Growing Your Region, Myth #2: Economic Growth will Grow Everything Else


This post is part of the series Growing Your Region. Read the full series here.

I cannot count how many meetings, workshops and talks I have sat through where the term regional growth is accompanied by words such as must, urgent, and vital. The message is that growth is not an option for rural regions, it is non-negotiable for survival. It is usually unclear, however, which kind of growth is driving this urgency.

In our Spring Series, we have been exploring 9 different kinds of growth relevant to rural regions. Each kind of growth is a process that creates different results – and results can vary quite a bit depending on the local context. In the last post, we saw that population growth can have a range of impacts, both positive and negative.

In this post, we’ll explore economic growth: another topic that can raise urgency and passion in rural communities. Recall that economic growth in practice is not a single ‘thing’; it can take multiple forms: such as growth in jobs; growth in productivity; growth in the number of businesses in a region; growth in regional investment; and growth in incomes.

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All are relevant forms of growth for rural regions – but they do not all happen in the same way, or at the same time. Further, some assumptions about economic growth can be dangerous when seeking to create prosperous futures for rural communities.

Myth #2: Economic Growth will Grow Everything Else

There is a long tradition in development work of expecting that all issues can be solved if only we had a strong economy. A strong economy, a growing economy, generates resources – and rural communities need resources. So economic growth is painted as a motor that will grow everything else.

Despite this logic, ‘economy first’ approaches have generally failed to deliver good results, particularly for regions that start from a position of disadvantage. When economic growth happens, the results tend to be uneven. Some things grow; other things don’t. Some people benefit; other people don’t.

To understand why, it is useful to remember that economic growth actually refers to a number of different processes within a regional economy. Growth in jobs, growth in productivity, in businesses, in regional investment and in incomes are all different economic processes, with different outcomes. Each has different flow-on impacts, and each benefits different people differently.

Jobs growth, for instance, is not the same as productivity growth. Jobs growth means more jobs in an economy; this benefits workers and people who are looking for work. Jobs growth may flow on to support other forms of growth, such as household income. Productivity growth, on the other hand, benefits business owners and investors, but not necessarily workers.

Productivity growth may also flow on to generate other kinds of growth: for instance if the profits from productivity are re-invested in workers (jobs, human capital), infrastructure, or community benefit. But if profits leave the region, productivity growth will not have much impact. In some cases, it can even have a negative impact: if growth is achieved by diminishing other regional resources, such as natural environments or social capital.

Growth in the number of businesses is another kind of economic growth; it is very useful for diversifying regional economies. Business growth may also grow jobs in a region – but not necessarily. Some businesses, even quite successful and productive ones, don’t require much labour. So businesses may grow and jobs not. The relationship between business growth and jobs growth may even move in opposite directions: when jobs disappear, business numbers may actually grow as people look to self-employment to make a living.

Economic growth can generate important benefits – and costs – but benefits and costs vary depending on what, exactly, is growing – and who is in a position to benefit. For instance, is growth in incomes enjoyed by many people in the region, or concentrated in the pockets of a handful of wealthy people? Economic growth can make entire regions more prosperous, or it can widen the gap between haves and have-nots, growing only inequity and disadvantage.

The relationship between economic growth and other forms of positive regional growth is often far from straightforward. It depends a great deal on how the growth is generated, and how the fruits of growth are distributed. Economic growth can create the resources to enhance local amenity; or it can sap resources from the environment and diminish amenity. Economic growth invested in people can grow human capital and community capacity; yet economic growth at the cost of people and communities can diminish both.

In the end, it is unrealistic to expect that economic growth will grow everything in a region. The important thing is to be clear about what kind of growth you are seeking to create; how growth will generate (and not diminish) regional resources; and who will benefit. This is the start of a recipe for regional prosperity.

Published by The Bush Prof

Professor Robyn Eversole is a practical regional development academic based in rural Tasmania.

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