4.4.5—Consequences of growth

Higher real output can increase employment, incomes and tax revenue, but the consequences of growth are not automatically positive or evenly shared.

Growth may reduce poverty and fund public services, yet rapid demand can create inflation, inequality or external costs such as congestion and emissions. Supply-side growth is usually more sustainable than a purely demand-led boom, but even it can have opportunity costs.

A productivity gain that raises real wages and tax receipts can improve living standards; if the gain is concentrated in one sector while pollution rises, average GDP growth hides distributional and environmental losses.

“More GDP” is not identical to “more welfare”. Judge the direction and distribution of effects, and distinguish a temporary cyclical recovery from sustainable growth.