Economic Development Versus Economic Growth
INTRODUCTION
Even if the terms economic development and economic growth have a similar sound, they differ greatly from one another. There are significant differences between economic growth and economic development, despite the fact that both are significant measures of a nation's economic health.
The idea of economic growth is not very broad. Contrary to economic development, which also takes into account qualitative shifts in societal attitudes and customs in addition to quantitative growth in output or national revenue, this refers to an increase in output on a quantitative level. Without growth, economic development is almost unimaginable.
In this article, we will learn what these two phrases signify and why it is important to comprehend their distinctions.
ECONOMIC GROWTH: WHAT IS IT?
• Increases in the production of economic goods and services from one time period to the next are referred to as economic growth.
• An increase in both the national and per capita incomes is referred to as economic growth.
• Because it reflects an improvement in the general population's living conditions, the increase in per capita income is a stronger indicator of economic growth.
• Think about a special berry that can only be found naturally in Utopia. Although Utopian locals have long used this berry, a wealthy German adventurer recently discovered it and brought samples back to his country.
• The visitor made an investment in a significant berry exporting business in Utopia since his German friends enjoy the berry. The new berry exporting business hired hundreds of Utopians to cultivate, harvest, wash, box, and ship the berries to German supermarkets.
• The new berry exporting business increased Utopia's GDP by more than $1 million in a single calendar year since the entire value of the goods and services it produced exceeded that amount. The GDP of Utopia grew, showing that the nation had economic growth.
• Instead of an increase in money income or nominal national income, economic growth is defined as a rise in real national income.
• In other words, rather than just raising the market pricing of already-existing items, the increase should be predicated on an increase in the output of goods and services.
• Real income should increase steadily over time, and both the national and per capita levels should continue to climb.
• Economic growth should not be confused with seasonal or transient income rises.
• Increased productivity should serve as the foundation for income development.
• Income increases can only be maintained if they result from a long-term improvement in the economy's productive capacity, such as modernization or the use of new technology in manufacturing, infrastructure improvement such as improved transportation networks, improved electricity generation, etc.
• Technology, labor force, capital goods, and human capital all have the capacity to support economic expansion.
ECONOMIC DEVELOPMENT: WHAT IS IT?
• An increase in the material well-being of society over time is what is referred to as economic development.
• A select few qualitative indicators of economic growth include the Human growth Index (HDI), gender-related indices, the Human Poverty Index (HPI), infant mortality, literacy rate, and so forth.
• According to the Utopia described above, the majority of Utopians resided in remote little towns until the berry export industry was established. Few Utopians had access to healthcare, clean water, or educational institutions. Utopian men spent long hours trying to gather crops on land that was naturally unsuitable for most crops in order to feed their close families.
• After the berry export and a rise in tax income, Utopians will have better access to healthcare, clean water, and educational opportunities. Better pay and set hours are offered by the export sector. The metrics of economic development in Utopia, such as the literacy rate, per capita income, and access to healthcare, improve.
• The ideas covered by economic development are more varied than those covered by economic growth.
• It also incorporates social, cultural, political, and economic developments that advance the material world in addition to national income growth.
• Changes in resource availability, capital formation rates, population size and composition, technology, skill sets, and productivity, as well as institutional and organizational structure, are all included.
• These adjustments support the overarching objectives of guaranteeing more equal income distribution, boosting employment, and reducing poverty.
• Long-term growth in a nation's net national product is the result of a complex network of interrelated changes in fundamental supply and demand elements.
ECONOMIC GROWTH VS. ECONOMIC DEVELOPMENT
|
Basis of Comparison |
|
Economic Growth |
|
Economic Development |
|
Meaning |
|
Economic growth is defined as an increase in the country's real output of goods and services. |
|
Economic development entails changes in income, savings, and investment, as well as gradual changes in the country's socio-economic structure (institutional and technological changes). |
|
Factors |
|
Growth is defined as a gradual increase in one of the components of GDP: consumption, government spending, investment, and net exports. |
|
Development related to human capital growth, a reduction in inequality numbers, and structural changes that improve the population's quality of life. |
|
Measurement/ Example |
|
Economic growth is measured quantitatively by factors such as real GDP growth or per capita income growth. |
|
To assess economic development, qualitative indicators such as the HDI (Human Development Index), gender-related indexes, Human Poverty Index (HPI), infant mortality, literacy rate, and so on are used. |
|
Effect |
|
Quantitative changes in the economy are brought about by economic growth. |
|
Economic development results in both qualitative and quantitative changes in the economy. |
|
Relevance |
|
Economic growth reflects national or per capita income growth. |
|
Economic development reflects progress in a country's quality of life. |
WHY ARE ECONOMIC DEVELOPMENT AND GROWTH IMPORTANT?
• The phrase "economic growth" is frequently used in economics and is helpful for both comparative economics and national-level economic studies and policymaking.
• The accessible growth rate information for the world's economies serves as the foundation for policymaking and long-term financial planning at international financial and commercial institutions.
• The ability to quantify growth in absolute terms, or its quantifiability, is its most crucial feature.
• We must make deliberate attempts to increase our income, growth, and greater economic development, just as we must make deliberate efforts to increase our income and growth.
• Nowhere in the world has development been possible without deliberate governmental policy.
• In a same vein, growth cannot occur without development.
• Economic growth will re-accelerate growth and eventually involve a bigger populace in development if it is used effectively.
• Similar to this, rapid growth coupled with poor development causes growth to slow down.
CONCLUSION
A part of economic growth is economic development. Economic growth is only one aspect of economic development. Economic growth only uses a few indicators for computation, such as gross domestic product, individual income, etc., but economic development uses a number of indicators to evaluate the state of an economy as a whole.
Economic Development, which is defined as an increase in an economy's or nations economic riches for the benefit of its citizens, is sometimes contrasted with economic growth. It should be highlighted that while economic growth is a requirement for economic development, it is not the sole one.