LT: ‘How Do We Measure Economic Development?

DTC: ‘Why Can Some Countries Have High Economic Growth But Be Less Developed?’
1. How Is Economic Development Defined?

Scholar Definition
The process of improving people’s wellbeing and quality of life
involving improving standards of living, a reduction in poverty,
Amartya Sen’s improvements in health and education, increased freedom and
Definition increased economic choice.

Economic development is defined in three ways: an increase in the

availability and distribution of life sustaining goods such as food,
Michael Todaro’s shelter, and health; Secondly, an increase in the standard of living;
Definition Thirdly, an expansion in economic and social choice.

Growth Is Beneficial For Development Growth Is Not Necessarily Beneficial For

Increase in growth leads to increase in
income since employment is a derived
demand of growth. This increase in income
leads to a greater quality of life and
employment reduces poverty and reduces
inequality.
Development
Economic growth may not be equally
distributed. If there is capital intensive
growth, the standard of living is felt more
notably by the owners of capital but not the
rest of society. This will mean we may not see
the standards of living rise.

It can increase profit. If firms increase their
profits, this can mean firms can invest in
capital. This will mean economies will
become more industrialised when technology
increases. This moves economies away from
an agricultural economy to a more service
based economy. This will move a feudal idea
of an economy to an economy where there
are service based jobs. This increases
standard of living.
Economic growth provides the government
with a fiscal dividend. Growth will decrease
the deficit because if there is more growth
there is more employment which means the
Government’s tax base increases. The
government will receive more tax revenue
from workers and from corporation tax. The
Government can use this revenue to increase
quality of life by investing in health,
education, and infrastructure.
Growth may cause negative externalities.
This is a cost incurred on a third party not
involved in the transaction. For example,
pollution on the environment or resource
depletion or resource degradation. This will
lead to a lower quality of life if there is poor
air quality or not enough natural resources.
Growth can be endured in one dominant
sector in an economy. This may mean the
benefits of growth may not be experienced by
the rest of the economy. In the UK, the
dominance of the financial sector means that
those who work in the financial services
sector may enjoy the benefits of growth
which is not distributed to others in the
economy.

Conclusion
This leads to the conclusion that growth is a necessary but not a sufficient condition for
economic development. There are other factors required to achieve economic development,
but not solely growth.
 LT: ‘How Do We Measure Economic Development?’

DTC: ‘Why Can Some Countries Have High Economic Growth But Be Less Developed?’