Discuss the defference between economic growth and economic development.
Answers
Answer:
Economic development :
Development looks at a wider range of statistics than just GDP per capita. Development is concerned with how people are actually affected. It looks at their actual living standards and the freedom they have to enjoy a good standard of living.
Measures of economic development will look at:
Real income per head – GDP per capita
Levels of literacy and education standards
Levels of healthcare e.g. number of doctors per 1000 population
Quality and availability of housing
Levels of environmental standards
Life expectancy.
Absolute Poverty. Do people have sufficient resources to maintain a healthy diet and basics of life such as shelter? Economic growth may be essential to enable higher incomes for people to be able to buy more food. However, economic growth doesn’t necessarily improve everyone’s living standards. Economic growth could bypass the poorest sections of society because they don’t have the ability to take part. A key issue is whether the benefits of economic growth are equitably distributed amongst different groups of society.
Economic growth without development :
It is possible to have economic growth without development. i.e. an increase in GDP, but most people don’t see any actual improvements in living standards. This could occur due to:
Economic growth may only benefit a small % of the population. For example, if a country produces more oil, it will see an increase in GDP. However, it is possible, that this oil is only owned by one firm, and therefore, the average worker doesn’t really benefit.
Corruption. A country may see higher GDP, but the benefits of growth may be syphoned into the bank accounts of politicians
Environmental problems. Producing toxic chemicals will lead to an increase in real GDP. However, without proper regulation, it can also lead to environmental and health problems. This is an example of where growth leads to a decline in living standards for many.
Congestion. Economic growth can cause an increase in congestion. This means people will spend longer in traffic jams. GDP may increase but they have lower living standards because they spend more time in traffic jams.
Production not consumed. If a state-owned industry increases output, this is reflected in an increase in GDP. However, if the output is not used by anyone then it causes no actual increase in living standards.
Military spending. A country may increase GDP by spending more on military goods. However, if this is at the expense of health care and education it can lead to lower living standards.
Evaluation
It depends on the nature of economic growth.
Are the proceeds of growth used to improve living standards?
Does everyone benefit from the higher GDP or are the proceeds kept by a small %?
Might be useful to use statistics like the Human Development Index which look at real GDP, but also education and health care indexes.