health programs can have a similar effect, allowing people to live longer, healthier lives, meaning they’re more able to work and produce an income. For several reasons, many great opportunities within global health and development are unduly neglected.

What can you do in economic growth?

We think there are multiple great career paths that are relevant for people looking to make a difference within economic growth. Here, we’ll cover a few of them.

One career that’s highly relevant here is development economics. Development economists are often focused on increasing growth in lower income regions of the world (whether directly or as a side effect of other interventions), and is a career that we’d highly recommend for people who are a good fit.

Another option is a civil service career in low-and-middle-income countries. These roles can provide a good platform for growth-relevant action. This will depend a lot on the area of government you find yourself in, but civil servants willing to push good policies in the right places can make a surprising individual difference.

International aid is a cause area that intersects heavily with economic growth, since aid is often targeted at increasing economic growth. It’s not a single career path, but rather a field with a wide range of (potentially promising) roles, in both aid organizations, multilateral institutions, and relevant NGOs.

Additionally, for those who want to help people living in poverty across the world, we’d recommend exploring how you can use your money to fund effective programs that assist the global poor. One example is the Center for Global Development, a research institute working to improve development and growth in the world’s poorest regions. You could also take a look at GiveWell, a charity evaluator that highlights some of the best charities working in this sector.