What is the difference between Economic Growth & Economic Development?

This is a question for 10 marks and frankly i don't know how to extend it for that long.

First Paragraph - Define Economic Growth and Economic Development.
Second Paragraph - Describe how both of them are measured.
Third Paragraph - Say that Economic growth is a necessary but not sufficient condition of economic development. Give criticisms of using growth as a measure of development (Distribution of Income, Depletion of Natural Resources, Informal Economy etc).

Anything else? I don't feel this would be enough for 10 marks at all.

Reply 1

ash213

yeh i also dont know
can some1 pls help with that

Reply 2

Multiplexed

What i have written for this:

Economic development is a normative concept meaning that the definition is variable however, the definition given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression aswell as a greater choice. The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth.

Economic Growth is an increase in a country's real level of national output which can be caused by an increase in the quality of resources by education etc, increase in the quantity of resources & improvements in technology. Economic Growth can be measured by an increase in a country's GDP. However this does not necessarily mean that development has occured.

There is an issue of the distribution of income. It is thought that an increase in a country's GDP means everyone benefits however this increase might only benefit the rich. This creates alienation, encourages crime and threatens social cohesion. This can be justified on the grounds that wealth will eventually trickle down, the 'trickle down' effect. But the problem this creates is that it is far too slow compared to other development policies for example an increase in government spending on health and education.

Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming.

Economic Growth does not take into account the size of the informal economy. The informal economy is also known as the black economy which is unrecorded economic activity which in most cases is illegal. This stifles development because it creates urban congestion & allows disease to be spread more quickly. The informal economy also has very little regard for health & safety issues. The government can not collect taxes from them and hence they can not use that money to spend on health and education. Developement alleviates people from low standards of living into proper employment with suitable shelter.

Using GDP as a measurement of Development is inaccurate because the exchange rate is not taken into account and the actual level of income might be very different. This can be resolved if the Purchasing Power Parity is used which takes into account the different price levels in country's. The HDI is more effective in measuring development however, this also has to be taken with caution as there are other elements such as access to clean water & doctors per 1000 which can also be used that are not included in the HDI.

Overall, to conclude, Growth is just one dimension of development. Economic Growth is a necessary but not a sufficient condition for development because GDP per capita might be rising but at the same time, poverty might be increasing, inquality rising and massive environmental damage might be occuring.

Reply 3

Drogue

I think you could go more into distribution. Firstly, criticise trickle down, as it's largely been rubbished (it just doesn't occur). Also, use examples, for instance a famous example of distribution issue is the Bengal famine, where throughout the famine, food per capita rose, yet because of the distribution 3 million people starved. Also there's the slightly more complicated point of wastage due to corruption. For example if the government decides who gets extra output, a lot of resources can be wasted by people trying to bribe or persuade the government to favour them. This happens a lot when financial aid is given directly to the government.

Moreover, the difference between GDP and GDP per capita is important. Economic growth can just occur because population grows, without any increase in welfare for any person.

If you have time and would like to read a little further, Amartya Sen's Development as Freedom is possibly the best book ever on this type of question, plus it's an accessable and relatively easy read. Just get it from a library and read the intro and it'll give you an idea. Also, if you want, you can send me your email and I can send you one of the essay's I've written on the topic. It might be a bit above A level (being a 2nd year degree essay), but it should be pretty accessable - no maths used.