MOI UNIVERSITY

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT SCIENCES

PROGRAMME: B.Sc. IN HUMAN RESOURCE MANAGEMENT

NAME: JOHN POWELL MILIMU

REG No. BHR/1837/21

COURSE CODE: HRD 103

COURSE TITLE: DEVELOPMENT CONCEPTS AND ITS APPLICATIONS

PRESENTED TO: DR. MOSES BERU-LECTURER

TASK: CAT ONE

DATE DUE: MARCH 1st, 2021

STUDENT SIGN. johnpowellmilimu

Economic growth is a necessary condition but not sufficient for economic

development. Discuss the assertion/the truthfulness of these statement and
explain the key differences between the two concepts.

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Economic growth is an increase in the production of economic goods and services,
compared from one period of time to another or an increase in national output and
national income. It can be measured in nominal or real (adjusted for inflation)
terms. Traditionally, aggregate economic growth is measured in terms of gross
national product (GNP) or gross domestic product (GDP). Economic growth is caused
by an increase in aggregate demand and an increase in aggregate supply.

Economic development is the creation of wealth from which community benefits are
realized also it’s the process focusing on both qualitative and quantitative growth of
an economy. Its more than a jobs program, it’s an investment in growing your
economy and enhancing the prosperity and standards of living/quality of life for all
residents. Caused by anything a community does to foster and create a healthy
economy. Economic development can be enhanced by business retention and
expansion-enhancing existing business, business expansion- attracting new
business and business creation-encouraging the growth of new businesses.

What is economic development, compared to economic growth/key differences

between the two concepts?

Okurut and Richardson maintain that Economic development to a larger extent is

concerned with third world countries and considers the problems that have
hindered these countries in their attempts to break out of their underdevelopment.
These problems are not only economic but include political, social, cultural,
environmental and technology dimensions too. On the other hand, economic growth
to a larger extent is associated with developed countries, when modernization have
taken place and therefore the main problem is how to raise the national output and
income in the long run.

Prof. Charles Kindleberger in distinguishing the two says that economic growth
means more output, while economic development implies both more. output &
changes in technical and institutional arrangement by which it is produced.
Economic development is also the creation of wealth from which community
benefits are realized also it’s the process focusing on both qualitative and
quantitative growth of an economy improvement in the quality of life and living
standards compared to economic growth that is the increase in real national
income/national output and is caused by an increase in aggregate demand and an
increase in aggregate supply.

Development is much broader than economic growth. Economic growth focuses on

short-run changes. It considers such factors as Gross Domestic Products (GDP), per
capita, Investment per capita, and household consumption per capita.
Development considers the whole question of human welfare. Essentially it is
concerned with the problems that have hindered the Third World countries in their
attempts to break away from underdeveloped state. These problems are not only
economic conditions. Thus, during the 1970s development came to be redefined in
terms of the reduction or elimination of poverty, inequality and unemployment
within the context of a growing economy.

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Economic development is considered as a long-term process and a
multidimensional phenomenon because it focusses on the income of the people and
on the improvement of the country whereas economic growth is considered short
term and a single dimensional in nature as it only focusses on the people of the
country.

Economic development in campuses both qualitative and quantitative terms: HDI

(Human Development Index), gender-related index, human poverty index, infant
mortality, literacy rate etc., whereas economic growth deals with the quantitative
terms: increases in real GDP. Economic development is also related to
underdevelopment and developing countries of the world whereas economic growth
is related to developed countries of the world. (related to)

Economic development has both quantitative and qualitative impact on the

economy. Improvement in life expect expectancy rate, infant, literacy rate, poverty
rates and mortality rate. Whereas economic growth brings a quantitative impact on
the economy. Increase in the indicators like per capita income and GDP, etc.

Economic development is a continuous process i.e., certain forces which brings

continuous change in the ecosystem and these forces include changes in basic
factor supplies, changes in the structure of demand for products and real national
income, whereas economic growth is within a certain period.

The concept of development concerns itself with human beings in totality. It looks at
the overall outlook of the welfare of a country’s citizens. It takes into account the
social, cultural and psychological aspects of human beings. It typically involves
radical changes in institutional, cultural, social and administrative structures as well
as popular values, altitudes customs, beliefs and morals.

How is economic growth necessary for development yet not sufficient for economic
development since Economic growth is basically defined as an increase of wealth of
a nation over time.?

Military spending due to instability. A country may increase GDP by spending more
on military goods. However, if this is at the expense of healthcare and education it
can lead to lower living standards. Instability very much affects human development
prospects. Peace, good regulations, investment climate contribute to development.
Conversely, a reduction in income levels of the majority and inflation are factors
that may potentially lead to instability. Generally, government’s behavior can either
be a stabilizing or destabilizing factor. Public discontent can also lead to instability,
which instead poses dire consequences for both economic growth and development.

