Economic development is a fairly new concept that came about during the early twentieth century. Some theorists have argued that Karl Marx introduced this concept as early as 1887. In his book “Capital”, Karl Marx mentioned that development is a process through which societies move and change.
During the last century, several theorists attempted to define economic development and to differentiate it from the concept of economic growth. In my analysis of these two concepts, I will examine the perspectives of two development economists, Gerald Meier and Dudley Seers. I will summarize both economists’ views on economic development and economic growth and determine how these two concepts differ from each other.
Meier’s definition of economic development is as follows: “Economic development is the process whereby the real per capita income of a country increasse over a long period of time – subject to the stipulations that the number of people below an ‘absolute poverty line’ does not increase, and that the distribution of income does not become more unequal.”
Meier speaks of economic development as a process. As mentioned earlier, in the late 19th century Karl Marx described development as a ‘process’. In economics, we normally think of economic processes involving factors both internal and external to the economic system. External forces refer to factors such as international prices, production and demand. While internal forces include domestic production and domestic economic policy.
Meier views development as inherently dynamic, involving not a few, but many different forces acting together to bring about a certain result.
In his definition of economic development, Meier looked at real per capita income. He theorised that in order for economic development to take place there would have to be a decrease in absolute poverty and in the inequality of income distribution. He also noted that economic development takes place over a long period of time, and cannot be measured using the short-term ups and downs of normal economic activity.
While Meier recognized economic development to be a dynamic process, he also recognized the importance of economic growth. Meier suggested that economic progress narrowly refers to increases in income and that economic progress is equivalent to economic growth.
While economic growth focuses on increases in income, Meier argued that economic development is a multidimensional concept. In order for economic development to be achieved there must a reduction in poverty and income inequality, the setting of a maximum level of unemployment that the society can tolerate, economic and regional diversification, increased life expectancy, reduced infant mortality, and improvements in basic literacy.
Unlike Meier, Dudley Seers in his writings, contends that the use of national income or per capita income as a measurement of economic development is inadequate and questionable.
Seers outlined three primary indicators of development. Firstly, he argues that an adequate income is necessary in order to ensure persons’ needs for food are met. Secondly, the provision of jobs which, in his views, promotes individual independence and self respect. Finally for Seers, inequality must be addressed if development is to take place.
Seers also identified other goals of development such as adequate education and literacy levels, good health, and social freedoms. Seers’ definition of economic development is basically the reduction of unemployment, poverty and income inequality. For Seers, Economic growth can be taken as an indicator, not of actual development, but of development potential. Economic growth is therefore a subset of economic development. Seers felt that even if per capita income doubled, that is, there is economic growth, it would be strange to call the result ‘development’ as issues such as poverty, unemployment and income inequality would not have been addressed. Seers acknowledged the convenience of using national income as indicators and said that economists have been reluctant to search for alternative indicators given the fact that the measure is quantifiable and appropriate for use in empirical analysis and model building.
Gerald Meier and Dudley Seers, recognised the importance to development of an increase in national income. They also recognised that there are several criteria against which true development is to be measured. These criteria include social and economic factors. They both agreed that economic development is a more complex and dynamic process than economic growth.
Both writers stressed that economic development cannot be equated with economic growth. They find it useful to know what is happening to income. For Seers, income is linked to poverty reduction and ultimately adequate provision of food, while for Meiers, per capita income has primary significance. Both writers however, included a long list of other objectives, economic and social, against whose achievement economic development is to be measured.
The following table is used to illustrate some of the factors used to determine economic development and economic growth. Some Indicators of Economic Development Indicators of Economic Growth:
- Gross Domestic Produc;
- National Income;
- Per capita income § Per capita income;
- Percent below poverty line;
- Employment rate;
- Life expectancy;
- Infant mortality rate;
- Adult literacy rate;
- External debt.
Economic development involves a more complex process than economic growth. According to Meier economic growth remains a key indicator of the achievement of development, in conjunction with certain other stipulated outcomes. While Seers relegates economic growth to a secondary signal of development potential, providing more an indication of what a nations may be able to achieve on the other primary fronts. The concept of economic development therefore differs from, and ultimately has more dimensions than economic growth.
When measuring economic growth we are limited to increases in national income and/or per capita income. While when measuring economic development factors such as gross domestic product, per capita income, poverty, life expectancy, infant mortality, literacy level and external debt are taken into consideration.