ECONOMIC GROWTH AND

DEVELOPMENT
ECONOMIC GROWTH

• Economic growth is a quantitative term as it represents quantitative increase in

the production of goods and services in the economy
• Economic growth is a steady process by which the productive capacity of an
economy increases overtime to bring about rising levels of national output and
income
• It is an increase in a country's real level of national output which can be caused
by an increase in the quality of resources, increase in the quantity of resources
and improvements in technology or in another way an increase in the value of
goods and services produced by every sector of the economy. Economic growth
can be measured by an increase in a country's GDP.
• Economic growth refers to the rise of country’s real national income
Three principal components of economic growth are of great
importance

• The sustained rise in national output is a manifestation of economic

growth and ability to provide a wide range of goods in the sign of
economic maturity

• Advancing technology provides the basis or preconditions for

continuous economic growth.

• To realize the potential for growth inherent in new technological,

attitudinal and ideological adjustment must be made
Kuznet identified the six important characteristics of growth
• High rate of growth of per capita output and population
• High rate of increase in total factor productivity
• High rate of structural transformation of the economy
• High rate of social and ideological transformation
• The propensity of economically developed countries to reach out the
rest of the world for markets and raw materials
• The limited spread of this economic growth to only one third of the
worlds population.
ECONOMIC DEVELOPMENT

• Economic development is a dynamic and multidimensional concept.

• Economic development is the process of increase in per capita
income over long period of time.
• In other words, it is the process by which countries with low per
capita income, low living standard and high absolute poverty become
nations with higher per capita income, higher living standard and low
absolute poverty.
• Economic development can also be defined as the reduction in
inequality, unemployment and poverty. It also means better, long,
healthy and happy life of people.
DEFINITIONS

• According to M.P. Todaro, “economic development is an increase in living standards,

improvement in self-esteem needs and freedom from oppression as well as a greater
choice.”
• According to world development report, 1991, "economic development is sustainable
increase in living standard that encompasses material consumption, education, health
and environmental protection.”
Economic development is a long period dynamic process which enabled poor countries
to break the vicious circle of poverty and helps them to achieve a better standard of life.
It is also defined as the reduction or elimination of poverty, inequality and
unemployment within a growing economy.
Development must therefore be conceived of a multidimensional process involving
major changes in social structure, institutions and as acceleration of economic growth.
• Thus, economic development is the improvement in living standard
of people.
• The most accurate method of measuring development is the human
development index (HDI) which takes into account the literacy rates,
life expectancy and per capita income, which affects productivity and
could lead to economic growth, it also leads to the creation of more
opportunities in the sectors of education, healthcare, employment and
the conservation of the environment.
• It implies an increase in the per capita income of every citizen.
THE THREE OBJECTIVES OF DEVELOPMENT
We may conclude that development is both a physical reality and a state of mind in which
society has, through some combination of social, economic, and institutional processes,
secured the means for obtaining a better life. Whatever the specific components of this
better life, development in all societies must have at least the following three objectives:
1. To increase the availability and widen the distribution of basic life-sustaining goods
such as food, shelter, health, and protection
2. To raise levels of living, including, in addition to higher incomes, the provision of more
jobs, better education, and greater attention to cultural and human values, all of which will
serve not only to enhance material wellbeing but also to generate greater individual and
national self-esteem.
3. To expand the range of economic and social choices available to individuals and
nations by freeing them from servitude and dependence, not only in relation to other
people and nation-states, but also to the forces of ignorance and human misery
Bases of Economic Development Economic growth
differences
Implications Economic development implies Increase in the real output of goods
changes in savings and investment and service in the country
along with progressive changes in
socioeconomic structure of country

Factors Relates to the growth of human Relates to the gradual increase in

capital index, decrease in inequality, GDP
structural changes that improves the
general population quality of life

