Economic growth is not an end in itself. Increasing gross domestic product, i.e. the value of all the goods and services produced in a single year, raises people’s incomes and thus their standard of living. A flourishing economy creates jobs and fills the state’s coffers with the means to finance education, environmental protection and social security.

There are two possible sources of economic growth. One of these is for people to work harder and invest more capital. Longer working hours, for instance, offer a potentially effective route to greater prosperity in an ageing and shrinking society. Another possibility is to increase efficiency, thereby achieving a better result from the same input. Technical progress offers the best chance of doing this as steadily improving production processes and new products are effective drivers of economic development.

It is also important to invest in minds: in a sound school education, outstanding universities and modern systems of ongoing in-company training. It is equally necessary to continually invest in capital equipment, such as modern machinery. However, whether investors invest their money in Germany, creating good jobs in well-equipped workplaces, depends to a large extent on the profits which they can expect to make here. If it is to succeed in the competition for investment capital that is now globally mobile, Germany must remain an attractive business location and create the conditions necessary for economic growth.

Michael Grömling

Michael Grömling

Senior Economist for Domestic and Foreign Economic Cycles

Tel+49 221 4981-776

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