Definition
Economic development
The process of increasing real per capita income while improving living standards and reducing poverty within an economy as whole.
Economic growth vs economic development
- In the mind 20th century, economic growth and economic development were used synonymously. This is because it was believed that the well-being and standards of living would grow as the economy grows.
- This view however started to change in the late 20th century, as it was noticed that even though the countries were experiencing economic growth, the poverty was still not going down and in some countries was even increasing.
- As a result the economists developed a multiple dimensions to look at economic development through them. Some of those dimensions include:
- Improvements in standard of living.
- Reduction in poverty.
- Increased access to goods and services.
- Reduction in gender inequality.
- Reduction in unemployment.
- Reductions in other inequalities.
In IB exams, explaining the main different between economic growth and economic development is very often required. Remember this golden sentence:
Economic growth refers to increases in real output over time, whereas economic development refers to a process that leads to improved living standards for a population as a whole. Increasing levels of output through economic growth does not, by itself, guarantee econovic development.