Measurement Human development Index, Gender Quantitative increase in real GDP

related index, Poverty Index,
Literacy rate etc.
Effect Brings qualitative and quantitative Brings quantitative changes in the
changes in the economy economy
Scope Concerned with structural Changes Concerned with the changes in
in the economy Nations output
Concept Broad concept Static concept
DETERMINANTS OF GROWTH AND DEVELOPMENT
Economic growth is not an automatic birthright for an economy. For an economy
to grow, it has to create the right or favorable economic conditions for growth.
The sources of growth and development are explained as follows:
1. NATURAL RESOURCES:
• If an economy has a plentiful supply of natural resources, it may help it to
achieve higher economic growth.
• Natural resources are land, minerals, oil, water, forest, climate, etc. The quantity
and quality of these natural resources play very important role in the economic
growth of a country.
• However, natural resources on their own are not enough. There also have to be
the skilled people and technology to exploit the natural resources.
NATURAL RESOURCES ARE IMPORTANT IN THE GROWTH PROCESS
IN TWO IMPORTANT WAYS:
a. Growth of agriculture sector.
• The composition and the quality of natural resources determine the relative
importance of different economic activities.
• For example, quality of land can influence the level of agricultural productivity
in the early stages of economic development, and this can determine the
importance of agricultural sector in the economy.
b. Influence on speed of development.
• Natural resources are likely to exert major influence on the speed of
development, the pace of agricultural advance and the pace of industrialization.
• Countries like the united states have been able to achieve a high rate of economic
growth because of rich availability of natural resources.
2. CAPITAL FORMATION:
Capital formation means the process of adding stock of capital in the economy over a period of
time.
It includes machinery, plants and building, means of transportation and communication, electricity,
schools, universities, hospitals, etc. The increase in capital formation or more capital means more
production, and more production means more economic growth.
For capital formation, countries have to invest and the level of investment will be the big
determinant of future economic growth.
To provide funds for investment, there should be generation of high level of saving, which can be
mobilized to investment through the financial institutions. Thus, capital formation involves
THE PROCESS OF CAPITAL FORMATION INVOLVES THREE STAGES, VIZ., (1)
GENERATION OF SAVINGS, (2) MOBILIZATION OF SAVINGS AND (3) INVESTMENT.
Generation of savings is the first and the foremost stage in the essential to increase the volume of
real savings so that the resources that would have been the real national income from the present
consumption generates real savings in the economy.
The magnitude of the real savings depends upon (a) ability to save, (b) desire to save and (c)
facilities to save.
Ability to save: ability to save in an economy depends upon the income level. Other things
remaining the same greater the national income greater the ability to save.
Willingness to save: the amount of saving also depends upon the willingness to save. Willingness
to save depends upon the saving habits of the people, the extent of their foresightedness about
future needs, their estimate about their future needs and their desire to attain higher economic and
social status.
Facilities to save: the amount of savings depends upon the availability of facilities to save.
Presence of banking and other financial institutions, security of property, favorable fiscal and
monetary policies of the government are likely to increase savings in the economy
Mobilization of savings: Savings generated in the economy need to be mobilized for
investment. Therefore, mobilization of savings is the second stage in the process of capital
formation. If people save part of their income, but saving is kept in the form of cash, gold
and jewellery, it will not lead to a high rate of capital formation. It is essential that savings
of the people are mobilized by creating adequate banking and financial institutions. There
should be a widespread network of banking, insurance and other financial institutions,
which may collect savings from the public and channelize them to the investors.
Investment: the process of capital formation is completed when real savings are converted
into capital goods. The use of the productive resources made available through savings for
entrepreneurial class which is prepared to undertake risk and channelize savings into the
productive investment, such as new factories, machinery equipments, but it is equally
roads, electricity, communications, irrigation facilities, etc. Similarly, investment in human
also lead to capital formation. Use of resources made through savings in providing
education and training to people will also lead to capital formation
3. TECHNOLOGICAL PROGRESS:
Technological progress implies improvement in the technique of production.
This is the most widely accepted and important source of economic growth. This
is because technology makes it possible to produce more from the same quantity of
resources (or factors of production).
This boosts the potential level of output of the economy. The pace of technological
change will depend on:
• The scientific skills of the country
• The quality of education
• The amount of GDP devoted to research and development
TECHNOLOGICAL PROGRESS IS THE MAJOR SOURCE OF ECONOMIC
DEVELOPMENT IN TWO WAYS:

1. Reduction in cost: technological progress enabled the modern economies to

produce most of the commodities at a low cost of production. This means either of the
two things, viz,
(i) producing more output with the same amount of land, labour and capital,
(Ii) producing same quantity of output by using less amount of inputs like land, labour
and capital.
Thus, technological progress has increased the efficiency of inputs in the form of
increased productivity of land and labour, etc.
Increase in productivities: technological progress has brought forth a flood of new
products, which could not have been dreamed of in the past. Computers, televisions,
cds, cameras, movies, motor cars, aeroplanes - all these are the product of
technological progress.
ROLE OF PUBLIC SERVICE IN ECONOMIC
GROWTH AND DEVELOPMENT
• Public service is the engine of effective governance delivery in the world economy; governments
across the world cannot function well without the enabling structures of public administration to
deliver on their mandate as set out mostly in (political) manifestos, while also making sure the
core mandate for meeting citizens’ basic welfare needs are made available through an efficient
market system.
• Despite the importance of private sector in driving growth and development in an economy, the
main actor or agent that is responsible for creating inter-linkages between service users in an
economy is the public service, which in short is the government.
• In a bid to facilitate efficient functioning of the public service, particularly in the area of
economic and social wellbeing, leadership in the public service should ensure mandatory
services are made accessible to the community
• Such service provision are normally outside of the remit of the private sector; these would
normally include basic services like transportation, education, health, and in addition the
legislative system, which facilitate the proper functioning of markets - a considered requirement
for growth stimulation in an economy
IMPORTANCE OF PUBLIC SERVICES AND ESSENTIAL REFORMS IN THE ERA OF TARGETING
GROWTH

