Economic growth can be defined as an increase in the real per capital income of an economic. By increase in the real per capital income, we mean economic improvement in real terms per person in the economy. Economic development on other hand focuses the improvement of the standard of living of the citizen and their quality of life.
Differences between Economic Growth and Development
Economic growth focuses on the quantitative improvement of the economic alone. In other words, it looks at the increase in per capital income only. On the other hand, economic development is concerned with both quantitative and qualitative improvements of the economic as you can see highlighted below-
(i) Increase in per capital output (qualitative)
(ii) High level of literacy (qualitative)
(iii) High life expectancy (qualitative)
(iv) High quality of health care (qualitative)
Under Development and Its Characteristic
Underdevelopment is defined as the under utilization of either the human capital or the natural resources of an economy. An underdeveloped economy is often characterized by the followings-
(i) High rate of poverty
(ii) Low level of literacy
(iii) Low quality of health care
(iv) Low level of per-capital income
(v) Wide income of inequalities
(vi) Underutilized man power and natural resources
(vii) High level of corruption
(viii) Dependence on primary goods
(ix) Use of outdated technology
Solutions to Underdevelopment
(I) Encourage investor to invest
(II) Provisions of infrastructure
(III) Provisions of employment opportunity
(IV) Haman capital development
(V) Economic export
(VI) Provisions of business incentives
Further Explanation of Solutions
- Encourage Investment:The government as a matter of utmost importance must encourage both local and foreign investor to invest into the economy .This will lead to job creation and reduce poverty in the country.
- Provisions of infrastructure: infrastructure like good roads, constant electricity most be provided so as to reduce the cost of doing business in the country
- Provision of employment opportunity:Government absorbed some of the unemployment into civil service as civil servant.
- Human capital development:Development of the labour force very key for a country to move from an under developed economy to a developed one .Government must hence education and researcher.
- Provision of business incentive:Business incentive like tax holidays and low interest rate on loans must be given to infant industry (new industry) for them to be able to complete with the stabilized ones.
Strategies for Economic Development
1) Import Substitution: This is when a country encourages the product of imported goods locally. By doing such, firms are spring up; supporting firms are also springing up, both employing labour and by extension reducing poverty. Example of this is the policy of encouraging local production of rice.
2) Export Promotion: this is a situation where government reduces or eliminates barrier that could hinder the export of final goods.
ASSESSMENT (Post the question title and your answer in the box below for discussion and evaluation)
- Which of the following is generally regarded as the true index of economic growth?
(a) An increase in national income at constant prices during a year
(b) A sustained increase in real per capita income
(c) An increase in national income at current prices over time
(d) An increase in national income along with a corresponding increase in population
- The concept of economic growth is:
(a) Identical with the concept of economic development
(b) Narrower than the concept of economic development
(c) Wider as compared to that of economic development
(d) Unrelated to the concept of economic development
- Which of the following is not an indicator of economically underdeveloped countries?
(a) Low per capita income
(b) High death-rate
(c) Low proportion of labour force in the primary sector
(d) High level of illiteracy
- The rate of growth of an economy mainly depends upon:
(a) The rate of growth of the labour force
(b) The proportion of national income saved and invested
(c) The rate of technological improvements
(d) All of the above
- Among the following determinants of growth, which is a non-economic factor?
(a) Natural resources
(b) Population growth
(c) Favourable legislation
(d) Capital accumulation
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