Buried at the end of David Landes’ ‘The Wealth and Poverty of Nations‘ is a simple and powerful fact that every Finance Minister should remember.
“What would such (growth) differences mean for the long run? A growth rate of 2.8 per cent yields a sixteen fold increase over the course of a century, as against 2,200 times for an annual rate of 8 percent. Such is the power of compound interest” (P.459).
The list of countries in europe who are in the growth club is unfortunately small. The policies needed to bring this about are simple and have a track record of success. Government policies are a small part, good entrepreneurs are are far rarer skill and are far more important to bringing about the benefits of growth.
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