Skip to main content

Economic growth and development

Economic growth

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).

Economic development

Economic development, on the other hand is a process where there is improvement in the lives of all people in the country. This involves not only living standards, such as greater availability of goods and services (and also the ability to purchase them) but also the promotion of attributes such as self-esteem, dignity and respect, and the enlarging of 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, it does not necessarily mean that it will experience development.

For a long period of time, economic development was seen to be a factor of economic growth. It was believed that economic development occurred when there was a high level of industrialisation and economic growth; social factors, such as poverty and unemployment were of lesser importance. It was also believed that the material benefits of growth would trickle down from the better off to the rest of the population, causing development. However, many developing nations have managed to achieve high rates of economic growth, yet have failed to experience any positive change in standards of living for the majority of their people. It was realised therefore that the definition of economic development had to be changed. 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:

  1. "To increase the availability and widen the distribution of basic life-sustaining goods such as food, shelter, health and protection.
  2. 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.
  3. 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, health, education, technology, employment, 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.

To start looking at the next page, click on the right arrow at the top or bottom of the page. To return to the table of contents at any time, just click the 'home' icon.