Growth and development are more often than not equated with each other. As a matter of fact, growth can not be interpreted as development or vice versa by any stretch of imagination. An attempt to draw an analogy between the two will be tantamount to oversimplification.
Whereas economic growth typically refers to growth of potential output, i.e., production at full employment, economic development is the sustained, concerted actions of policy makers and communities that promote the standard of living and economic health of a nation. Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percentage of rise in real Gross Domestic Product (GDP). Growth of the ratio of GDP to population is per capita income.
The lower middle income status conferred to Bangladesh by the World Bank is calculated on the basis of economic growth over the years and since quantitative and qualitative changes in the economy have not been taken into consideration, the newly acquired title makes us proud, but offers very little to be complacent. Â
While growth is usually measured in inflation-adjusted terms, to eliminate the distorting effects of inflation on the price of goods produced, efforts are made to restrict inflation to a tolerable limit. Measurement of economic growth uses national income accounting methods. Since economic growth is measured as the annual percentage change of GDP, it has all the advantages and drawbacks of that measure. Such acts can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, social inclusion, health, safety, literacy and other initiatives. Whereas economic development is a policy intervention effort with the objective of achieving economic and social well-being of the people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist Amartya Sen observes, "economic growth is one aspect of the process of economic development."
In addition to increasing private incomes, economic growth also generates additional resources that can be used to improve social services like healthcare, education, community development etc. By generating additional resources for social services, unequal income distribution will be mitigated and social services will be distributed equally across each community to the benefit of each individual. To be concise, the relationship between human development and economic development can be explained in three ways. First, increase in average income leads to improvement in health and nutrition known as capacity building through economic growth. Second, it is believed that social outcomes can only be improved by reducing income poverty known as capacity building through poverty reduction. Lastly, social outcomes can also be improved with essential services such as education, healthcare and clean drinking water known as capacity building through social services. For a nation aspiring to foster economic development and escape the ignominy of the third world, economic growth not only remains a macroeconomic objective, but also the only target to be achieved. Economic development without economic growth is inconceivable and is thus essential for Bangladesh and considering its present growth rate of 6.1 per cent, it can be predicted safely that higher growth rate is not unattainable. Despite protracted political tangles, growth rate is still stationery at 6.1 per cent. Therefore achieving the growth rate of 7.4 per cent as projected in this year's budget in next five years is not going to be easy. Following the several assumptions of the current fiscal and monetary policies, it is possible that growth rate will accelerate, but it can not be accurately predicted that there will be better income distribution. The budget this year emphasises upon lowering of income inequality, which in itself will lead to development, as the standard of living should thus improve.
However, the national income statistics can reflect the current situation of a country to a certain extent. One of the cardinal weaknesses of GDP statistics is that it ignores externalities. Although growth is recorded in GDP statistics, GDP fails to recognise the environmental side effects of growth like, air, water and land pollution, ozone depletion and global warming. The net benefits of industrial production would have been much lower had these negative externalities been taken into consideration.
Although growth is one of the main components of economic development, it can in fact threaten the standard of living in a country as is evident in China. China is the world's fastest growing major economy with an average growth rate of 10.0 per cent over the past thirty years. Despite its remarkable progress in economic and social development and poverty reduction, China still faces challenges to reduce residual poverty. China's inaction on environmental damage has forced children in Shang Hai to stay indoors and wear masks to guard against carbon emissions in the air. Â
We have a striking similarity with China. The state of water bodies, especially the Buriganga river, is no better. Industrialisation in Bangladesh is certainly increasing the rate of economic growth, but only at the cost of threatened economic development.
Unlike growth, economic development is a more qualitative and holistic measure. It not only considers how much money an individual has in his wallet, but goes on to include the freedom of an individual to spend the money. As noted by Amartya Sen, economic development is freedom to choose the kind of life one wishes to live. Assuming that a high rate of economic growth is possible in Bangladesh, can it also be determined that economic development is just as possible. Rapid industrialisation at the cost of pollution cannot favour development. It is only sustainable growth that can be the first step towards development. Development requires better education and health care, it demands empowerment and it is only through the people of the society that a society can be improved.
Economic growth is not economic development itself, rather it is the most important ingredient to help produce it. This is not to say that economic growth should be foregone to achieve development, because that is not possible. For economic development to prosper, an economy has to grow financially. On purely socio-economic grounds, it is simply for the welfare of the people in the country that growth should be targeted in such a way that development does not become a far-fetched goal.
saleh.akram26@gmail.com
Achieving development through growth
Saleh Akram | Published: August 11, 2015 00:00:00 | Updated: November 30, 2024 06:01:00
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