22/05/2012INTRODUCTIONEconomic growth and development of various societies is a focus of importance for various governments across the globe (Mankiw 2010. p. 16). The welfare of people in general, particularly the improvement of the living standards, has been allegedly the focus of various politicians and the mostly promised goal to achieve by their various political undertakings. Over different periods of time say a year, there is always an announcement of economic growth indices for different nations. However, there lacks a clear manifestation of this growth to the members of different societies at different levels.
Specifically, the common public at the grassroots level often fail to even understand the basis of a mention that a particular economy has grown by a particular percentage. The main question of this study then comes in; what do we mean by economic growth and economic development? Is the growth really realizable? What aspect of economic growth and development does a common man look at to seal up the allegation that there is an economic growth and/or development? The most appropriate angle to approach this problem is to first of all internalize the meaning of the terms economic growth and economic development and their interrelationship.
According to Mankiw (2010), economic growth of a particular country is an increase in GDP (Gross Domestic Product) of such a country. This literally means an increase in output of goods and services of a country. This reflects an increase in per capita income in a country. Mankiw (2010) elaborates that this increase is a result of improvements in the quantitative and qualitative aspects of the factors of production that are evident in a particular country including the land, labour, capital and entrepreneurship.
In other words, economic growth is an expansion of a country’s productivity potential. Manifestation of economic growth should be higher living standards and reduction in unemployment (Besley 2006. p. 35). Economic development is a more comprehensive term and is defined as the overall progressive changes in the socio-economic structure of a country. It is mostly marked by decrease in the agricultural portion of the GDP and a simultaneous replacement by industries, trade banks construction and their services (World Bank 2008b.
p. 14). Economic development further refers to occurrence of changes in the institutional and technological organizations of production and the distributive pattern of the income. Some studies argue that the term economic development is highly used in the context of the developing countries while the term economic growth is an issue of importance mostly among the developed world. Economic growth is easier to realize as compared to economic development (Mankiw 2010. p. 34). In general, economic growth index refers to increase or decrease in the output of a country in terms of goods and services while economic development index is the change in the socio-economic aspects of a society as caused by the economic growth (Mankiw 2010.
p. 29). Economic development indicates the importance of economic growth. Understanding the role of economic growth towards achieving of economic development is the core of this study. The question as to whether economic growth can effectively help achieve economic development still remains. The reason for this is that improvement of the living standards of a society calls for more than increase in material wealth for each citizen (Lal 2006.
p. 17; World Bank 2008b. p. 16). This issue is analysed further below.