Also producing toxic chemicals will lead to an increase in real GDP. However,
without proper regulation, it can also lead to environmental and health problems.
This is an example of where growth leads to a decline in living standards for many.
Also the environmental sustainability of development that economic growth ushers.
All too often we have had new investors erecting factories in wetlands or destroying

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forest to plant sugarcane, much to detriment of our environmental. According to
‘Our Common Future’ (1987) definition of sustainable development, clearly, this
kind of development may meet the needs of the present by creating jobs, but the
associated impact such as climate change, soil erosion and global warming also
compromises the needs of the future generations.

Congestion, production and corruption. Economic growth can cause an increase in

congestion. This means people will spend longer in traffic jams. GDP may increase
but they have lower living standards because they spend more in traffic jams. If a
state-owned industry increases output, this is reflected in an increase in GDP.
However, if the output is not utilized by anyone then it causes no actual increases in
living standards. a country may see higher GDP, but the benefits of growth may be
syphoned into the bank accounts of politicians.

Economic growth may benefit a small percentage of the population. For example, if
a country produces more oil, it’ll see an increase in GDP. However, it’s possible, that
this oil is only owned by one firm, and therefore, the average worker doesn’t really
benefit. As a country with high fertility rate, the rapidly growing population means
available resources, including social services becomes insufficient compared to the
swelling population. The associated problems like hunger, traffic congestion
undermines the standards of living of citizens, more so for the poor. The population
increase is not just a statistical figure, they represent more mouths to feed, more
bills to pay etc. To the government, this necessitates building new schools and
hospitals or expanding existing ones to cater for the population increase.

Development meanwhile can be described as a social condition within a nation in

which the authentic needs of its population are satisfied by the rational and
sustainable use of natural resources and systems. Economic growth and
development are closely intertwined. In fact, economic growth is but a step in the
direction towards development – one of prime significance, indeed a precondition to
it, but by no means can it be conceptualized as development itself. For a country to
be generally recognized as a developed one, it also needs to be able to provide its
citizens with as fair as it is possible a distribution of basic resources and social
amenities, such as healthcare and education.

The Gross National Product (GDP) is the primary indicator for measuring economic
growth. GDP represents the total value-added in production of goods and services in
a year, while GDP per-capita is the economy-wide average. The major draw-back is
that GDP leaves out/does not deduct figures associated with environmental
consumption/damage, the informal sector and other social costs of economic
growth. Linking this to development, it is noteworthy that neither income nor
expenditure measures the wellbeing people obtain from goods and services. Thus,
GDP, a purely economic indicator, falls short of providing a true picture of a
country’s development or lack of it.

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The concept of development spans far and beyond the realms of economic
wellbeing of individuals. For instance, politics, human rights, education and cultural
conditions are all social variables that influence development. Thus, based largely
on the comparison between GDP and the Human Development Index (HDI), it is
argued that growth and development, though interrelated, are actually two different
phenomena.

With the widening gap between the rich and the poor, available facts indicate that,
regrettably, development in Uganda cannot be an inevitable and automatic
consequence of economic growth. For instance, in any typical agrarian economy, as
industrialists make more money and acquire more means of production such as
land, the livelihood of farmers who previously depended on that land for agriculture
is likely be affected. As the net worth of capitalists like Sudhir Ruparelia and
Madhvani grows, so does the GDP as well as the GDP per capita – yet the GDP
growth may be attributed to just a handful of the rich.

It can therefore be deduced that economic growth improves the situation of those
who have been relatively well-off anyway, while it does not help, if not adversely
affects, the poorest and the most vulnerable members of the community. As for the
majority of the population, more often than not, even the little they have may be
taken away and are left impoverished – an obvious step backwards into
underdevelopment rather than one towards development. Uneven distribution of
benefits of such growth among the country’s citizens implies growth does not
directly translate into development.

The issue of how the market perceives risk is a major stumbling block to furthering
development, even where there is economic growth (Busharizi 2012). The market is
unlikely to invest in the social services, which investments have a long repayment
period and are therefore riskier in the eye of private capital. For instance, the
market may not be able to discern a potential return in setting up a borehole in a
village or providing education free of charge or providing free mosquito nets to a
community. But it is these social services that give more people a chance to climb
up the social ladder by being more productive persons.

