Essay On Economic Development And Economic Growth Enough

Over the years, many countries have shown remarkable growth and registered high economic development. However, social welfare has not improved in most of these countries. It refers to the level of well-being of the population. This depends on several factors such as equal distribution of resources, proper environmental conditions, quality of life, and individual sense of happiness. The rising GDP growth rates depict the rise in the income of the economy which has raised the general standard of living. However the question of attaining higher well-being along with a high-income growth rate remains an issue for discussion. The flowing section shows the critical literature review of possible discrepancies between economic development and happiness

All economies undergo the production of goods and services to sell them at a market price in a given period. It refers to the total value of goods and services that is expressed through income. The total income of the entire economy divided by the total population gives the per capita income which shows the average income of the economy. These measures indicate the growth of the economy in quantitative terms. It refers to the process in which the economic parameters such as personal income, GDP, consumption, investment, and demand go up and low-income countries gradually turn into high-income countries.

 

The concept of Human development gave way to an index that has been designed to include health and educational aspects along with the parameter of income. The health component of the economy is reflected in the life expectancy index at birth. The educational index is the geometric mean of schooling years and expected years of schooling of adults which shows the educational attainment of the economy. Without these two critical components, growth holds very little sense. To attain high GDP, the economy needs to have a healthy workforce with proper education and training services. Weal education and health system will lead to slower economic growth. 

 

Welfare is linked to the concept of happiness and many economists have tried to find out its source. It was evident that a rise in economic growth did not imply a rise in happiness. Suicide levels, depression rates, social evils, and many more have been increasing in rich countries. Human development has been used for the articulation of the capability approach that was developed by economist Amartya Sen. Poverty has been an obstacle in the lives of people to live a good life and has deprived the capability of every individual. Sen’s capability approach emphasizes the quality of life index that is built on the concepts of capability and functioning. The capability refers to the level of effective freedom of a person concerning health, education, and politics. On the other hand, functioning refers to the state of being and having access to health and shelter. Many development researchers relate happiness to personal well-being (Soliyev, & Ganiev, 2021). Apart from health and education, other factors such as unemployment levels, infrastructure, corruption, work-life balance, and individual freedom play an important role in determining the overall well-being of the economy. According to Sen, resources are converted to functioning which is valuable by individuals who may vary differently in terms of their capabilities. The theory focuses on subjective well-being that values happiness as a valuable function.

Prior 1970s the concept of economic development was only given by the measure of gross domestic product or gross national income. It was a quantitative approach as it used numerical figures to measure development. It was assumed that the effects of growth would be distributed among all members of the society with the help of the trickle-down effect. This implied that income would trickle down to the low-earning groups as the rich population would increase their spending. There was an inclination toward industrialization activities reflected in the economic policies and the government ignored the agricultural sectors.

 

In the post-1970s, it was observed that even though counties fared well in GDP, there was an unequal distribution of income and wealth in the society. It leads to inefficient allocation and use of economic resources. Poverty and unemployment became major societal issues in countries with high economic growth. This made economists rethink the definition of development and develop the concept of human development. It laid emphasis on the capability approach that allowed the government to invest in social services. The new definition of economic growth and development was both quantitative and qualitative in nature.

The unequal distribution of income and growth has resulted in major differences in income levels across various regions within a country and also across countries (Kochhar, & Cilluffo, 2018).  It is leading to polarization where the majority of the world’s income is concentrated in the hands of the rich. This type of income distribution showing the share of 20% accruing to rich countries and the bottom 60% living in Sub- Saharan is referred to as the champagne glass phenomenon according to its shape. This rising inequality has been taken into account in the measure of inequality-adjusted HDI where each element is adjusted for the unequal distribution. The presence of unequal distribution adversely affects growth (Bilan et al., 2020). South Korea has been able to register high growth rates and showed a steep rise compared to countries like Brazil and Mexico. The real GDP of a country shows the growth adjusted for the rate of inflation and hence accounts for growth in real terms. It is always preferred over nominal GDP in analyzing the true performance of the economy.

Social factors are largely responsible for the source of happiness that helps in the whole development process. Studies have shown that there is a strong link between unemployment, education, and a health system with economic development. The success of most economies comes from the combined GDP growth rates and eradication of poverty, malnutrition, income disparity, illiteracy and gender discrepancies. Inclusive growth strategies that target both social dimensions along with economic dimensions. Sen’s capability approach holds meaning across different economies and political scenarios. The economic activities have seldom resulted in equal distribution of wealth and income and the trickledown effect has not worked. Skewed growth has always widened the gap between the income levels and caused socio-economic disparity leading to a fall in the well-being of the economy.

Bilan, Y., Mishchuk, H., Samoliuk, N. and Yurchyk, H., 2020. Impact of income distribution on social and economic well-being of the state. Sustainability, 12(1), p.429.

 

ECON1157-Economics of International Development Lecture 1 – Development in a historical perspective

 

Kochhar, R. and Cilluffo, A., 2018. Income inequality in the US is rising most rapidly among Asians. Pew Research Center, 12.

 

OECD Development, 2019 Perspectives on Global Development Rethinking Development Strategies

 

Soliyev, I.I. and Ganiev, B.B., 2021. Key Factors Influencing Economic Development. European Journal of Research Development and Sustainability, 2(3), pp.12-16.

 

Todaro, M.P. and Smith, S.C., 2020. Economic development. Pearson UK. London