Question- Explain
the meaning of
Economic Growth, Economic Development. What is the difference between the two.
In
general, the terms “Economic Growth” and “Economic Development” are used to
express the same idea i. e., “Economic Advancement”. But the term economic
development is more comprehensive in its scope. Growth means persistent
increase in physical output or per capita income. While development includes the
overall quality of life and structural changes like, infrastructural, social
and political in the country.
ECONOMIC GROWTH:
Definitions:
Ø According to Micheal P. Todaro.
“Economic growth is a steady
process by which the productive capacity of the economy is increased over time
to bring about rising levels of national output and income”.
Ø According to Simon Kuznets.
“Economic growth may be defined
as a long term process wherein the substantial and sustained rise in real
national income, total population and real per capita income takes
place”.
Essentials of Economic Growth:
Above
definitions are showing following basics of economic growth:
- Economic growth is a
long run process; it includes a period of decades.
- Economic growth shows higher
rate of increase in real per capita income than rate of
growth of population.
- Economic growth is always
linked with large increase in productive ability of the
economy.
ECONOMIC DEVELOPMENT:
Definitions:
Simple Definition.
“It refers to the process whereby
the total supply of goods and services of the society increases leading towards
improved living standard.”
According to Micheal P. Todaro.
“Development must be conceived
(considered) for as a multi-dimensional process involving major change in
social structures, popular attitudes and national institutions as well as the
acceleration of eco-growth, the eradication (end) of poverty and reduction of
inequality of wealth.”
Structural Changes of Economic
Development:
Economic
development represents following structural changes in various sectors of the
country:
There
is a change in the occupational structure. In economic
development there is decrease in the share of labour force in primary sector
(farming, fishing and mining etc.) and increase in the share of labour force in
secondary sector and tertiary sectors.
- There is a change in
the structure of national output. The contribution of
primary sector in the national output falls and the share of secondary and
tertiary sectors gradually increase.
- There is a change in
the structure of industrial production. There is an
increase in the production of capital goods and decrease in the production
of consumer goods.
- There is a change in
the structure of foreign trade. The share of primary
goods in exports decreases and the share of capital goods in imports
increase. Accordingly, in economic development there is an increase in
exports of manufactured and final goods. Similarly, there is decrease in
the imports of consumer items.
- There is a change in
the structure of technology. In the economic development
modern and advanced techniques are used in all the sectors of economy.
- There is a change in
the social and institutional sector. Due to economic
development there is an increase in the self-esteem and living standard of
the population.
Prof. Goulet explained the
meaning of economic development by mentioning the three Core Values of
Development[1]:
Life
Sustenance:
The life-sustaining basic human
needs include food, shelter, health and protection. When any one of these is
absent or in critically short supply, a condition of absolute
"underdevelopment" exists.
Self-esteem:
A second universal component of
good life is self- esteem- a sense of worth and self-respect- of not being used
as a tool by others for their own ends. Due to the significance attached to
material values in developed nations, worthiness and esteem are now-a-days
increasingly conferred only in countries that possess economic wealth and
technological power- those that have developed.
Freedom
Arthur Lewis stressed the
relationship between economic growth and freedom from servitude when he
concluded that "the advantage of economic growth is not that wealth
increases happiness, but that it increases the range of human choice.
Difference between Economic Growth Economic
Development
Economic Growth is a narrow
concept. Economic development is broader in nature. Economic Growth includes
the quantitative changes economic development also includes certain qualitative
changes in the economy. Economic growth means just Physical increase in the
real per capita income where as Economic Development is the reduction in
economic-divide, poverty, illiteracy and unemployment. Thus, economic
development includes both economic growth as well as social welfare. Economic
development focuses on inclusive growth – Growth that includes all sectors of
the economy and all sections of the society. The following discussion outlines
the basic differences between Economic Growth and Development:
Economic Growth is Single dimension Concept: Economic
growth is merely a quantitative concept. It is concerned with rate of increase
in national income.
Economic Development is Double / Multi dimension
Concept: Concept of economic development is both quantitative
and qualitative in nature. It is concerned with welfare of people (a
qualitative aspect) along with increase in per capita income (a quantitative
concept).
Growth Ignores Distribution of Income: Distribution
of income is ignored in case of economic growth. In spite of increase in
income, number of poor people may rise if the distribution of income becomes
further unequal.
Development Considers Distribution of Income: In case
of economic development, distribution of income is given due consideration.
Reduction in inequality (of income distribution) is one of the principal
targets of economic development. Inequality of income and wealth must be
reduced.
Independent
of Structural, Institutional and Technical Changes:
Economic growth is independent of any structural,
institutional and technical changes in the economy. Associated with
socio-technological Change:
Economic development is invariably associated with
significant structural, institutional and technical changes in the economy. Development
is a qualitative concept and relates to human development index (HDI) Gender
Development Index (GDI) Human Poverty Index (HPI). Growth is quantitative
concept.
***
[1]
Goulet, D. (1971) The Cruel
Choice: A New Concept in the Theory of Development, New York, Athenaeum
