Economic development and economic growth

The economic development is a concept related to improvements in the living conditions of the population. Instead, economic growth implies increased productivity and income, which can be seen in a multitude of indexes and schemes.

Usually, in mere everyday life, the concept of economic development and economic growth are used interchangeably. That is, we think they are the same. However, the reality is different.

Economic development is the ability of a country or region to create wealth in order to promote or maintain the economic and social well-being of its inhabitants. If you will, it is a more moral concept, although it is an absolute part of the economy and has its own branches.

For its part, economic growth refers to the increase in the value of final goods and services or the value of income produced by an economy. It is a progress observed from different indicators and in a certain period of time.

Both concepts are essential, in any case, to evaluate the performance of the countries with regard to the achievement of their objectives, both economic and social. Sometimes, however, the relationship between development and growth can be unbalanced, with the latter occurring but not the former.

Economic development

Economic development is a concept of macroeconomics linked to qualitative indices and their increases in a given population. That is, it is an economic concept that is expressed in improvements or not in the quality of life of people, which is nothing more than the satisfaction of the needs of individuals.

Naturally, it is often assumed that if economic development improves, which translates into improvements in people’s purchasing power, it can have an impact on the economic growth of the country or region. However, this chain is not necessary: ​​people’s lives, for example, may improve due to the development of an informal market or some form of external aid.

Possibly the best indicator of this concept is the Human Development Index, created in 1990 by the United Nations Development Program. Here, factors such as life expectancy are taken into account, which refers to the average number of years of the population; education, reflected in the literacy rate and access to basic, middle and higher education; and finally per capita income, measured through the nation’s GDP and the purchasing power of the population.

There are multiple factors that influence economic development: economic growth, social institutions such as the State or laws, infrastructure, legal security, land productivity, laws against corruption and even people’s values, be they taken individually or collectively.

Economic growth

Economic growth is defined as the ability of an economy to increase the level of production of goods and services. In other words: there is an increase in income in a territory or region due to an increase in productive capacity or a rise in the prices of goods and services, which is reflected in GDP (Gross Domestic Product).

If you want to see broadly, this growth can be analyzed as the increase in some indicators. These are an immense crowd, since one can mention savings, investment, increased energy consumption, the production of goods and services, a favorable trade balance or even the consumption of calories per head within the population.

Therefore, if these indicators progress, it should be understood as a positive evolution in the standards of life of the people in the territory to which they refer. This is how the productive capacity and income will be reflected within a given period.

While it can be assumed that increased economic growth implies economic development, this is not necessarily the case. For example, poor management of the economic policies of a State can break this link between both economic concepts.

Finally, there are many factors that influence the increase in economic growth. Positive trade balance, increase in the labor force, increase in production, political stability, innovation and technology, capital accumulation, level of consumption, investments, etc.