Economic growth is one of those things that may seem, to the layman, rather confusing. By this I mean that it doesn’t seem that economic growth is particularly important, or at least it doesn’t seem that it should be very important, and yet the papers constantly fuss over a half of a percentage point on the growth of the GDP. A question that might naturally arise, then, is why we care so much about growth? Why not just live with what we have, as a rich nation, rather than persisting in what appears to be a blindly materialistic rush to produce? As we shall see in the coming pages, the answer is quite simple: growth, in and of itself, is not important. But money is very important indeed. It is only a large GDP per capita that allows for the high standard of living currently enjoyed by citizens of first world countries, and, should growth stop, serious deficiencies might be felt as soon as five or ten years down the line. Even a half of a percentage point here or there can be a rich country’s ruin or a poor country’s salvation.

I spoke, above, of GDP per capita. The reason for this is quite simple: a nation’s GDP, and particularly its GDP per capita, serves as an excellent proxy for its economic health. The GDP is not inherently important, to be sure. Far more important are metrics like mean real household wages and employment figures, but it is through GDP growth in relation to total population that these more direct metrics can be improved. In the United Kingdom, statistics concerning the nation’s GDP, both total and per capita, as well as employment and real household wages, are collected and published monthly by the Office for National Statistics (ONS, 2010).

I will speak here first of the theoretical advantages of having a high GDP per capita before moving on to practical examples of those advantages. The most important and most obvious advantage of a high GDP per capita is that there is simply more money to go around, even if one accounts for increasing economic inequality within the nation (Barro & Sala-i-Martin, 2004, pp. 6–10). This translates, first and foremost, to a better job market: higher real wages, more consistent employment, and faster creation of new jobs. So to the extent that a strong job market is important, so too is per capita GDP.

In addition to what we might call the social benefits of being wealthy as a nation, there are also more individual benefits. By social benefits, I mean that there will be fewer who require government assistance to maintain the bare minimum standard of living, that employment will be more consistent, and that the economic health of the nation will therefore be further improved in a thoroughly beneficial cycle. By individual benefits, I refer to the higher standard of living that inhabitants of the country will enjoy (Barro & Sala-i-Martin, 2004, pp. 6–10). An inhabitant of a wealthy country like the United Kingdom has an enormously high standard of living compared to (for instance) an inhabitant of sub-Saharan Africa.

There are those, of course, who will argue that these increases in quality of life do not truly count — after all, they will say, studies have often shown that money only makes a person happier up to a certain level of relative prosperity, and it is entirely possible that the relatively well-off in Ethiopia, for instance, enjoy lives that are just as satisfying as the relatively well-off in the first world. However, there is a second key benefit of being an inhabitant of a wealthy nation: improved health. What this argument neglects is the very real overall increase in life expectancy as a result of living in a wealthy country (Acemoglu, 2008, p. 7).

We have therefore settled the question of why a country would want to be wealthy. But why should a country obsess over growth? The United Kingdom is a wealthy country, after all — why should it bother attempting to become wealthier? The answer, plainly and simply, is that growth is absolutely essential to maintaining a relatively high GDP in the face of inflation, and that apparently miniscule changes in growth rates can have extraordinary effects in the long run (Acemoglu, 2008; Barro & Sala-i-Martin, 2004, pp. 8–18). Consider, for instance, a comparison between South Korea and Brazil. In the 1960s, Brazil was actually slightly wealthier than South Korea. But Brazil’s economy grew slowly, while South Korea’s grew explosively, with the result that today, South Korea’s GDP is almost two orders of magnitude greater than that of Brazil (Acemoglu, 2008, fig. 1.8). The message is quite clear: stagnation is unsafe.

It is my hope that this brief essay has provided some insight into the reasons that countries emphasize economic growth almost to the point of obsession. This emphasis is driven, of course, by the desire to become or remain a wealthy nation. The evidence indicates that this desire is not only rational but inescapable — the benefits of being wealthy are simply too great for any nation to forego. To adopt a complacent posture in the face of international economic growth is to doom oneself to the pain of “stagflation” (Olson, 2008).