Differences Between Economic Growth and Economic Development

Economic Growth

Economic growth is an essential indicator of a nation's economic health, often calculated as the percentage rise in a nation's gross domestic product (GDP) or gross national product(GNP) during a specific period, typically a year or a quarter. While GNP is a measure of all the products and services generated by a country's citizens, wherever they may be, GDP is an indicator of all the products and services generated within a country's borders.

Economic growth can be influenced by several factors, including

1. An increase in labor productivity: This can be accomplished by investing in infrastructural improvements, technological advancements, and education and training programs.
2. Growth in Capital stock: This is the entire cost of a nation's tangible assets, such as its buildings, machinery, and equipment. Production can rise, and the economy can expand as the capital stock does.
3. An increase in population: A growing population may result in higher demand for products and services, which could promote economic expansion.
4. Trade growth: A nation can achieve economic growth by boosting exports or cutting down imports.
5. A rise in the availability of natural resources: A nation can enjoy economic growth if it can fully utilize its mineral resources, such as its oil or mineral reserves.

Many economic theories attempt to explain economic expansion. According to the traditional conception, which Adam Smith and others formulated, economic growth is the inevitable outcome of the functioning of free markets. According to the notion, as people and businesses act in their best interests, more products and services will be produced, resulting in greater wealth for everyone. The neoclassical concept, created in the late 19th and early 20th centuries, concentrates on technological advancement's function in promoting economic growth. This hypothesis contends that technological improvements result in higher production, which supports economic expansion.

Several other government initiatives might encourage economic expansion. These consist of the following:

1. Fiscal policy: It refers to the government's taxing and spending to boost or depress the economy. To promote investment and increase output, the government may, for instance, spend more on infrastructure improvements or give businesses tax advantages.
2. Monetary policy: To affect economic activity, interest rates, and the money supply are used. The central bank has two options for promoting borrowing and investment: lowering interest rates or expanding the money supply.
3. Trade policy: To stimulate economic growth, the government may adopt measures that support global trade, such as lowering tariffs and other trade restrictions. Although economic expansion has numerous advantages, like economic wealth and better living conditions, it can also have drawbacks. For instance, economic expansion may result in worsening income inequality, deterioration of the environment, and other social and financial issues. Governments must carefully weigh the trade-offs and adopt a balanced strategy to encourage economic growth.

Economic Development

The process of enhancing a community's or nation's economic prosperity and standard of living is referred to as economic development. It is a broad term that refers to various things, including raising productivity, creating more employment with better pay, enhancing infrastructure, and expanding access to healthcare and education.

Economic growth can take many forms, and the precise tactics and measures employed might differ significantly depending on the particular conditions and requirements of a given community or nation. There are, however, a few common elements that appear in debates about economic development

Increasing productivity is one of the key components of economic development and can be done in many ways. For instance, spending money on training and education can improve the knowledge and skills of the workforce, boosting productivity. Similarly, funding Research and Development can contribute to creating new technologies and procedures to increase productivity.

Creating new higher-paying jobs is a crucial aspect of economic development. This can be accomplished in several ways, such as by bringing new firms and industries to a region, assisting in expanding and growing current enterprises, and encouraging entrepreneurship and the development of small businesses.

Infrastructure development is necessary for economic development as well. It can involve spending money on telecommunication services, other utilities, and transportation infrastructure, including roadways, bridges, and public transportation. Having better infrastructure can assist in making it simpler for people to get to work and for businesses to run, promoting economic growth.

Finally, expanding access to healthcare and education is essential for economic development. Education may assist the workforce in becoming more skilled and knowledgeable, and healthcare can help a community's general health and well-being. A richer and more productive society can benefit from both of these aspects.

The process of economic development is complicated and diverse, involving a variety of elements and tactics. Communities and nations can improve their economic well-being and quality of life by raising productivity, creating new and better-paid jobs, investing in infrastructure, and increasing access to healthcare and education.

Importance of Economic Growth and Economic Development

1. Increased prosperity: A country's overall wealth rises due to economic expansion, enabling its citizens to live comfortably. It includes having access to better healthcare, education, and other conveniences.
2. Creation of Job opportunity: Jobs are produced by economic expansion, which can aid in reducing poverty and unemployment.
3. Government revenue growth: The government normally receives more tax revenue when the economy expands, and this money may be used to pay for public services like infrastructure and education.
4. Improved standards of living: Growth in the economy can raise living standards by reducing infant mortality and raising life expectancy.
5. Reduced poverty: By generating jobs and raising a nation's overall wealth, economic growth can reduce poverty and raise the living standards for the most vulnerable segments of society.
6. Political stability: By eliminating unemployment and poverty, which can be key contributors to social discontent, economic growth can contribute to the maintenance of political stability.
7. Increased competitiveness on the global stage: A thriving economy can make a nation more competitive on the global platform.
8. Multifaceted development: GDP is simply one facet of economic growth; other areas of development, such as social and ecological well-being, are also impacted.

