To understand why countries grow, look at their firms

Illustration: Álvaro Bernis

Mar 5th 2026|5 min read

TO GRASP THE stakes of economic growth, start with the arithmetic of compounding. Over two generations an economy growing at about 1% a year will not even double in size; one growing at 7% will expand roughly 30-fold. South Korea and Ghana show what such differences can mean. In 1960 the two had similar incomes. Today South Koreans browse Gangnam’s luxury boutiques and sip lattes in Garosu-gil’s trendy cafés, while the typical Ghanaian still lives on less than $4 a day. Even a few percentage points make an enormous difference over time: fewer children die, people live longer, education spreads and daily life becomes more comfortable. Little wonder that Robert Lucas, a Nobel-prizewinning economist, remarked that once you start thinking about economic growth it is hard to think about anything else.