Development is both ‘a cause and a consequence of change. There is a two-way relationship between them, i.e., development influences, and is influenced by, a change. The change implies a physical, technological, Social, Cultural, attitudinal, organizational, or political changes. Whereas all manifestations of development can be traced to some change somewhere, sometimes not all changes lead to development; a change may be either for the better (development), or the worse (retrogression). A change may occur naturally or autonomously, or may be induced. A development manager may accelerate the pace of development by both inducing a desirable change in a given system, and by properly directing the autonomous change.
While economic growth is an essential component of development, it is not the only one, as development is not a purely economic ph it must encompass more than the material and financial sides of people’s lives. Development should, therefore, be perceived as multidimensional process, involving the reorganization and reorientation of both economic and social systems- In addition to improvements in the level and distribution of incomes and output; it involves radical changes in institutional, social and administrative struc-tures. Finally, although development is usually defined in a national context, its widespread realization may necessitate fundamental mod¬ifications of the international economic, social and political systems as well. The terms economic growth and economic development are used interchangeably in economics or development economics literature. Here forth, in the proceeding paragraphs these terms are used interchangeably to mean the same concept.
Definition of Economic Growth or economic development
A positive change in the level of production of goods and services by a country over a certain period of time. Nominal growth is defined as economic growth including inflation, while real growth is nominal growth minus inflation. Economic growth is usually brought about by technological innovation and positive external forces. An Economic growth rate is Annual rate at which a country’s or an industry’s income increases. When this rate is adjusted for the effects of inflation, it is termed real economic growth. Two consecutive quarters of falling growth rates mean a recession, and a similar period of rising growth rate indicates an expanding economy.
It is a well recognized fact that any development efforts must start with the people potential and proceed to their enhancement and growth, that is development is equated with human development-defined as enlarging people’s choices in a way which enables them to lead longer, healthier and fuller lives. Clearly, there exists a strong connection between economic growth (EG) and human development (HD). These theoretical and especially empirical links between HD and EG become stronger particularly when HD of a country is defined in its narrow sense as consisting of the health and education of its people. On the one hand, EG provides the resources to permit sustained improvements in HD. On the other, improvements in the quality of the labor force are an important contributor to EG. HD is viewed as the central objective of human activity and economic growth as potentially a very important instrument for advancing HD. At the same time, achievements in HD themselves can make a critical contribution to economic growth. There are thus two distinct causal chains to be examined: one runs from EG to HD, as the resources from national income are allocated to activities contributing to HD; the other runs from HD to EG, indicating how, in addition to being an end in itself, HD helps increase national income.
GNP contributes to HD mainly through household and government activity; civil society, e.g., through community organizations and other nongovernmental organizations (NGOs), also plays a role. The same level of GNP can lead to very different performance on HD according to the allocation of GNP among and within these institutions and variations in their behavior. On the other hand, contribution from HD to EG, ample evidence suggests that as people become healthier, better nourished and educated they contribute more to economic growth, although some important dimensions of HD, such as making the lives of the terminally ill tolerable, do not directly lead to enhanced productivity. Higher levels of HD, in addition to being an end in themselves, affect the economy through enhancing people’s capabilities and consequently their creativity and productivity. Clearly, the health and education of a population are among the main determinants of the composition and growth of output and exports, and constitute an important ingredient in a system’s capacity to borrow foreign technology effectively. Specifically, (i) health, primary and secondary education and nutrition raise the productivity of workers, rural and urban; (ii) secondary education, including vocational, facilitates the acquisition of skills and managerial capacity; (iii) tertiary education supports the development of basic science, the appropriate selection of technology imports and the domestic adaptation and development of technologies; (iv) secondary and tertiary education also represent critical elements in the development of key institutions, of government, the law, the financial system, among others, all essential for economic growth.
Measuring Economic Growth
For most economists and policy-makers, development has usually been seen as equivalent to growth in economic activity. A basic measure of economic activity is Domestic Product (GDP) -the total output of goods and services in an economy measured at market prices. It is important to note that this measurement should, ideally, only include the final output produced and not intermediate production. For example, if a factory produces screws that subsequently contribute to the value of a car also produced in the same country, then only the final value of the car should be included in GDP – to count the value of the screws separately would be to double-count. GDP, essentially, measures the total productive capacity (in use) of an economy.
An economic development (GDP and GNP) per capita is measured by the gross or total national product divided by a country’s population to give an average figure for a country’s level of economic development. At a micro level the impacts of economic growth can be measured in terms of jobs, business sales or personal income. Economic growth can be viewed as bringing more business sales, more jobs, more personal income and more population growth to the state. Such economic growth is publicly perceived as desirable insofar as it leads to greater employment opportunities, greater variety of shopping merchandise and cultural activity, higher income levels, a more vibrant atmosphere for private business investment and greater public resources for investment in local infrastructure.