Both economic growth and economic development are popular options on the market, but there are some key differences to be aware of.

• Economic growth is the rise in a nation's real output over a specific period. At the same time, economic development refers to raising the production level within an economy while raising living standards and advancing technologically.
• While economic development takes into account all formal or informal activities and helps those with a low standard of life find a decent place to live and a job that suits them. The informal economy's income is not considered when measuring economic growth, and the unrecorded economic activity makes up the informal economy.
• Lack of natural resource availability is not reflected in economic growth. Environmental problems are putting pressure on governments, and global warming is mostly to blame. On the other hand, economic development focuses on sustainability, which is the ability to meet existing requirements while making no concessions in the future.
• Economic development is a subcategory of economic growth.
• Economic growth is a narrower idea than Economic Development. Economic development is the steady rise in Real National Income that results from a nation's socioeconomic and economic system through time. Economic growth denotes the rise in a nation's Gross Domestic Product (GDP), and economic growth is primarily associated with advanced economies. Underdeveloped or developing countries around the world are related to economic development.
• Economic growth, in contrast to economic development, happens automatically. While organized and goal-oriented actions produce economic development.
• The increase in the value of every product generated in the economy is called economic growth, and it displays the percentage annual growth in the GDP or GNP of the nation. It alludes to a significant increase in per-capita GDP over time, i.e., the growth rate of total production should be higher than the growth rate of the population.
• Different indicators are used to measure economic development vs. economic growth. Increases in GDP, per capita income, and other indicators are ways to quantify economic growth. However, improvements in life expectancy, infant mortality, literacy, and poverty rates can be used to evaluate economic development.
• It is possible to assess economic growth over a specific time frame. On the other hand, economic development takes place over time and is a continual process.

Conclusion

We can generally state that economic growth and development have different concepts. Many of us occasionally mix up the terms "economic growth" and "economic development" and use them interchangeably. It's challenging to separate them, so we discussed the distinction between economic growth and development.

Economic growth can occur for various reasons, and in its simplest form, it can be defined as an increase in the amount of national output. The numerous factors include the high-quality education presently offered in the country, technical advancements, or, as we may say, an increase in the value of the various commodities and services provided to a country's citizens by multiple sectors. The country's Gross Domestic Product, or GDP as we like it, is the best way to assess economic growth. Economic growth is not necessary, but it will not be able to explain economic development independently because a few other requirements must also exist. When it comes to economic progress, defining it is a difficult process because it entirely depends on an individual's point of view and it's moral philosophy. Nowadays, people can decide if something is excellent, awful, right, or wrong. Now, a lot of individuals have attempted to define economic growth. Still, the finest explanation comes from Michael Todaro, who said economic development improved self-esteem requirements, freedom from oppression, and more choice. We can look at the Human Development Index (HDI) to predict economic development. HDI considers several variables, including mortality and literacy rates, which impact productivity and drive economic growth.

We shall now examine some fundamental distinctions regarding economic growth and economic development. While economic development focuses on enhancing people's moral character, economic growth concentrates on raising the nation's income and level of development. Economic development requires well-organized and structured

organizations, whereas the latter does not. According to economists, even the approach is different between the two: economic growth requires a quantitative approach, whereas economic development requires a qualitative approach. Economic development is significantly more important than economic growth because it provides a more comprehensive picture of the status of the economy than growth does. Experts place a greater emphasis on economic development than growth.

One other way to look at them is by examining their duration. We may readily determine Economic Growth by examining monthly, annual, or decade-by-decade data, making it possible to identify it in the short term, such as a year. Since it takes a long time to change people's perspectives and organizational structure, we must consider long periods of economic development, which may span several decades. Additionally, economic growth is frequently connected to the issues that industrialized countries face, whereas development issues worry developing nations. Despite having little impact on growth, the political environment is very important for economic development.

To summarise, we can confidently say that economic growth tries to elevate society by causing it to advance in terms of national revenue, savings, and the overall organizational framework. At the same time, Only the Gross National Product (GNP) or the population's per capita income is used to determine economic growth. In addition, policymakers look to the GNP values to assess economic growth to determine the various policies governing a country. One might counter that economic growth is less significant than economic development. Still, it's important to note that without taking economic growth into account, it's impossible to measure economic development accurately.