Economic Growth and Economic Development - Read, Think, Discuss
This occurs where there is an increase in the productive potential
of the economy and is best measured by the increase in a country's real
level of output over a period of time, i.e. the increase in real Gross
Domestic Product (real means adjusted for inflation) - You can use
either PPC or AS/ADmodels to illustrate answers in this area.
Economic development, on the other hand, is a process where there is improvement in the quality of lives of people in the country. This involves not only living standards (see above definition), such as greater availability of goods and services (and also the ability to purchase them) but also the promotion of attributes such as:
- dignity and respect,
- people's freedom to choose and to take control of their own lives.
While a country may grow richer therefore, through the growth
of its real output, this may mean sacrificing other aspects of welfare
such as China´s rapid GDP growth creating massive externalities at the
same time. However, increasing GDP (Economic Growth) ceteris paribus
does mean development has occurred.
As Dudley Seers says: "if one or two of the central problems (poverty, unemployment or equality) have been growing worse, especially if all three have, it would be strange to call the result 'development' even if per capita income doubled"(from D.Seers, 'The meaning of economic development').
According to Professor Michael Todaro, development should involve the following objectives:
- "To increase the availability and widen the distribution of basic life-sustaining goods such as food, shelter, health and protection.
- To raise levels of living including, in addition to higher incomes, the provision of more jobs, better education, and greater attention to cultural and humanistic values, all of which will serve not only to enhance material well-being but also to generate greater individual and national self-esteem.
- To expand the range of economic and social choices available to individuals and nations by freeing them from servitude and dependence not only in relation to other people and nation-states but also to the forces of ignorance and human misery."
(from M.P.Todaro 'Economic development')
There are several measures that are used to measure economic development such as
- GNP/GDP per capita,
- population growth and structure,
- rural/urban migration,
- rights of women and
- distribution of poverty and income.
Statistically, GDP per capita is generally acknowledged as the
best single indicator but composite indicators of development are also
used. One such index is the Human Development Index (HDI) which includes
- GDP per capita,
- life expectancy and
- literacy rates.