The annual Latvijas Banka’s conference this year is dedicated to economic growth. It lists the 10 facts about the factors that supposedly determine the economic growth process, whether the chimera of growth is necessary, and why it is (un)likely to continue forever.

1. The basis of the economic growth process is a continuous increase in labor productivity.
2. Economic growth is a relatively new phenomenon.
3. The most promising tool for promoting economic growth is institutions.
4. “Economic growth” means taking one small step every day.
5. Countries can become rich only by continuously developing over a long period of time.
6. In the process of economic growth, countries are not competitors but allies.
7. Economic growth affects small and large countries equally.
8. Economic growth no longer means a cult of consumption and environmental degradation.
9. Economic growth may not last forever.
10. Economic growth is not a main aim, but a tool.

Economic growth is regarded as the prominent standard for measuring the performance of an economy. However, what is published as the gross domestic product (GDP) does not represent production but reports overall spending. The calculation of economic growth is based on the nominal gross domestic product deflated by a price index.

Thus, the figure for real economic growth is subject to two distortions: the indicator does not measure production but reports expenditures, and, secondly, the obtained number is dependent on the techniques that are applied to the calculation of the respective price indices.

The calculation of economic growth in terms of “real GDP” requires deflating the nominal values of expenditures. In order to do that, the statistical offices create a basket of goods and compare the prices of the goods in this basket to the respective reference periods. But there is no objective representative basket of GDP other than as a statistical construct based on disputable assumptions, and there is no common standard (as a tertium comparationis) that would allow the comparison of one period’s production to the other.

In a private market economy, the aims of economic activity are highly diverse and represent individual and subjective valuations. One may add up nationwide the various monetary prices of the goods and services that were sold, but besides the aggregation of the monetary values of diverse items – what is the true and reliable informational value of this exercise?

For governments, using the figure for GDP as an indicator of economic performance has contributed to the illusions of fiscal and monetary policy such as when spending for consumption is said to produce wealth or when government spending is said to boost economic growth as it happens with military expenditures.

In the context of a non-collectivist economic theory, the focus would be on the conditions of market exchange as the way to economic amelioration. Given that the criteria for assessing economic improvement are individual and subject to change, no guideline is adequate other than that there is an unhampered market and the protection of property rights.

In this perspective, what brings about improvement comes not from economic growth or stability, but through economic transformation that is guided by the freedom of private initiative within an open market system.

The grand-scale interventions that are performed by monetary and fiscal policy in the name of growth and stability disrupt and misguide the plans for the individual, and they distort the decisions at the business level. Instead of its fixation on economic growth and stability, a non-interventionist system would favor the space that is given for the individual to demonstrate and actively pursue his preferences.