What Fuels Long-Term Economic Growth?

If you look at the state of the global economy, you’re likely to feel a sense of doom and gloom about the future.

But rather than letting the current economic crisis grind us down, now’s the best time to learn about what contributes to long-term economic growth. You want to learn the basics of economic freedom and what steps to take to avoid future problems.

This short article will show you the basics of understanding long-term economic growth and how you can foster a growing economy in your area.

Here’s what you need to know:

Limited Government

Without a doubt, the growing economy can make a downturn if there’s too much interference from the government. The prominent economist James Robinson has discussed how the influence of the State and a few political elites have stifled economic growth.

One can look at history and compare nations to see this in action. Singapore went from Third World to First World. This is because Singapore’s Founding Father Lee Kuan Yew allowed a free market with little interference from the government.

Compare this to India, where almost any job required a license and businesses couldn’t get started without the government’s permission. India’s economic growth was stifled until the economy opened up in the 1990s.

The first step to ensure a growing economy is to advocate for limited government. More responsibility should be placed on the citizenry.

Inflation

It’s likely that you’ve asked yourself “what is inflation?” as you notice the prices of everyday goods increasing.

The current economic crisis has led to worldwide inflation. This means that all national currencies have lost their purchasing power. However, this isn’t something recent.

Since President Nixon took the dollar off the gold standard the amount of money printing by the Federal Reserve has increased. This means that each day, your dollars lose their value.

To combat this, you must consider diversifying your currency holdings. Bitcoin is seen as a great hedge against inflation. Gold and silver bullion have been traditional hedges against inflation as well.

Low Taxes

You might think that high taxation is ideal for providing services for your country. Some countries, such as the Nordic countries, have provided excellent social services by charging high taxes.

However, The Laffer Curve has shown us that productivity decreases with high taxes. You want to advocate for low taxes to encourage more economic activity.

You can also encourage your entrepreneurial friends to find ways to legally reduce their tax burden. Emigration to low tax jurisdictions will put pressure on governments to reduce tax burdens as well.

That’s How to Ensure Long-Term Economic Growth

Now you know what it takes to provide long-term economic growth and ensure prosperity.

You want to advocate for limited government. The best economists have always shown that less government interference has led to a growing economy.

You also want to consider hedging against inflation. This guarantees that you maintain your purchasing power during an economic crisis. Lowering taxes is also a crucial step toward ensuring productivity.

You can read more about what causes economic growth on our blog!