Understanding Economic Growth and Development Factors
Economic Growth and Development
Economic growth is the increased production of goods and services within a year. It’s measured by GDP, especially GDP per capita.
Development encompasses economic growth along with structural changes that improve economic and social conditions, increasing the quality of life for a country’s people.
Development is measured using social and economic indicators:
- Social Indicators: Life expectancy, level of education, workforce skills.
- Economic Indicators: GDP or GDP per capita, income distribution, percentage of GDP spent on R&D, the weight of economic sectors.
- Policy Indicators: Public sector intervention in the economy, degree of democracy.
The UN uses the Human Development Index (HDI) to measure a country’s development, considering:
- GDP per capita
- Life expectancy
- Adult literacy rate
- Enrollment in primary, secondary, and higher education
Factors Contributing to Development
Historically, development progressed from agriculture in the 18th century to industry in the 19th century, and services in the 20th century, driven by large companies and new technologies.
Current factors contributing to development include:
- Increased Productivity: The amount of goods and services output per unit of factor used. Improving productivity involves investing in real productivity, enhancing education and worker motivation, advancing the use of new technologies, and better management.
- Savings and Investment: Governments should encourage household savings, which become investments that increase production. Countries that save and invest reduce reliance on foreign companies.
- Education and Training: Key factors for a country’s future.
- Political Stability: Provides certainty for investors.
- Free Trade: Facilitates new markets and access to foreign products.
- Population Control: Distributes income among fewer people, increasing individual welfare.
Consequences of Development
Post-1950, significant growth and development occurred in developed countries, with both positive and negative consequences.
Positive Consequences:
- Higher incomes
- Improved education
- Better healthcare
- Public lighting
- Home appliances
- Personal vehicles
- Improved housing
- Scholarships
- Pensions
- Increased life expectancy
Negative Consequences:
- Pollution and exploitation of material resources, leading to environmental deterioration.
- Abandonment of rural areas, causing neglect of agriculture and rapid urbanization that outpaces service provision.
- Growing disparity between rich and poor, exacerbated by slower population growth and higher economic growth in rich countries, versus rapid population growth and insufficient resources in poor countries, increasing reliance on wealthier nations.
Currently, 20% of the world’s population owns 80% of total resources.