Similarities Between Economic Growth And Economic Development PdfBy Deesrilanmo In and pdf 31.03.2021 at 03:20 5 min read
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Economic Development vs. Economic Growth
This overview considers the past, the present, and the future of economic development. It begins with the conceptualization, definition, and measurement of economic development, highlighting that a narrow focus on the economic is inadequate to capture development and even, paradoxically, economic development itself.
Key aspects of economic and human development over the past seven decades are then outlined, and the current landscape is described. The paper then considers the future of economic development, highlighting the challenges faced by developing countries, especially the opportunities and risks provided by the recent downward global trend in the share of labor in overall economic activity.
What is economic development and how has the concept evolved through the years? The economic part of it could be thought to be relatively straightforward. Surely, a steady rise in per capita income as conventionally measured is an anchor, in concept and in reality. It would be odd indeed to describe declining per capita income as economic development. But rising per capita income, while necessary, is certainly not sufficient for development, and even for economic development.
The distribution of this rising income among the population is legitimately in the domain of economic development. Two key features of the distribution of income are inequality and poverty. If average income rises but the inequality of its distribution also increases, then an egalitarian perspective would mark down the latter as a negative aspect of economic development. If poverty, the population below a socially acceptable level of income, also increases then this is another negative mark to be set against rising average income in assessing economic development.
Of course, the actual outcome on poverty will depend on an interaction between average income and inequality and which of the two forces dominates empirically. If higher average income is accompanied by increasingly unequal distribution, an egalitarian perspective will qualify it as negative.
Growing poverty would also contrast negatively with highter average income in any evaluation of economic development. But identifying economic development purely with income is too narrow a conception. Other aspects of well-being are surely relevant. Education and health outcomes, for example, go beyond income. They are important markers of well-being in their own right, but they influence, and are influenced by, income.
High income can deliver an educated and healthy population, but an educated and healthy population also delivers high income. Thus, any assessment of development, and even economic development, needs to take into account a broader range of measures of well-being than simply income and its distribution. Education and health, and their distribution in the population, are important as well. Distribution is not simply about inequality between individuals.
Inequality across broadly defined groups is also a key factor. Gender inequality saps economic development as it suppresses the potential of half the population. Thus, improvements in measures of gender inequality are to be looked for in their own right, but also because of the contributions they make to economic growth and to addressing economic inequality.
Similarly, inequalities between ethnic and regional groups stoke social tension and affect the climate for investment and hence economic growth. It is difficult to separate out these seemingly non-economic dimensions from the narrowly economic. Economic development is thus also about development more generally. A narrow focus on measured market income misses out on use of resources which are not priced appropriately in the market.
The most important of these is the environment, especially in the context of greenhouse gas emissions and climate change. Rising national income as conventionally measured does not price in the loss of irreplaceable environmental resources at the national level nor, in the case of climate change, irreversible moves toward catastrophic risks for the planet we live on.
The eight MDGs were expanded and modified to seventeen SDGs, which include conventional economic measures such as income growth and income poverty, but also inequality, gender disparities, and environmental degradation Kanbur, Patel, and Stiglitz, But what have these trajectories been over the past seven decades since World War II? The next section takes up the story. The six decades after the end of World War II, until the crisis of , were a golden age in terms of the narrow measure of economic development, real per capita income or gross domestic product, GDP.
This multiplied by a factor of four for the world as a whole between and For comparison, before this period it took a thousand years for world per capita GDP to multiply by a factor of fifteen. Of course, the crisis of caused a major dent in the long-term trend, but it was just that.
Even allowing for the sharp decreases in output as the result of the crisis, postwar economic growth is spectacular compared to what was achieved in the previous thousand years.
The six decades after the end of World War II, until the crisis of , were a golden age in terms of the narrow measure of economic development, real per capita income. But what about the distribution of this income, and in particular the incomes of the poorest?
Did they share in the average increase at all? Here the data do not stretch back as far as for average income. In fact, we only have reasonably credible information going back three decades. The large countries of the world—China, India, but also Vietnam, Bangladesh, and so on—have contributed to this unprecedented global poverty decline.
But the story of the postwar period is not simply one of rising incomes and falling income poverty. Global averages of social indicators have improved dramatically as well. Primary school completion rates have risen from just over seventy percent in to ninety percent now as we approach the end of the second decade of the s. Maternal mortality has halved, from to per , live births over the last quarter century.
Infant mortality is now a quarter of what it was half a century ago 30 compared to , per 1, live births. These improvements in mortality have contributed to improving life expectancy, up from fifty years in to seventy years in Focus on just income, health, and education hides another major global trend since the war.
This has truly been an age of decolonization. Membership of the UN ratcheted up as more and more colonies gained political independence from their colonial masters, rising from around fifty in to more than three decades later. There has also been a matching steady increase in the number of democracies with decolonization, but there was an added spurt after the fall of the Berlin Wall in , when almost twenty new countries were added to the democratic fold.
With this background of spectacular achievements at the global level, what is to stop us from declaring a victorious past on human progress? The answer is that we cannot, because good global average trends, although they are to be welcomed, can hide alarming counter tendencies. Countries in Africa which are mired in conflict do not have any growth data to speak of, and indeed any economic growth at all.
Again in Africa, for countries for which we have data, although the fraction of people in poverty has been falling, the absolute number in poverty has been rising, by almost million in the last quarter century, because of population growth. A similar tale with two sides confronts us when we look at inequality of income in the world. Inequality as between all individuals in the world can be seen as made up of two components.
