Why Government Bailouts Actually Lower GDP Growth Potential

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By Sasha Cekerevac for Investment Contrarians

What does it take to create and sustain long-term gross domestic product (GDP) growth in an economy?

One of the most important factors is a high level of investor confidence.

Investor confidence throughout the economy can help support the formation and expansion of businesses and the development of new technologies and ideas.

GDP growth, as we all know, does not originate from government-led initiatives, but from businesses creating new innovations and technologies.

One of the problems with government intervention is that GDP growth is actually stifled and reduced due to a misallocation of resources. This misallocation of resources occurs when weak firms are supported or bailed out due to poor management decisions.

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