CONCEPTIONS

AND DIMENSIONS
OF DEVELOPMENT
Economic Growth

■ Economic growth is an increase in the production of goods and services over a specific
period. To be most accurate, the measurement must remove the effects of inflation.

■ Economic growth creates more profit for businesses. As a result, stock prices rise. That
gives companies capital to invest and hire more employees. As more jobs are created,
incomes rise. Consumers have more money to buy additional products and services.
Purchases drive higher economic growth. For this reason, all countries want positive
economic growth. This makes economic growth the most watched economic indicator.
■ Increase in a country's productive capacity, as measured by comparing gross national
product (GNP) in a year with the GNP in the previous year.
■ Increase in the capital stock, advances in technology, and improvement in the quality
and level of literacy are considered to be the principal causes of economic growth. In
recent years, the idea of sustainable development has brought in additional factors such
as environmentally sound processes that must be taken into account in growing an
economy.

■ Read more: http://www.businessdictionary.com/definition/economic-growth.html

■ KEY TAKEAWAYS
■ Economic growth is an increase in the production of goods and
services in an economy.
■ Increases in capital goods, labor force, technology, and human
capital can all contribute to economic growth.
■ Economic growth is commonly measured in terms of the
increase in aggregated market value of additional goods and
services produced, using estimates such as GDP.
■ How to Measure Economic Growth
■ Gross domestic product is the best way to measure economic growth. It takes into
account the country's entire economic output. It includes all goods and services that
businesses in the country produce for sale. It doesn't matter whether they are sold
domestically or overseas.
■ GDP measures final production. It doesn't include the parts that are manufactured to
make a product. It includes exports because they are produced in the country. Imports
are subtracted from economic growth.
■ Most countries measure economic growth each quarter.
■ The most accurate measurement of growth is real GDP. It removes the effects of
inflation. The GDP growth rate uses real GDP.
■ The World Bank uses gross national income instead of GDP to measure growth. It
includes income sent back by citizens who are working overseas. It's a critical source of
income for many emerging market countries like Mexico. Comparisons of GDP by
country will understate the size of these countries' economies.
■ GDP doesn't include unpaid services. It leaves out child care, unpaid volunteer work, or illegal
black-market activities. It doesn't count the environmental costs. For example, the price of plastic is
cheap because it doesn't include the cost of disposal. As a result, GDP doesn't measure how these
costs impact the well-being of society. A country will improve its standard of living when it factors
in environmental costs. A society only measures what it values.

■ Similarly, societies only value what they measure. For example, Nordic countries rank high in the
World Economic Forum's Global Competitiveness Report. Their budgets focus on the drivers of
economic growth. These are world-class education, social programs, and a high standard of living.
These factors create a skilled and motivated workforce.

■ These countries have a high tax rate. But they use the revenues to invest in the long-term building
blocks of economic growth. Riane Eisler's book, “The Real Wealth of Nations,” proposes changes
to the U.S. economic system by giving value to activities at the individual, societal, and
environmental levels.

■ This economic policy contrasts with that of the United States. It uses debt to finance short-term
growth through boosting consumer and military spending. That's because these activities do show
up in GDP.
Increase Welfare and Human
Development
Human development grew out of global discussions on the links between economic growth and development
during the second half of the 20th Century. By the early 1960s there were increasingly loud calls to
“dethrone” GDP: economic growth had emerged as both a leading objective, and indicator, of national
progress in many countries i, even though GDP was never intended to be used as a measure of wellbeing ii.
In the 1970s and 80s development debate considered using alternative focuses to go beyond GDP, including
putting greater emphasis on employment, followed by redistribution with growth, and then whether people
had their basic needs met.

These ideas helped pave the way for the human development approach, which is about expanding the
richness of human life, rather than simply the richness of the economy in which human beings live. It is an
approach that is focused on creating fair opportunities and choices for all people. So how do these ideas
come together in the human development approach?
■ People: the human development approach focuses on improving the lives people lead rather
than assuming that economic growth will lead, automatically, to greater opportunities for
all. Income growth is an important means to development, rather than an end in itself.
■ Opportunities: human development is about giving people more freedom and opportunities
to live lives they value. In effect this means developing people’s abilities and giving them a
chance to use them. For example, educating a girl would build her skills, but it is of little
use if she is denied access to jobs, or does not have the skills for the local labour market.
The diagram below looks at aspects of human development that are foundational (that is
they are a fundamental part of human development); and aspects that are more contextual
(that is they help to create the conditions that allow people to flourish). Three foundations
for human development are to live a healthy and creative life, to be knowledgeable, and to
have access to resources needed for a decent standard of living. Many other aspects are
important too, especially in helping to create the right conditions for human development,
such as environmental sustainability or equality between men and women.
■ Once the basics of human development are achieved, they open up opportunities for progress in
other aspects of life.
■ Choices: human development is, fundamentally, about more choice. It is about providing people
with opportunities, not insisting that they make use of them. No one can guarantee human
happiness, and the choices people make are their own concern. The process of development –
human development - should at least create an environment for people, individually and
collectively, to develop to their full potential and to have a reasonable chance of leading
productive and creative lives that they value.
■ The human development approach, developed by the economist Mahbub Ul Haq, is anchored in
Amartya Sen’s work on human capabilities, often framed in terms of whether people are able to
“be” and “do” desirable things in life iii. Examples include
■ Beings: well fed, sheltered, healthy
■ Doings: work, education, voting, participating in community life.
■ Freedom of choice is central: someone choosing to be hungry (during a religious fast say) is
quite different to someone who is hungry because they cannot afford to buy food.
■ As the international community seeks to define a new development agenda post-2015, the
human development approach remains useful to articulating the objectives of development and
improving people’s well-being by ensuring an equitable, sustainable and stable planet.
Modernization