Economic growth for a developing country like Uganda often falls short of
translating into development owing to the crooked nature of prioritization. For
instance, instead of being earmarked for education and healthcare, there is
enormous evidence pointing to the fact that an increase in budgetary revenue has
all too often been spent on arms or spent on administrative costs.

In Uganda’s case, governance (leadership, public engagement and participation) is

another crucial factor that has jeopardized the prospect of economic growth ever
equaling to development. This is precisely so because poor governance is
synonymous with fiscal indiscipline, poor prioritization and worse still that endemic
cancer- aggravated corruption. Uganda’s revenue envelope has been increasing
over the years thanks to economic growth, offering government the economic

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leverage to increase budgetary allocations to line ministries for infrastructure
development and social welfare services. The budgetary allocations however,
amount to nothing if the same monies are swindled with impunity as has repeatedly
been the case. Thus, the increased revenues notwithstanding, the precarious
situation of the service delivery stagnates at its usual pathetic shape. Indeed, the
actual income of a country is of relatively lesser importance when compared to the
way in which this relative wealth translates into the quality of services the state
renders to its citizens.

In the words of Seabrook (1993) “All over the world, more and more people are
being disadvantaged by a version of development which, even if it creates wealth,
leaves them with a sense of loss and impoverishment”. Uganda is no exception to
this conceptualization. In fact, already the pinch is being felt in form of floods
destroying life and property for residents of Kampala suburbs such as Bwaise and
other areas where drainage channels have been blocked as a result of the so called
“development” i.e., constructing shopping malls and factories on wetlands without
planning for alternative drainage channels.

How is economic growth necessary?

Higher average incomes and lower unemployment: economic growth enables

consumers to consume more goods and services and enjoy better standards of
living. Economic growth during the twentieth century was a major factor in reducing
absolute levels of poverty and enabling a rise in life expectancy. With higher output
and positive economic growth, firms tend to employ more workers creating more
employment.

Lower government borrowing and improved public services: economic growth

creates higher tax revenues, and there is less need to spend money on benefits
such as unemployment benefit. Therefore, economic growth helps to reduce
government borrowing. Economic growth also plays a role in reducing debt to GDP
ratios. Higher economic growth leads to higher tax revenues and this enables the
government to spend more on public services, such as health care and education
etc., this can enable higher living standards such as increased life expectancy,
higher rates of literacy and a greater understanding of civic and political issues.

Increased investment and money can be spent on protecting the environment: with
higher economic growth a society can devote more resources to promoting
recycling and the use of renewable resources. Economic growth encourages firms to
invest, in order to meet future demand. Higher investment increasing the scope for
future economic growth- creating a virtuous cycle of economic growth/investment.

Increased research and economic development: high economic growth leads to

increased profitability for firms, enabling more spending on research and
development. Also, sustained economic growth increases confidence and
encourages firms to take risks and innovate. The biggest factor for promoting

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economic development is sustained economic growth. Economic growth in south-
east Asia over the past few decades has played a major role in reducing absolute
levels of poverty -increasing life expectancy.

More choice: in less developed economies, a large proportion of the population work
in agriculture/subsistence farming, economic growth enables a more diverse
economy with people able to work in service sector, manufacturing and having a
greater choice of lifestyles.

Lifts per capita incomes and raises people out of extreme poverty: how quickly
Economic growth reduces poverty depends both on the initial income distribution
and how it evolves over time. In societies with more unequal distributions the same
growth rate makes far less of a dent in poverty.

Conclusion

After examining the above information, we can say that economic growth is a
subset of economic growth. Economic development is a bigger concept than
economic growth. Economic development uses various indicators to measure the
progress in an economy as a whole, however, economic growth uses only specific
indicators like the gross domestic product, individual income, etc. for the
calculation. Economic growth is often contrasted with economic development.
Economic growth is essential but not the only condition for economic development.
As studies on “Growth without Development” and “Development without growth”
suggests, growth alone is itself not sufficient, which is why despite its comparatively
poor economic performance, Bangladesh has made relatively greater progress in
terms of its social development than Pakistan.

Reference Materials

1. Busharizi, Paul (2012) The Role of Private Sector in Development. The Guide.
Published by ACTADE and Konrad Adenauer Stifftung, Uganda Office.

2. Seabrook, Jeremy (1993) Victims of Development. Resistance and Alternatives.

London, New York: Verso.

3. Storey, Andy (2003) “Measuring Development”, in McCann, Gerard and Stephen

McCloskey (eds.) (2003) From the Local to the Global. Key Issues in Development
Studies. London, Starling: Pluto Press.

4. Todaro, Michael P., Stephen C. Smith (2006) Economic Development. Harlow:

Pearson Education Limited.

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