Insurance News

Economic Development | Definition | Difference between Economic Growth and Economic Development

Economic Development | Definition | Difference between Economic Growth and Economic Development


After World War II, the desire for Economic Development rose in the backward countries of the world. Poor countries of the world are facing various challenges such as poverty, illiteracy, unemployment, malnutrition, diseases, economic stagnation, and environmental pollution. Whereas, in developed countries, people have access to facilities.

The concept of economic development goes back to the appearance of the Industrial Revolution in Europe in the 18th century. UK, France, and Germany initiated the process of industrialization. Afterward, this process spread over to Japan, the USA, and Russia. The countries from Asia, Africa, and Latin America and surprisingly, failed to avail the perks of the Industrial Revolution. In this way, an international division came into being- The rich countries and the poor countries.

Definition of Economic Development 

Economic development is a process of economic transition involving the structural transformation of an economy through industrialization, raising the gross national product, and per capita income. 

Economic development refers to an increase in output per head. Economic development is a multi-dimensional process involving major changes in social structures, people‚Äôs attitudes, national institutions, acceleration of economic growth, and reduction of inequality. 

Also, Economic development means an increase in the output of goods and services in the economy. 

It is more important than economic growth because economic development is a more comprehensive process than economic growth. Economic growth is a quantitative term as it represents a quantitative increase in the production of goods, services, and factors of production, whereas economic development is a qualitative term as it indicates the continuous increase in real national income and structural changes in the economy of a country. 

Objectives of Economic Development 

  • Increase of supply of food, clothing, health, and education facilities. 
  • Increase in standard of living of the people. 
  • Increase in leisure, political freedom, and equal opportunities of life. 
  • Increase in capital formation that is new buildings and industries. 

Definition of Economic Growth 

Economic growth means more production of goods and services. Growth is measured in terms of an increase in the real gross national product (GNP or GDP) or an increase in per capita income. It is a steady process by which the productive capacity of an economy increases over some time to uplift the levels of national output and income. 

Measurement of Economic Growth 

  1. Increase in the real gross national product. 
  2. Increase in the real per capita income. 
  3. Increase in the general welfare of the masses. 
  4. Increase in social, economic, and human development. 

Factors Needed For Economic Growth 

The ability of an economy to produce more goods and services depends on the following factors: 
  1. An increase in stock and quality of its capital goods. 
  2. An increase in quantity and quality of its labor force. 
  3. An increase in quantity and quality of its natural resources. 
  4. Efficient use of factor inputs to maximize their contribution to the expansion of output, through improved productivity. 
  5. Development and introduction of innovative techniques and new products i.e. technological progressiveness. 
  6. An increase in the level of demand ensures full utilization of the increased production capabilities of the economy. 
  7. Achievement of a high rate of economic growth is one of the main objectives of macroeconomic policy. The significance of economic growth lies in its contribution to the general prosperity of the community. 

Growth is desirable because it enables the community to consume more goods and services. It also contributes to the provision of a greater quantity of social goods and services such as health and education, thereby improving the real standard of living of the people. 

Govt. can stimulate the growth process by increasing current spending in the economy through tax cuts by Fiscal policy and by increasing money supply and reducing interest rates by adopting Monetary policy.

Economic Factors Needed For Economic Development 

1. Natural Resources 
Natural resources are one of the three main factors of production the other two are labor and capital. Natural resources include areas of land, forests, rivers, climate, and mines. If a country is rich in a better quality of all-natural resources, it will develop economically at a fast speed. 
2. Capital Formation 
It is the process of adding the net physical capital stock of an economy. Capital formation creates the productive potential for future production. Capital formation has three stages namely,
  • savings 
  • financial institutions and capital market for mobilization of savings 
  • act of investment in machinery and buildings. 
3. Specialization 
Output is greater as a result of specialization. Specialization enables an economy to use its scarce resources more efficiently, thereby producing a larger volume of goods and services. It increases the rate of economic development of a country. 
4. Technology 
Inventions and innovations reduce manufacturing and distribution costs. Technological progress serves to change cost conditions in the long run; thus technological changes play an important role in economic development. 
5.     Transport and Communication 
Efficient communication facilities increase the production capacity of all sectors of the economy. It reduces the cost of production, increases the mobility of goods within and outside the country. 
6.      Entrepreneurship 
If entrepreneurship is capable, skillful, and trained then the output of his organization will be greater. Entrepreneurship results in the introduction of new types of output, new techniques, and new sources of supply of inputs for business and industry. 

