Economic growth & Economic development
Economic development
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Economic development is a complex field. Amartya Sen & Michael Todaro have been viewed as the god fathers of the field of development economics. Let’s see how they defined this growing and important area of study.
Amartya Sen:
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The process of improving people’s well-being and quality of life, involves improvement in standard of living, reduction in poverty, improved health and education along with increased freedom and economic choice.
Michael Todaro agrees with Sen’s definition, and break things down into three key objectives that should be achieved:
1. Availability and distribution of life-sustaining goods such as food, shelter, and health
2. An increase in the standard of living
3. Expansion and Economic & social choice
*Knowledge extracted by Youtube Channel: Econplusdal’s video for Economic development
Economic growth vs. Economic development
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Economic growth - increase in rGDP & income over a certain time period
How we can relate economic growth to economic development
However, Economic growth ≠ Economic development, the table above might be too idealistic since:
1. Income distribution can be unequal
2. Increase in rGDP only indicates the total production in the country has increased, it doesn’t necessarily means the living standards have increased.
3. Also, the country that is experiencing an increase in rGDP can still produce goods that are causing negative externalities
4. Increase in rGDP doesn’t mean that growth is happening in the whole society. Growth can happen in only one society as many countries in the world are heavily relying on a specific industry/sector as their source of economic growth.
Therefore, economic growth is necessary, but not sufficient to economic development.
Characteristics of Developing countries (not necessary to have all of these characteristics to be considered as 'developing' countries.
1. Low levels of GDP/GNI per capita
2. High levels of poverty
3. Relatively large agricultural sector
4. Large urban informal sector
5. High birth rates and population growth
6. Low levels of health and education
7. Low levels of productivity
8. Dual economies (fancy word, simply means something like the rich/poor, educated/illiterate, urban/agriculture sectors are all happening in the economy)
The poverty cycle/trap
I guess this seems very logical if you guys are able to get through micro/macro/international economics
This poverty cycle can be drew in different ways depending on the condition, as long as it is logical it'll be fine
It is hard for people suffering in the cycle to break the cycle by its own, it requires intervention by the government to invest and make improvements in the standard of living and human capital.