However, in the conventional economic growth measurements complex societal problems were reduced to only technical and economic problems. Despite positive change in economic growth in many countries, the condition of majority of the poor worsened. Growth led to little job creation, increased poverty, and ultimately to increased dualism (polarization of society in to ‘modern’ and ‘traditional’ sector). In the 1970s dissatisfaction with the output approach to development began to grow. Dadely seer (among others) argued that the output theory was too simplistic and that economic growth would not associate with ‘development’ unless trends were positive in three other indicators. He argued that it was important to ask not only what was happening, to production but also, what was happening to poverty, unemployment and inequality. Seers (1969; 3) succinctly tackled the basic question of the meaning of development when he wrote: the questions to ask about a country’s development are therefore; what has been happening to poverty? What has been happening to unemployment? What has been happening to inequality? If all three of these have declined from high levels, then, beyond doubt, this has been a period of development of the country concerned. If one or (two of these central problems have been growing worse, especially if all three have, it would be strange to call the result ‘development’ even if per capita income doubled. HDI human development index (multiple criteria in addition to economic: encapsulates the concepts of development as a process of enlarging people’s choices, allowing them to live longer, to acquire knowledge etc. thus, the narrow focus from economic growth and transformation is widened to embrace a variety of other (economic and non economic) factors.
Core Values and Objectives of Development
There are at least three basic components or core values that used as a conceptual basis and practical guideline for understanding the inner meaning of development. These core values are sustenance, self-esteem, and freedom that represent common goals sought by all individuals and societies. They relate to fundamental human needs that find their expression in almost all societies and cultures at all times. Let us therefore examine each in turn.
Sustenance: The Ability to Meet Basic Needs
All people have certain basic needs without which life would be impossible. These life-sustaining basic human needs include food, shelter, health, and protection. When any of these is absent or in critically short supply, a condition of “absolute underdevelopment” exists. A basic function of all economic activity, therefore, is to provide as many people as possible with the means of overcoming the helplessness and misery arising from a lack of food, shelter, health, and protection. To this extent, we may claim that economic development is a necessary condition for the improvement in the quality of life that is development. Without sustained and continuous economic progress at the individual as well as the societal level, the realization of the human potential would not be possible. One clearly has to “have enough in order to be more. Rising per capita incomes, the elimination of absolute poverty, greater employment opportunities, and lessening income inequalities therefore constitute the necessary but not the sufficient conditions for development.
Self-esteem: To Be a Person
A second universal component of the good life is self-esteem-a sense of worth and self-respect, of not being used as a tool by others for their own ends. All peoples and societies seek some basic form of self-esteem, although they may call it authenticity, identity, dignity, respect, honor, or recognition. The nature and form of this self-esteem may vary from society to society and from culture to culture. However, with the proliferation of the “modernizing values” of developed nations, many societies in Third World countries that have had a profound sense of their own worth suffer from serious cultural confusion when they met economically and technologically advanced societies. This is because national prosperity has become an almost universal measure of worth. Due to the significance attached to material values in developed nations, worthiness and esteem are nowadays increasingly conferred only on countries that possess economic wealth and technological power-those that have “developed.
Freedom from Servitude: To Be Able to Choose
A third and final universal value that we suggest should constitute the meaning of development is the concept of human freedom. Freedom here is to be understood in the sense of emancipation from alienating material conditions of life and from social servitude to nature, ignorance, other people, misery, institutions, and dogmatic beliefs. Freedom involves an expanded range of choices for societies and their members together with a minimization of external constraints in the pursuit of some social goal we call development. The advantage of economic growth is not that wealth increases happiness, but that it increases the range of human choice. Wealth can enable people to gain greater control over nature and the physical environment (e.g., through the production of food, clothing, and shelter) than they would have if they remained poor. It also gives them the freedom to choose greater leisure, to have more goods and services, or to deny the importance of these material wants and live a life of spiritual contemplation. The concept of human freedom should also encompass various components of political freedom including, but not limited to, personal security, the rule of law, freedom of expression, political participation, and equality of opportunity.
- To increase the availability and widen the distribution of basic life-sustaining goods such as food, shelter, health, and protection
- To raise levels of living including, in addition to higher incomes, the provision of more jobs, better education, and greater attention to cultural and humanistic values, all of which will serve not only to enhance material well-being but also to generate greater individual and national self-esteem.
- 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.