What Drives Economic Growth?
When you see a new business open up on a street you might think, ‘this is economic growth’.
It is. But, it was economic development that helped create the environment for growth to occur.
Simply put, economic growth is measured as an increase in Gross Domestic Product (GDP), which is the total value of everything produced by the people and the businesses in the region. The result is a dollar value that represents the amount of money floating around our specific economic ecosystem. Growth can be quick, but not always sustained.
“Consider our GDP as the gas in the engine,” says Ron Gaudet, CEO of Economic Development Greater Saint John (EDGSJ). “If we want our communities to go further, faster – we need a higher GDP.”
The Economic Development work we do in our communities influence the GDP equation. Creating wealth (which fuels consumer spending), growing businesses (which fuels business investment spending), and boosting exports (which influences both). Economic Development is still further influenced by the work government does with regulation and taxation strategies and infrastructure spending.
Gaudet has more than 20 years in Economic Development in several communities across two provinces and no matter what community he has worked with to drive economic growth, the winds of change are never straight forward.
“Sometimes economic development work is with the wind at our back. Taxes might be decreased. The population might be growing. Exports might be booming. Other times, we’re fighting a headwind. The global economy might be in recession. The Canadian dollar might be climbing. The price of oil might be dropping,” adds Gaudet.
But, one way to offset that is to focus on diversified strengths of a region. Greater Saint John has very diversified economy for the size of our region. From Energy, Information Communications & Technology, to Advanced Manufacturing, and Business Services. The analogy of a simple seed growing into so much more is the analogy Gaudet would like people in the region to get behind. Looking at creating a longer runway when it comes to economic development.
“Economic development work is about having a long-term vision, and staying focused on your key priorities,” says Gaudet. “In the Greater Saint John area, we want to focus on three simple priorities: more jobs, more people working, and creating a more attractive business environment. Everything we will do will support those areas.”
In the near future, EDGSJ will be looking at traditional economic indicators to gauge where the region stands before GDP numbers are in.
“A leading indicator is the proverbial canary in the coal mine – a warning sign (or a celebratory sign) that the economy is changing: the number of building permits, housing sales, average home prices, and the number of new business start-ups. They can be tracked monthly. But, we also need to look at what happens after the change. Lagging indicators like the unemployment rate, interest rates, and wages,” says Gaudet.
With all that considered, it reminds us that the new business opening up on the street is just the beginning. A business can open quickly; a sign of economic growth,m for sure but it can also close quickly. But, giving a new entrepreneur the tools and resources to make their business successful, will make sure it stays there for the long-term. That’s economic development.
Originally Published in Telegraph Journal, July 24, 2018