The first is inequality between average incomes across countries—the gap between rich and poor countries. The second is inequality within each country around its average. Given the fast growth of large poorer countries like India and China relative to the growth of richer countries like the US, Japan, and those in Europe, inequality between countries has declined. Inequality within countries displays a more complex picture, but sharp rises in inequality in the US, Europe, and in China and India means that overall within-country inequality has increased.
Combining the two, world inequality has in fact declined overall Lakner and Milanovic, The importance of between-nation inequality has fallen from a contribution of four fifths of global inequality a quarter century ago. But its contribution is still not lower than three quarters of total world inequality. These two features, rising within nation inequality in large developing countries, and the still enormous role of between-nation inequality in global inequality, are the other side of the coin from the good news of developing country growth on average in the last three decades.
But income growth, if it comes at the expense of the environment, mis-measures improvement in human well-being. Particulate pollution has increased by ten percent over the last quarter century, with all of its related health implications. The global population under water stress has almost doubled in the last half century, and there has been a steady decline in global forest area over the same period. Global greenhouse gas emissions have increased from under 40 gigatons equivalent to close to 50 gigatons in the last quarter century.
The consequences of global warming have already begun to appear in terms of an increase in severe weather outcomes. Thus, the past seven decades have indeed been golden ones for economic development on some measures, and even development more broadly measured. But all is not golden. The trends hide very worrying tendencies which have begun to surface in terms of their consequences, and are shaping the landscape of development we have with us.
The next section takes up the story with a focus on the present of economic development. The present of the economic development discourse is, of course, shaped by the trends of the distant and recent past. An interesting and important feature of the current landscape is the shift in the global geography of poverty. The fast growth of some large countries, accompanied by rising inequality in these countries, means that the average income increases have not been reflected in poverty reduction to the same extent.
So, although these countries have now crossed the middle-income category boundary, which depends on average income, they still have large absolute numbers of poor people. These poor in middle-income countries vie with the poor in poor countries for global concern and attention. This disengagement is difficult to justify on ethical grounds, but also difficult to understand if middle-income countries are also the source of global environmental problems and, for some of them, the source of conflict-based migration.
Migration, conflict-based and economic, brings us to another important feature of the present landscape of economic development, one which is the result of past trends and which will surely have global implications for the future. Rising inequality in rich countries has intersected with increased migration pressures from poor countries.
Despite the closing of the gap between rich and poor countries because of the fast growth of some poor countries, the gap is still enormous, both on average and especially so for the poorest countries who have not grown as fast. These gaps have combined with increased pressures because of armed conflict and exacerbated by environmental stress.
The hollowing out of the middle class in rich countries has coincided with greater immigration, leading to a toxification of democratic politics in these countries and the rise of far-right, nativist, and xenophobic tendencies in the body politic Kanbur, Nor is this just an issue in rich countries.
The anti-migrant mob violence in South Africa and ethnic conflict in countries such as Myanmar are part of the same pattern of migration tensions which color economic development today. The current terrain of economic development has clearly been influenced by the great financial crisis of Most recently, the global crisis has proved disruptive to development gains, although the losses can be said to have been mainly concentrated in the rich countries.
But the reactions and the backlash now apparent in rich countries are having and will have consequences for economic development in poor countries. Further, the genesis of the crisis exposed fault lines in the economic model pursued by rich countries, with wholesale deregulation of markets and especially of banking and capital flows.
The hollowing out of the middle class in rich countries has coincided with greater immigration, leading to a toxification of democratic politics in these countries and the rise of far-right, nativist, and xenophobic tendencies in the body politic. The current state of affairs and ongoing debates relate back to the trajectory of thinking since the fall of the Berlin Wall in
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Readers Question: What is the difference between growth and development? Can a country experience economic growth without development? Economic growth measures an increase in Real GDP real output. It basically measures the total volume of goods and services produced in an economy. Development looks at a wider range of statistics than just GDP per capita.
Economic Growth is the increase in the real output of the country in a particular span of time. Whereas, Economic Development is the increase in the level of production in an economy along enrichment of living standards and the advancement of technology.
The key parameters of economic growth in any economy are its Gross Domestic Product GDP and gross national product which helps in measuring the actual size of an economy. For example, we say the GDP of India is 2. It shows how much the production of goods and services has increased compared to last year in a quantitative manner. It has many parameters to measure and few of them are as below:.
In the very first sentence of the book entitled Whose Development?
Difference Between Economic Growth vs Economic Development
This overview considers the past, the present, and the future of economic development. It begins with the conceptualization, definition, and measurement of economic development, highlighting that a narrow focus on the economic is inadequate to capture development and even, paradoxically, economic development itself. Key aspects of economic and human development over the past seven decades are then outlined, and the current landscape is described. The paper then considers the future of economic development, highlighting the challenges faced by developing countries, especially the opportunities and risks provided by the recent downward global trend in the share of labor in overall economic activity. What is economic development and how has the concept evolved through the years? The economic part of it could be thought to be relatively straightforward. Surely, a steady rise in per capita income as conventionally measured is an anchor, in concept and in reality.
Economic Growth refers to the rise in the value of everything produced in the economy. It alludes to considerable rise in per-capita national product, over a period, i. Economic Growth is often contrasted with Economic Development , which is defined as the increase in the economic wealth of a country or a particular area, for the welfare of its residents. Here, you should know that economic growth is an essential but not the only condition for economic development.
It can be measured as a percentage increase in real gross domestic product. Where a gross domestic product GDP is adjusted by inflation. Economic Development is the process focusing on both qualitative and quantitative growth of the economy.
Development economics is a branch of economics which deals with economic aspects of the development process in low income countries.