What is Economic development? – Factors, Concept, and More
Economic development can be define as the capacity of countries or regions’ income to create wealth to maintain the economic and social prosperity or well-being of its inhabitants. Economic development could be the result of qualitative leaps within a financial system facilitated by growth rates that have remained high over time and allowed capital accumulation processes to be maintained. However, qualitative leaps do not occur if there are quantitative accumulations of a single variable since the springs can even be external and depend not only on internal conditions.
The field of study of economic development is called development economics. Public policy generally aims to sustain economic growth and expand the national economy so that “developing countries” become “developed countries.” Economic development supposes legal and institutional adjustments that are complete to provide incentives to encourage innovations and investments to create an efficient production system and a distribution system for goods and services
Economic growth implies an increase in the population’s income as a benchmark for a level of consumption and well-being. The way growth is measure Gross Domestic Product (GDP). However, as Amartya Sen pointed out, “economic growth is one aspect of the process of economic development”. For this reason, alternative indicators such as the Human Development Index and the Social Progress Index have been plan and apply
Factors of Economic Development
Classical economics developed the three-way classification of the “factors of production”: land, capital. Later, a fourth factor was additional: business understood as the talent and effort necessary to organize the other three.
Although the factors of production are central to economic development, many theorists assume that tastes, technology, and social institutions (for example, the different forms of social, economic, and political organization, the legal system, and even religion) expect and fix. But in reality, technological and institutional changes are the most dynamic source of transformation in the entire economy. Consequently, they constitute the most profound economic development factors in the long term.
This set of variables is sometimes call the “sociocultural context” of economic activity. Usually, the most relevant institutions in regional and national economies are the social structure, political regime, ideological inclinations of the dominant groups or classes, and the masses.
A social function of institutions is to provide elements of continuity and stability, without which societies would disintegrate. However, institutions may be an obstacle to economic development (as in the case of the sacred cows in India) or inhibit innovation and technology diffusion. Nevertheless, there are times when innovations occur in institutions. Historical examples of these institutional innovations are organize markets, coinage, patents, various forms of business, etc.
It would be very tough to count all the social institutions that have influenced past economic events and economic structures. However, any attempt to know the nature and causes of economic development without reference is bound to fail.
Economic and Social Development
The global jobs crisis is one of the most significant security risks. Following this course runs the risk of having a more fragmented, protectionist and confrontational world. The persistent scarcity of decent work opportunities, insufficient investment and low consumption causes an erosion of the social contract on which democratic societies are based. According to which progress must benefit everyone.
It is necessary to consider the international community’s commitments to promoting social inclusion and employment as essential conditions for reducing poverty and respect for fundamental principles and rights at work. The ILO considers economic growth an essential but insufficient need to reduce poverty. A reorientation of growth in favor of the poor will be necessary to achieve this. It require to make changes in institutions, laws, regulations and practices that are part of the process that generates and perpetuates poverty.
The Concept of Economic Development
Qualifies development as “a polysemic concept that has suffered very diverse, even found interpretations throughout history”. The reason is that the semantics of any language do not fully and accurately resolve the extended meanings of words. One of those cases has been the subject of discussion for being one of the most ambiguous and debated concepts within economic theory. At the same time, the word alone offers a wide variety of meanings. Other words or adjectives add a complementary tone, more flowery or encompassing, with other meanings. Such is the case of: “Human development”, “social development”, “sustainable development” “integral development” “ecodevelopment”.
Development is “the action and effect of developing and developing” and defines developing. “Increasing perfecting and improving something or someone”. It follows that the concept of the Royal Academy encompasses two dimensions. A quantitative one, indicating “increase”, and a qualitative one, present in the action of perfecting. The development concept is custom in several disciplines and sciences. Such is the case in biology. When discussing the development of an organism, it is understood as a life cycle. Where with conditions, specific capacities that the organism potentially has developing. Organisms produce, grow, reach their full development, and then decrease in a given time.