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Economic development is the sustained, concerted actions of policy makers and communities that promote the standard of living and economic health of a specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy, and other initiatives.
Economic development differs from economic growth. Whereas economic development is a policy intervention endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GAP. Consequently, as economist Mammary Seen points out: “economic growth is one aspect of the process of economic development. The scope of economic development includes the process and policies by which a nation improves the economic, political, and social well-being of its people. 2] The University of Sow’s Center for International Finance and Development states that: ‘Economic development’ is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernizes, and especially Industrialization are other terms people have used while discussing economic development. Economic development has a direct relationship with the environment.
Although nobody is certain when the concept originated, most people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism. [3] Ansell and When also state that economic development has been understood since the World War II to involve economic growth, namely the increases in per capita income, and (if currently absent) the attainment of a standard of living equivalent to hat of industrialized countries. 4][5] Economic development can also be considered as a static theory that documents the state of an economy at a certain time. According to Schumacher (2003), the changes in this equilibrium state to document in economic theory can only be caused by intervening factors coming from the outgrowths and development[edit] Dependency theorists argue that poor countries have sometimes experienced economic growth with little or no economic development initiatives; for instance, in cases where they have functioned mainly as resource-providers to wealthy industrialized countries.
There is an opposing argument, however, that growth causes development because some of the increase in income gets spent on human development such as education and health. According to Rains et al. , economic growth and development is a two-way relationship. According to them, the first chain consists of economic growth benefiting human development, since economic growth is likely to lead families and individuals to use their heightened incomes to increase expenditures, which in turn furthers human development.
At the same time, with the increased consumption and spending, health, education, and infrastructure systems grow and contribute to economic growth. In addition to increasing private incomes, economic growth also generate additional resources that can be used to improve social services (such as healthcare, safe drinking water, etc. ). By generating additional resources for social services, unequal income distribution will be mitigated as such social services are distributed equally across each community, thereby benefiting each individual.
Concisely, the relationship between human development and economic development can be explained in three ways. First, increase in average income leads to improvement in health and nutrition (known as Capability Expansion through Economic Growth). Second, it is believed that social outcomes can only be improved by reducing income poverty (known as Capability Expansion through Poverty Reduction). Lastly, social outcomes can also be improved with essential services such as education, healthcare, and clean drinking water (known as Capability Expansion through Social Services).
John Joseph Pathname’s research aims at the process of economic growth theories that lead to economic development. After analyzing the existing capitalistic growth- development theoretical apparatus, he introduces the new model which integrates he variables of freedom, democracy and human rights into the existing models and argue that any future economic growth-development of any nation depends on this emerging model as we witness the third wave of unfolding demand for democracy in the Middle East.
He develops the knowledge sector in growth theories with two new concepts of ‘micro knowledge’ and ‘macro knowledge’. Micro knowledge is what an individual learns from school or from various existing knowledge and macro knowledge is the core philosophical thinking of a nation that all individuals inherently receive. How to combine both these knowledge would determine further Roth that leads to economic development of developing nations.
Yet others believe that a number of basic building blocks need to be in place for growth and development to take place. For instance, some economists believe that a fundamental first step toward development and growth is to address property rights issues, otherwise only a small part of the economic sector will be able to participate in growth. That is, without inclusive property rights in the equation, the informal sector will remain outside the mainstream economy, excluded and without the same opportunities for study.