Economic growth and economic development pdf
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- Unit 1 Conceptualising Development
- Difference between economic growth and development
- Economic growth
We have started our discussion of development by addressing very broad issues relating to the concept of development. However, much of the literature and thinking about 'development' focuses on economics. Indeed 'development' and 'economic development' have often been treated as synonymous concepts.
Unit 1 Conceptualising Development
We have started our discussion of development by addressing very broad issues relating to the concept of development. However, much of the literature and thinking about 'development' focuses on economics. Indeed 'development' and 'economic development' have often been treated as synonymous concepts. The economic development of a country or society is usually associated with amongst other things rising incomes and related increases in consumption , savings, and investment.
Of course, there is far more to economic development than income growth; for if income distribution is highly skewed, growth may not be accompanied by much progress towards the goals that are usually associated with economic development.
What characteristics are typically associated with economic development? Write down a list of features that in your view might distinguish an economically developed country from one that is not. Clearly not all developed countries exhibit all these characteristics in equal measure. And, some of you might even question the presence of certain items in the above list, pointing perhaps to countries or regions within them in which, for example, crime and employment levels appear to be quite high, or highlighting the fact that not everyone has access to good public services, housing and so on.
Some of these points are clearly open to debate. For instance crime levels in the rural areas of many developing countries where most people live are often much lower than in some of the urban population centres of developed countries. Nonetheless, the above list is probably fairly indicative of the characteristics that distinguish countries that are economically developed from those that are not. From the answer to the previous question you will have noticed that the listed characteristics once again say more about goals than the processes or mechanisms for achieving them.
So what drives a country towards achieving these goals? The orthodox view, espoused by most governments, most major international organisations, and the economists that advise them, is that a big part of the answer lies in economic growth. However, economic growth can follow many different paths , and not all of them are sustainable.
Indeed, there are many who argue that given the finite nature of the planet and its resources, any form of economic growth is ultimately unsustainable. We shall leave these debates for later.
For now let us look at what exactly economic growth is and how it is measured. GDP is calculated from a country's national accounts which report annual data on incomes, expenditure and investment for each sector of the economy. GNP is derived by adjusting GDP to include repatriated income that was earned abroad, and exclude expatriated income that was earned domestically by foreigners.
In countries where inflows and outflows of this sort are significant, GNP may be a more appropriate indicator of a nation's income than GDP.
The income approach, as the name suggests measures people's incomes, the output approach measures the value of the goods and services used to generate these incomes, and the expenditure approach measures the expenditure on goods and services.
In theory, each of these approaches should lead to the same result , so if the output of the economy increases, incomes and expenditures should increase by the same amount.
Figures for economic growth are usually presented as the annual percentage increase in real GDP. Real GDP is calculated by adjusting nominal GDP to take account of inflation which would otherwise make growth rates appear much higher than they really are, especially during periods of high inflation.
A distinction needs to be made between short-term growth rates and longer term ones. It is quite normal for short-term growth rates to fluctuate in line with the business cycle. This can be seen in the two figures in 1. When politicians are talking about sustainable growth they are often referring to macroeconomic concerns relating to the cycle of boom and bust.
An economic boom involves high growth rates and is often accompanied by rising inflation. It is often followed by a period of lower growth rates and recession 'bust'. Sustainable growth in this context relates to stable growth rates that even out the fluctuations in the business cycle, thus avoiding high peaks and the large troughs associated with recessions.
Note that this is different from the issues that environmentalists typically focus upon when they discuss the sustainability of economic growth. We shall say more on this later. Do high levels of GDP necessarily correspond with high levels of development? Not necessarily. Countries like China and India have much higher levels of GDP than, say, Singapore, New Zealand or Belgium, but few would suggest that the latter are economically less developed than the former.
Assuming that it does, is it reasonable to say that development is taking place? Certainly, statistics reveal that the most developed countries are those with the highest GDP per capita. Clearly, though, GDP per capita doesn't tell the whole story. It says nothing about how incomes are distributed or spent. Growth in GDP per capita could result from growth in the incomes of richer groups in society, with incomes of poorer groups remaining largely unchanged.
It coincides with spending patterns that are skewed towards the rich and which exclude the needs of the poor. It doesn't necessarily follow that growth in per capita GDP will lead to a reduction in poverty or to broader social and economic development.
Indeed, there are those who argue, rightly or wrongly, that in many countries economic growth is associated with increasing levels of poverty, rather than the reverse. The relationship between economic growth and poverty is a hotly debated topic, about which people are very divided. Some people highlight the negative effect of growth on low income groups, stressing the need for new approaches to economic development that will allow the poor to benefit more from economic growth than they do at present.