Non-Economic Factors 

1. Social Values and Attitudes 
It includes the culture, religion, and lifestyle of a society. Some societies are orthodox and do not like the material approach to life. Religion does not allow them to keep themselves busy day in and day out for material prosperity. Most societies believe in festivals and different cultural ceremonies. They do not prefer to save money; hence savings rate reduces too much. In such societies, material gains are not appreciated. 
2. Political Stability 
Strong and stable Governments can prepare five-year development plans, they can enforce monetary and fiscal policies, and change social attitudes and institutions, which may be progressive ones. The frequent changes in Govt. setup result in the lack of concrete economic policy decisions. 
3. Administrative Efficiency 
Educated, trained, skillful and hardworking Govt. officers can push the development of a country at a very fast speed, whereas untrained administration of a country retards the economic development. 
4. Economic Freedom 
Private ownership of resources and maximum freedom to deploy these resources in line with profit signals create strong incentives to work hard. If everybody is allowed to participate in economic activity, then due to competition the rate of economic development will increase. 
5. Right of Private Property 
Private ownership of the means of production results in an increase in the supply of goods and services. To own and accumulate profit and property, people work hard, thus trade and business activity flourishes. 

Economic Development and Growth 

Economic Development 
Economic development is a qualitative term as it indicates a continuous increase in the real national income and structural changes in the economy of a country. It means an increase in the output of goods and services in an economy. Economic development is more important than economic growth because economic development is a wider and more comprehensive process than economic growth. Economic development is a process of economic transition involving the structural transformation of an economy through industrialization, raising GNP, and per capita income. 
Economic Growth 
Economic growth is a quantitative term as it represents a quantitative increase in the production of goods and services in an economy. Economic growth is a steady process by which the productive capacity of an economy increases over time to bring about rising levels of national output and income. Economic growth is the name of more production. Growth is measured in terms of an increase in the real gross national product (GNP/GDP) over time or an increase in per capita income. 

Difference between Economic Growth and Economic Development 

Economic Development

Economic Growth

Economic Development is the qualitative change in the wants, goods, incentives. It can be experienced but cannot be numerically measured. 

Economic Growth is a quantitative term as it is the positive change in the countries per capita income. It can be measured numerically. 

Economic development is a wider concept as it implies human welfare in terms of health, education, and other aspects.

Economic growth is a narrower concept as it indicates the overall increase in the national income and expressed in terms of Gross Domestic Product (GDP). 

Economic development emphasizes on balanced growth of the economy. 

Economic growth is concerned with the statistical uplift of the economy. 

Economic development is unclear as it incorporates social measures such as life expectancy or literacy rate as a means of economic development. 

Economic growth is defined by an increase in Gross Domestic Product (GDP). 

Economic development is aimed at the welfare of the citizens of a country. 

Economic growth may not be aimed at human welfare. An increase in National Income may be the result of the introduction of ammunition and intoxicants. 

Economic development is a long-term process and takes many years to change social, economic, and institutional structures. 

Economic growth is a short-term process and can be measured on yearly basis to analyze the changes in the national income.

Conclusion

Economic growth and economic development go side by side. Sometimes, both terms are used by economists as alternatives. It is difficult to imagine economic development without economic growth. Above mentioned methods of measuring economic development reveal that each method has certain objections and limitations. However, the qualitative approach can not be better than the quantitative approach. Without quantitative development, qualitative development cannot be achieved. 

https://feeder.co/discover/c296da6544/insurancepost-my-id

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button