Main differences between growth and economic development
It has not been many years since we emerged from the last major economic crisis, the 2008 euro crisis. In fact, despite the fact that the situation has stopped being as critical as before, the consequences of this are still valid in part of the globe , with which we still could not talk about a total recovery.
However, fortunately it seems little by little different countries are improving their situation and it is observed compared to the first years of crisis some growth and economic development . With regard to these last two terms, they are often considered practically identical synonyms.
But although they have a certain relationship with each other, the truth is that they actually refer to different concepts. That is why throughout this article we are going to make a brief explanation of the differences between economic development and economic growth .
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Economic growth: basic concept
Economic growth is understood as that situation or economic reality in which the set of goods and services produced per year surpass those of the previous period . In other words, we consider that we are in a situation of economic growth when the production of a country or territory is greater than during the period (usually year) immediately preceding, with a greater volume of income.
This growth is perceived per capita, that is, it is derived from the increase in the value of each worker's production.
This growth can lead to an increase in the welfare of the population as a whole , as there is greater economic capacity on the part of the territory to search for the benefit of citizens. However, although we are talking about something that usually leads to this improvement, it does not always necessarily imply it, and it is not necessary for economic growth to exist if the capital increase is reflected in the quality of life of the population as a whole.
And is that economic growth is defined as a purely quantitative factor and directly measurable through existing capital figures. It can be assessed from different statistical indicators, among which the Gross Domestic Product or GDP stands out as the main one .
What is economic development?
With regard to economic development, this concept is referring to the socio-economic situation in which there is an increase in the quality of life of the inhabitants of a country, which increases the conditions of citizens and their prosperity. a generalized form.
The economic development happens when the growth of the economy translates into a progress of the whole of the community that inhabits the country or territory, in an equitable manner and affecting different areas.
On the other hand, economic development implies for example the improvement of health and education systems, infrastructure, life expectancy or economic capacity of each of the members of society. It also includes the development of more egalitarian and inclusive social policies , as well as the increase of freedoms and rights (also on the other side of their duties) and the participation of the citizen in political and community life.
The concept of economic development, unlike the concept of growth, it is not quantitative but qualitative : development is difficult to measure directly, and different mechanisms should be used such as satisfaction indexes, measurement of the different aspects that influence the quality of life, literacy or access to employment or training.
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Main differences between growth and economic development
Observing the above definitions of development and economic growth already allow us to indirectly glimpse some of the main differences between both concepts. However, to make them more evident, we will now delve into what aspects make us differentiate between economic growth and economic development.
1. How it is applied
To begin with, one of the main and most important differences is that while economic growth implies only the existence of a higher level of capital within the territory , the development implies that this growth or the economic situation of the country in question will be applied in the improvement of the welfare of each one of its inhabitants.
2. Economic development needs growth
They also differ in that while economic development generally requires economic growth in order to be effective, the latter need not need or lead to development. Likewise, in order for a country's economic development to take place, growth may be necessary, but it is not enough to generate it: it requires a correct application of the benefits . In addition, while economic growth refers mainly to the economic in the case of development, we tend to focus instead on the structural and social changes that can be derived from it.
3. Qualitative or quantitative indicators
Another difference is in the way in which the indicator of each of them is obtained. While growth is a quantitative measure that is obtained from relatively simple mathematical calculations, calculating the level of economic development involves making a qualitative and not totally accurate assessment of the general situation of the population.
4. Degree of stability
Finally, it should be taken into account that while economic growth can easily see trimmed and move to a situation of degrowth In the case of economic development, this tends to be more stable in terms of most of its advances, although it can also be deeply influenced by the alteration of the economy.
Bibliographic references:
- Galor, O. (2005) From Stagnation to Growth: Unified Growth Theory. Handbook of Economic Growth, Elsevier.
- Maddison, A. (2001). The World Economy: A Millennial Perspective, Paris, OECD.