Others are more sanguine, believing that the benefits of current models for growth will eventually ' trickle down ' to poorer groups in society, if they are not already doing so. Most development professionals now believe that growth, at least in poorer countries, is essential but not always sufficient for poverty reduction in the longer term. However, inequality is a potentially important factor in determining how quickly and effectively growth reduces poverty, with growth in countries that start out with high levels of inequality being less effective in reducing poverty than it would be were inequality less pronounced see Ravallion A renewed interest in the role of inequality and efforts to reduce it appears to have entered the development discourse since the global economic crisis of the late s.
Much of the debate in this area revolves around the values and ideals of those engaged in it, as well as the different theories on the subject. It also hinges upon interpretations of the empirical evidence. Poverty and income distribution are hard to measure, especially in developing countries where the capacity to gather and analyse data is often very weak.
Consequently, the strength of the statistical relationship between growth, poverty and inequality remains the subject of heated debate. There is also controversy about the mechanisms by which economic growth may reduce poverty, the timing of these and the policy implications. This has been heightened by the ' bottom billion ' debate see 1. The bottom billion debate which revolves around the question of whether the poorest people the bottom billion are to be found in the poorest countries see Collier or in fast growing middle income countries see Sumner The policy implications and the politics of tackling poverty depend greatly on which perspective is taken in this debate.
Should, for example, international efforts to reduce poverty be focused on the poorest countries much of sub-Saharan Africa plus various failed states or on reducing poverty in more densely populated parts of the world especially South Asia, but elsewhere too where most of the world's poor now live, but where average incomes in the countries they live in are much higher than in low income countries?
Some would argue that the poor in middle income countries should be the responsibility of the national government concerned and international efforts should be concentrated instead on countries where governments have far fewer resources at their disposal. Others argue that this is to neglect the plight of the majority of the world's poor people.
This problem arises because one US dollar in the United States or Europe, for example, does not buy the same amount of goods and services as it would do in, say, Africa or Asia. For many goods and services one dollar will purchase significantly more in a developing country than it will in a developed one. To overcome this difficulty, economists often use purchasing power parity PPP dollars when making cross-country comparisons of GDP.
These are dollars that are adjusted to account for the differences in purchasing power between different countries. The weaknesses inherent in the use of GDP as a measure of development have led to the creation of other measures. The HDI is a composite index that rates countries according to their overall performance in relation to three criteria. As noted earlier, these are related to fundamental freedoms to live and to participate in society.
UNDP publishes a number of different human development indicators, many of which are composites of other weighted indexes. The main indexes are. Try and find out where your country sits in the HDI rankings. How does it compare with the performance of other countries that you are familiar with?
Do the results surprise you and how do you think they might be explained? Also, see if you can find the latest Human Development Report. You might want to download this for future reference.
Now take a moment to think about what GDP and GDP growth tell us about a country's level of economic and social development. The standard answer is yes. Source: unit author.
Difference between economic growth and development
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. 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.
Asian countries are increasingly tackling this agenda of 'inclusive growth'. India's most recent development plan has two main objectives: raising economic growth.
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. It measures all the aspects which include people in a country become wealthier, healthier, better educated, and have greater access to good quality housing.
Institutions and Market Economies pp Cite as. In recent decades, the study of the nature and role of institutions has become a central concern of economists and other social scientists. In part this reflects a preoccupation to establish the fundamental determinants of capital accumulation and innovation, and thereby long-term growth and development. The time has long passed when explanations of economic progress could focus only on inputs into the production process. The aggregate production function approach which stressed the need to raise the ratio of investment to income as the means of quickening the pace of self-sustained growth has been found wanting.
Главное достижение заключалось не в том, что секретная информация стала недоступной для широкой публики, а в том, что к ней имели доступ определенные люди. Каждой единице информации присваивался уровень секретности, и, в зависимости от этого уровня, она использовалась правительственными чиновниками по профилю их деятельности. Командир подводной лодки мог получить последние спутниковые фотографии российских портов, но не имел доступа к планам действий подразделений по борьбе с распространением наркотиков в Южной Америке. Эксперты ЦРУ могли ознакомиться со всеми данными об известных убийцах, но не с кодами запуска ракет с ядерным оружием, которые оставались доступны лишь для президента.
Прислонившись к перилам, он вглядывался в грохочущее нутро шахты ТРАНСТЕКСТА.
Difference Between Economic Growth vs Economic Development
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