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Differences Between Economic Growth And Development

Differences Between Economic Growth And Development

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From a traditional economic perspective, development may be viewed as economic growth related to the rise in GDP, per capita income and infrastructural adjustments in the economy relative to population changes. However, in a simpler and more refined view, development may be taken to mean the improvement in quality of life of the population through poverty eradication, reduction of inequality, reduction of unemployment and demographic control measures. The traditional view on development focused more on the trickle down effect of wealth to the masses in to influence the real per capita GNP which was assumed to grow at a higher rate than the growth in population. Primarily, the trickle down effect involved creation of employment opportunities and enhancement of distribution of economic and social benefits through planned structures of production and employment.

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The current view on economic development has been focusing more on poverty eradication through establishment and achievement of development goals that may include reduction in disease, illiteracy, unemployment and social/economic inequality. Moreover, many institutions actively involved in enhancing global economic development, including the World Bank, United Nations, World Food Program, world Health organization and International Monetary Fund among others have come up with development goals whose core values may include ensuring everybody is able to sustain basic needs, enhancing society’s self esteem and enhancing freedom from servitude.

Despite these efforts, the gap between the developed and the developing countries and the issue of inequality in distribution of wealth are still evident. Moreover, a lot is expected to be achieved through the millennium development goals of 2015 which encompass eradication of poverty, enhancing universal education, enhancing gender equality, enhancing child and maternal health, combating HIV/Aids, ensuring total environmental sustainability and enhancing global partnership. However, these efforts are being hampered by the financial crisis, food crisis, political crisis and climate change, all of which have tended to be the mainstay in the contemporary world. This paper will discuss the subject of economic development and its impact to the contemporary society.

Historical view of development

The classical economic theorists clam that economic development involved the growth in total output relative to the growth in population and changes in per capita income on real GNP of an economy. Although they focused on elimination of poverty as the main goal of economic development, they based such an agenda on the wealth creation and distribution through division of labor and capital concentration in competitive capitalist environment (Cypher and Dietz, 2004, pp. 109-110). Although the difference in economic development between the poor and the rich nations may be attributed to the earlier years of slavery and colonialism, the asymmetrical growth in population as compared to food production may be one undoing factor in decelerating economic development.

According to Cypher and Dietz (2009, p. 114), Malthus, a classical economists, posited that population did tend to increase at a geometric progression while food production/output increased at an arithmetic progression which indicated that there was overuse in the fertile land under cultivation and the subsequent surge in population would more than worsen the disreputability of the limited food reserves. In their view, economic development would be achieved through distribution of economic wealth to the people with an aim of enhancing the social well-being since the society was divided into haves and have-nots (Willis, 2005, p. 63).

Modern Economic development view

Generally, economic development is taken to mean the measure of the level of social-economic welfare of the people in a national economy. The current focus on economic development has been the sustainability of the social welfare through poverty eradication, eliminating unemployment and eliminating inequality. In a more broader sense, there may be a buffer between economic growth and economic development in that, while economic growth will measure the rate at which the GNP and per capita income are changing, the latter may be realized with or without economic growth and it involves social and structural changes such as demographics, environmental sustainability, political relations, literacy levels, social diversity and health.

According to Hoff and Stigliz (2001, p. 391), the government ands markets as the determinants of economic development coupled with institutions, wealth distribution and historical ideologies, all of which have affected the developmental patterns in the world economies especially in the developing nations. While the institutions influence the direction of transaction costs in the economy, wealth distribution impacts on the economic efficiency and thus creating influence on the developmental adjustments in the economy. Mookherjee and Ray (2001, p. 118) view that wealth distribution affects saving, investment, and production structures thus influencing occupational choices and institutional adjustments that tend to explain the difference between the developed and developing economies.

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Measuring economic development

As a measure of socio-economic welfare, economic development aims at achieving various objectives which include availing and distributing human basic commodities, improving the standards of living through provision of social amenities and job creation, and aligning the social and economic choices available to the society. In the contemporary economic environment, the gap between the poor and developed nations has remained to widen, despite the developing nations having a higher economic growth rate in the recent years. However, the globalization of trade has enhanced economic development especially through reorganization and reorientation of economic and social systems as well as improvement in household incomes and economic output (Todaro, 2009, p. 68).

The attainment of millennium development goals according to United Nations (2009) provides a clear measure of economic development in the world economies. Despite the deadline being 2015, there has been developmental progress especially in areas related to literacy, gender equality, primary health care, global partnership and environmental sustainability. However, the HIV/Aids remains to be one of the stubbing blocks on development especially in Africa where poverty is much higher than in other parts of the world.

Barriers to economic development

The economic crisis (as experienced recently), the food crisis, adverse climatic changes and political warfare (civil strife and external sanctions) have remained to be the hindrances to the attainment of the economic development (World Bank, 2009). For instance, the globalization effect has led to environmental degradation and pollution resulting to interference with climatic changes that have created threat to food production (Meier and Stiglitz, 2001, 170). In addition, recently witnessed financial meltdown may slow down the realization of developmental goals due to its effect on investment patterns and interference with wealth distribution.


Economic development may be differentiated from economic growth due to the difference in measures and effects to the society. For a nation to experience economic development there must be structural adjustments that focus on the attainment of human wellbeing. Sound economic policies should be available to ensure that all the fundamentals that influence economic development are addressed fully and comprehensively.


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