• There is a need to make sure the public service deliver on its mandate in order to avail citizens,
at least the basics of what it takes to live a decent life.
• In view of this, emphasis should be placed in making certain the public sector administrative
system is free of political manipulation – this means that public administrators should be given
the opportunity to devote time and energy in steering the vehicle of supporting decent
economic wellbeing – this can be done through effective utilization of staff expertise in the
civil service to deliver essential services in the best interest of citizens, and likewise to the
private sector community.
• Public service is the gateway and engine of a country’s pathway of development – therefore,
sufficient planning needs to be strategically addressed in order for governments to deliver on
set goals. In this vein, there is a need for public service institution to take responsibility in
producing quality data.
For example, the statistical office, finance ministry, central bank should keep up to date with
much needed information to plan activities that are relevant to support developmental ventures.
• In order to bring about reforms in the delivery of public services, many
economies in the developing world resorted to tight structural reforms in the
early 1980s, which became popularly referred to as ‘structural adjustment
programs (SAP)’
• Though it was critically cried down for its lack of concern with social welfare
realities, the deplorable state of public service delivery in many of these
economies really warranted much needed reforms as a way of addressing
economic malaise.
 DEVELOPMENT GOALS AND THEIR
LINKAGES WITH EFFECTIVE PUBLIC
SERVICE DELIVERY
ERADICATING POVERTY
• In order for this to be realised, those in authority should develop innovative
approach in addressing issues of concern around poverty. In general, poverty
seem to be a common phenomenon in both developed and underdeveloped
economies
• By way of eradicating poverty, those in the leadership of public service
administration must endeavour to revolutionize the system in a bid to avail
resources for the good of all citizens – this mean that people should be avail the
opportunity of accessing at least all of the five core sustainable livelihood assets
– these include human, natural, financial, physical and social network.
• Institutions that embodies public service delivery, for example, the ‘ministries,
departments and agencies (mdas)’ must work cooperatively to avail every human
being on earth the opportunity of gaining access to some form of resources that
will keep them above poverty line.
• It is possible to reduce poverty by half with cooperation from independent public
institutions like central banks – they are normally assigned the responsibility of
supporting government actions through powers vested in setting policies geared
towards price and financial stability.
• With effective policy delivery, institutions responsible for their implementation
would need to act swiftly in a bid to address concerns around poverty and the
sustained wellbeing of citizens’ earning potential.
ERADICATE HUNGER

• It is very important for public service institutions like the ministry of agriculture
to utilize resources capable for improving output in the drive towards attaining
food self-sufficiency.
• In a bid to achieve this, governments across the world, particularly those in
developing regions must endeavour to work with international partners or
institutions like the food and agricultural organisation (FAO) to utilize
technology innovations, which are capable of addressing food self-sufficiency
requirements for citizen’s at the most affordable rate, while also channeling
opportunities for improving human skills.
• While the state of malnutrition for children in underdeveloped is perceived to be
high, efforts should also be made by relevant public service units to increase
international collaboration in support of ending child starvation
PROMOTE HEALTHY WELLBEING FOR ALL AGE GROUPS