■ the transformation from a traditional, rural, agrarian society to a secular, urban,

industrial society
■ Modernization encompasses urbanization, the application of science and technology,
rapidly increasing occupational specialization, rising bureaucratization and rising
educational levels, but the core of the process is industrialization, which makes it
possible to escape the poverty and helplessness of subsistence agriculture. By
industrializing, a society could dispel hunger, acquire the new technology now needed
to compete militarily, and attain a much longer life expectancy than was possible in pre-
industrial society. Adopting this goal becomes compellingly attractive from the
perspective of low-income societies, once it has been demonstrated that it can be done.
Today, almost every society on Earth is at some stage of the industrialization process. In
advanced industrial (or ‘postmodern’) societies, the prestige of rationality, science and
technology is declining. Postindustrial values give a higher priority to self-expression
than to economic effectiveness: people are becoming less willing to accept the human
costs of bureaucracy and of rigid social norms. Postmodern society is characterized by
the decline of hierarchical institutions, and by the expansion of the realm of individual
choice and mass participation. Moreover, the emergence of postindustrial society favors
democratic institutions, partly because these societies require highly educated and
innovative workers, who become accustomed to thinking for themselves in daily job
life.
■ Modern society is industrial society. To modernize a society is, first of all, to industrialize it.
Historically, the rise of modern society has been inextricably linked with the emergence of
industrial society. All the features that are associated with modernity can be shown to be related to
the set of changes that, no more than two centuries ago, brought into being the industrial type of
society. This suggests that the terms industrialism and industrial society imply far more than the
economic and technological components that make up their core. Industrialism is a way of life
that encompasses profound economic, social, political, and cultural changes. It is by undergoing
the comprehensive transformation of industrialization that societies become modern.

■ Modernization is a continuous and open-ended process. Historically, the span of time over which
it has occurred must be measured in centuries, although there are examples of accelerated
modernization. In either case, modernization is not a once-and-for-all-time achievement. There
seems to be a dynamic principle built into the very fabric of modern societies that does not allow
them to settle, or to achieve equilibrium. Their development is always irregular and uneven.
Whatever the level of development, there are always “backward” regions and “peripheral” groups.
This is a persistent source of strain and conflict in modern societies. Such a condition is not
confined to the internal development of individual states. It can be seen on a global scale, as
modernization extends outward from its original Western base to take in the whole world. The
existence of unevenly and unequally developed nations introduces a fundamental element of
instability into the world system of states.
Elimination of Dependency

■ A common term used in the news and social media today is the 'developing world'. This
term is used to indicate countries that are less economically developed than the United
States or European nations. The term is an odd one, isn't it? It suggests that there is a
process that leads to economic development, and the expectation is that eventually all
countries will become industrialized. A number of sociologists and economists,
however, believe that this is not the case, and instead they developed dependency
theory. Nevertheless, due to some of the major objections to dependency theory, it has
fallen out of favor among today's sociologists and economists. Still, elements of
dependency theory exist today, and it may prove useful in an understanding of current
social trends.
■ Dependency theory is a sociological theory which holds that economic events in history
have encouraged developing countries to depend upon the support of more advanced
nations. This dependence prevents developing nations from fully creating institutions and
infrastructure necessary for their full transition into industrial nations. This process can take
many forms for the developing country. However, it might be better to talk about
dependency theories, as there are a variety of different theories with similar themes.

■ In a historical sense, dependency theory looks at the unequal power relations that have
developed as a result of colonialism. In the colonial period, newly industrialized colonial
nations expanded into areas that were unclaimed by other colonial powers. The result was
that the natural resources of less-developed nations were used to fuel the colonial nations'
factories. The methods used by imperial powers often involved direct military and political
control.

■ Colonialism collapsed after the Second World War, but its legacy continued in the form of
neocolonialism. International finance and capitalism became the preferred methods of
control over developing nations. As a result, many underdeveloped countries now owe
developed nations a significant amount of money and cannot shake that debt. Others suffer
from a reliance on importing finished goods and exporting natural resources.
Development as History