What Factors Affect World Economic Growth?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 09 May 2020
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World economic growth refers to an analysis of the factors that contribute to or negate the growth of the economy from a global perspective. There are many contributing factors to the growth or lack of growth of world economies, including education, politics, health and transportation. All of these factors affect global economic growth in some manner.

One the chief factors that affect world economic growth is human capital in the form of education. The value of education toward achieving a more contributory rate of world economic growth from the various countries in the world can be seen through an analysis of the rate of economic growth in countries with a large percentage of highly educated people, as opposed to a country with less. Education is considered a part of human capital because a solid education normally yields returns in the form of the application of the education toward activities that help in the development of the economy. People with education are often more likely to apply their skills toward the development of entrepreneurial ideas that will lead toward the establishment of specialized companies. These companies serve useful purposes, such as the establishment of subsidiaries in other countries, employment of people from different countries, payment of taxes, and a general promotion of world economic growth.

Political stability is vital for world economic growth, because when several countries are experiencing political turmoil the revenue that would have accrued from those countries would be lost. For instance, if a country has a wealth of natural resources it cannot use due to political strife, the world economy would feel the impact in terms of the loss of employment from those industries and in the revenue that would have been realized from the sale of resources on the local and international market. The country would also be a drain on other countries due to the burden the citizens of that country will place on them as a consequence of the assistance and other forms of financial and material aid they will require.

Another important factor that affects world economic growth is health, which is another component of human capital due to the fact that any investment in the health of an individual will yield an expectation of better health and more productivity. The diseases in some countries affect the growth of their economy due to the higher incidences of mortality in such places as well as the loss of manpower. A good transportation network, which is a product of sound infrastructural management, also contributes to economic growth.

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Post 3
@ysmina-- Absolutely, trade is very important. This is why we have the WTO.

If countries do not trade with one another, or experience many disputes during trade and establish high tariffs and embargoes, everyone will lose out economically.

Organizations like WTO try to prevent these problems. They resolve trade disputes between countries and encourage countries to work with one another. You're absolutely right.

Post 2

What about trade? I think trade must be one of the most important factors that affect economic growth in the world.

Post 1

I think that education is an interesting factor when it comes to economic growth. I think it's similar to GDP growth in the sense that too little or too much of it can actually do more harm than good. If GDP grows too quickly, it leads to inflation; if education levels rise too quickly, employment becomes problematic.

Unemployment rates have been rising globally. Some think that the problem arises from educational requirements. Either people are too qualified or are under-qualified for jobs due to their education. So we have some fields where there are no jobs because there are too many qualified people and immense competition. And then there are jobs that no one wants to do.

Of course, this is not good for economic growth because it leads to less production and eventually less consumption. Balanced demand and supply are very important for the economy to grow.

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