• In this vein, there is high responsibility placed on institutions like the health
ministry to set policies in place, through cooperation with the legal authorities
and also, international partners like the world health organization (WHO) to
strengthen action that prevent acute use of substance abuse (hazardous use of
psychoactive substances, including alcohol and illicit drugs)
• Given the high level of risks placed on developing economies with regard to
the exposure to such abusive substances, efforts must be made by public
service institutions
For example, the police and health ministry to establish early warning signs,
through cooperation with national media outlets.
• Equally, sustained efforts to promote healthy wellbeing must be promoted for all
age groups, for example, where necessary, those considered to be outside of the
working age group (0-18 and 60+)
• Equally, those with disabilities must be avail the opportunity to access supportive
care treatments in institutions like public hospitals / health care centers.
• This should also be widely promoted in rural communities by relevant
community health workers in a bid to protect the poor and needy.
• It is therefore incumbent on the public sector to continue promoting healthy
means of research through public institutions like universities, and where
necessary, establishing public private partnership (PPP) arrangements in a bid to
improve efficiency of delivery, while also reducing astronomical costs to the
public sector.
INCLUSIVE AND EQUITABLE QUALITY EDUCATION
• This require mandatory effort by the public sector to prioritize investment
towards education – to make it more effective
• Governments around the world should provide free education to all children at
primary and secondary levels.
• Efforts must be made to strategically plan the process of making inclusive
education mandatory for all, while also emphasising the need for people to take
up lifelong learning, irrespective of age or social status in society
• This will make it possible for everyone to compete for opportunities,
particularly jobs that are made available by employers through public service
outlets like job centers
PROMOTING GENDER EQUALITY
• While also empowering all women through variety of opportunities, possibly through
preferential schemes connected with their engagement in science and technology.
• In this vein, deliberate efforts must be made by relevant public sector institutions, for
example the department for gender to direct efforts in narrowing gaps in gender
inequality.
• Where necessary, women must be given the opportunity to compete in different
programs, in a bid to increase their participation in society, which obviously will also
bring about high level of economic gains to society as seen nowadays in the case with
women’s involvement in science, technology, engineering and mathematics (stem)
education promoting sustained and inclusive economic growth
• With consideration given to full employment and decent working conditions, as
opposed a situation where conditions can force people to seek the underground world
of making money - otherwise known as ‘informal employment’
• The role of the public service is very critical here, given the importance full
employment plays in supporting governments’ effort to deliver on key mandates
connected with funding essential services like health, education, transportation,
water supply and energy supply.
• It is important that departments that are responsible for promoting employment
opportunities devote high priority in delivering on their commitments.
• In this vein, legislations must be set up to encourage collaborative working
partnerships between employees and employers at every point in time so as to
limit disturbances to work operations .
• Opportunities must be avail to ensure private sector is encouraged to support
government efforts by providing incentives to private sector employer through
reduced corporation tax incentives, in addition to the enabling competitive and
stable environment that protect businesses from collapsing.
BUILDING RESILIENT INFRASTRUCTURES,
• Economic development is impossible without the development of infrastructure.
Infrastructure investment by the public sector in areas such as power,
transportation, communication, basic and heavy industries, irrigation, canals,
education, and technical training, and so on has set the way for the country’s
agricultural and industrial development, resulting in overall economic growth.
• These infrastructural facilities produced by the country’s public sector are also
dependent on private sector investments.
• With the motive of promoting inclusive and sustainable industrialization is very
important in developing an efficient public service. This requires the creation of
strong institutions at national and cross-border level to support high intensive
industrialization motive in building capacity for the working population to
engage creatively in productive work activities.
• This will also create the enabling atmosphere of capacitating
government’s ability to increase wealth (through taxes and other forms of
income generation activities).
• Which in return can be utilized for the purpose of servicing essential
sectoral activities connected with education, health and transportation.
• In this vein, there is high responsibility on governments to invest in
education, more so that which is focused on facilitating technological
innovations, with scope for citizens to engage in lifelong learning.
MITIGATE THE IMPACT OF CLIMATE CHANGE
• In this regard, the public service being the engine of governmental
operations must seek to pursue goals that mitigate the impact of climate.
• In this vein, the department for environment must seek to educate people
about the relevance of keeping the world safe, through sensible utilization
of resources connected with reforestation
TO CONCLUDE

• It must be stressed that the world as it is cannot be a better place to live without an
effective functioning public administration – despite not very well recognised,
particularly in developing regions around the world, it is highly believed that
government is indeed the engine of smooth delivery of diverse range of services as
would be required by humanity in the global community.

• The role of those working in the delivery of public services should not be
underestimated – even the richest of a private enterprise would still need the service of
public administration for their business to function in the most efficient way.

• In this vein, it is very important that services that requires continuity in public
administration delivery are continued to be financed in the most efficient way, with very
minimal level of bureaucracy for systems to work effectively.
• In terms of the financing of public goods or services, one would think that segmentation of
service duties would make it possible for every departments within a complex public
administration system to be able to discharge duties that would make it possible for revenues
generated to be dispensed in the most appropriate way.
• That said, it is therefore necessary that high level of consideration is given to modernizing the
public service, through continued means of innovation as in the case with present-day high level
digital technology (e.g., Electronic payment system).
• There is a need for governments across the world to continue efforts to establish good
relationship that foster inter-agency coordination (world bank, 2018), which thereby makes it
very easy for services to be outsourced in a bid to improve efficiency and where necessary,
reducing high costs to public service budgets.
• It is highly recommended for governments around the world to model administration system that
takes into consideration the identified key factors for a successful public sector performance
innovations – ‘political leadership, institutional capacity building, technology, incentives and
transparency’