Tuesday, 8 March 2011

Economic Growth and Economic Development

The concept of economic development is often confused with that of economic growth.the growth of GNP is no longer regarded as the main objective of economic development.Most of the economic define the development in the term of growth.However, it seems necessary to differentiate these two concepts.Economic growth implies increase in the output.On the other hand, development is considered a multi-dimensional and multi faceted process encompassing the entire economic and social aspects and sector of the economy.Besides improvement in institutional, social and administrative structure and the entire social behavior as a whole.However, some economists explained these concepts as below.

According to Kuznets economic growth is defined as 'a long term process where in the substantial and sustained rise in real national income , total population and per capita income.

"The raising of income levels is generally called economic growth in rich countries and in poor ones it is called economic growth".

He defines development as a continuous and spontaneous change in the stationary state which forever alters and displaces the equilibrium state previously existing, while growth is a gradual and steady change in the long-run which comes about by a gradual increase in the rate of saving and population."

Economic growth means more output, while economic development implies more output and changes in the technical and institutional arrangements by which it is produced and distributed.Growth may well involve not only more output derived from greater amounts of input but also greater efficiency, i.e. an increase in output per unit.Development goes beyond this ti imply changes in the composition of output and in the allocation of inputs by sectors.

He defines growth as an expansion of the system in one or more dimensions without a change in its structure and development as an innovative process leading to the structural transformation of a social system.

In the light of the above discussion, the economic growth is related to a quantitative sustained increase in the country's per capita output or income accompanied by expansion in its labour force,consumption, capital and volume trade.
One the other hand , economic development is related to qualitative changes in economic wants, goods, incentives and institutions. it describes the underlying determinants of growth such as technological and structural changes i.e. occupational changes, sectoral changes, technical break in agriculture, industry, transport, communication methods of thinking acting producing and consuming etc.
An economy can grow but it may not develop because poverty , unemployment and inequalities may continue to persist due to the absence of technological and structural changes.

SUMMING UP : It is difficult to imagine development without economic growth in the absence f an increase in per capita, economic growth and economic development go side by side and these terms are often used as synonyms. Thus, economic development implies growth plus changes.


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