ECONOMIC GROWTH AND

DEVELOPMENT

Alarcon, Frich Thea Marie

Azucena, Ira Marie

Delmoro, Krizzle Christy Karen

Dorgu, Elizabeth

Pimentel, Joyzy Faith

An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.

For comparing one country's economic growth to another, GDP (Gross Domestic Product) or GNP (Gross National Product) per capita should be used as these take into account population differences between countries.

Economic growth is

usually associated with

technological changes.

An example is the

large growth in the

U.S. economy during

the introduction of the

Internet and the

technology that it

brought to U.S.

industry as a whole.

The growth of an

economy is thought of

not only as an increase

in productive capacity

but also as an

improvement in the

quality of life to the

people of that

economy.

The Rostow's Stages of Growth model is

one of the major historical models of economic

growth. It was published by American

economist Walt Whitman Rostow in 1960. The

model postulates that economic growth occurs in

five basic stages, of varying length:

Traditional society

Preconditions for take-off

Take-off

Drive to maturity

Age of High mass consumption

Traditional society

characterized by subsistence agriculture

or hunting and gathering; almost wholly

a "primary" sector economy

limited technology

A static or 'rigid' society: lack of class or individual economic mobility, with

stability prioritized and change seen

negatively

Pre-conditions to "take-off"

external demand for

raw materials initiates economic change;

development of more productive, commercial agriculture and cash crops not consumed by producers and/or largely exported

widespread and enhanced investment in changes to the physical environment to expand production (i.e. irrigation, canals, ports)

increasing spread of

technology and advances in existing technologies

changing social structure, with previous social equilibrium now in flux

individual social mobility begins

development of national identity and shared economic interests

Take off

Urbanization increases, Industrialization proceeds, Technological breakthrough occurs

the "secondary" (goods-producing) sector expands and ratio of secondary vs. primary

sectors in the economy shifts quickly towards

secondary

textiles and apparel are usually the first "take-off" industry, as happened in Great Britain's

classic "Industrial Revolution"

Drive to maturity

diversification of the industrial base; multiple industries expand and new ones take root

quickly

manufacturing shifts from investment-driven (capital goods) towards consumer durables

and domestic consumption

rapid development of transportation infrastructure

Large-scale investment in social infrastructure (schools, universities, hospitals, etc.)

Age of mass consumption

the industrial base dominates the economy; the primary sector is of greatly diminished

weight in economy and society

widespread and normative consumption of high-value consumer goods (e.g.

automobiles)

consumers typically (if not universally), have disposable income, beyond all basic

needs, for additional goods

Economic Development

Progress in an economy, or

the qualitative measure of this. Economic

development usually refers to the adoption of

new technologies, transition from agriculture-

based to industry-based economy,

and general improvement in living standards.

Development indicators and indices

There are various types of macroeconomic and socio-cultural indicators or "metrics" used by economists and geographers to assess the relative economic advancement of a given region or nation. The World Bank's "World Development Indicators" are compiled annually from officially-recognized international sources and include national, regional and global estimates.

GDP per capita - Growing development population

Income distribution

Literacy and education

Access to healthcare

Social security and pensions

Formula use to compute

Economic Growth

The growth rate of real GDP is the

percentage change in real GDP from one

year to the next.

We can express the rate of growth in, for example, the period 2004-2005, as follows:

U.S. real GDP in 2004 was 10.76 trillion and in 2005 it was 11.13 trillion. Thus the growth rate of real U.S. GDP from 2004 to 2005 was

(11.13 10.76) / 10.76

= (0.37) / 10.76

= 0.034 or 3.4%

Formula use to compute Gross

National Product (GNP)

GNP helps to measure the contribution of residents of a country to the flow of goods and services within and outside the national territory. Hence, GNP is the core concept of national income accounting.

The general formula used for Gross National Product is:

GNP = GDP + Net factor income from abroad

Methods of assessment of Economic

Development

The Expenditure Approach

This method of determining GDP adds up

the market value of all domestic

expenditures made on final goods and

services in a single year, including

consumption expenditures, investment

expenditures, government expenditures,

and net exports. Add all of the

expenditures together and you determine

GDP.

The Production Approach

This method also called the Net Product

or Value added method requires three

stages of analysis. First gross value of

output from all sectors is estimated. Then,

intermediate consumption such as cost of

materials, supplies and services used in

production final output is derived. Then

gross output is reduced by intermediate

consumption to develop net production.

The Income Approach

This method of determining GDP is to

add up all the income earned by

households and firms in the year. The total

expenditures on all of the final goods and

services are also income received as

wages, profits, rents, and interest income.

By adding together all of the wages,

profits, rents, and interest income, you

determine GDP

HDI - A comparative measure of life

expectancy, literacy, education, standards of living and quality of life for countries worldwide. It is a standard means of measuring well-being, especially child welfare. It is used to distinguish whether the country is a developed, developing, or under developed and also to measure the impact of economic policies on quality of life.

a sovereign state that has a highly

developed economy and advanced

technological infrastructure relative

to other less industrialized nations.

Country HDI 1 Norway 0.944

2 Australia 0.933

3 Switzerland 0.917

4 Netherlands 0.915

5 USA 0.914

6 Germany 0.911

7 New Zealand 0.910

8 Canada 0.902

9 Singapore 0.901

10 Denmark 0.900

also called a lower developed

country, is a nation with a

lower standard of living. Developing

countries are, in general, countries

that have not achieved a significant

degree of industrialization relative

to their populations.

Country HDI

1 Maldives 0.698

2 Mongolia 0.698

3 Turkmenistan 0.698

4 Samoa 0.694

5 Palestine 0.686

6 Indonesia 0.684

7 Botswana 0.683

8 Egypt 0.682

9 Paraguay 0.676

10 Gabon 0.674

Underdeveloped countries suffer

conditions of extreme developed,

ongoing and widespread conflict

(including civil war or ethnic clashes),

extensive political corruption, and lack

political and social stability. Resources

are not used to their full socio-

economic potential, with the result

that local or regional development is

slower in most cases than it should be.

Country HDI

1 Niger 0.337

2 Congo 0.338

3 Central African Republic 0.341

4 Chad 0.374

5 Sierra Leone 0.381

6 Eritrea 0.388

7 Burkina Faso 0.389

8 Burundi 0.392

9 Guinea 0.393

10 Mozambique 0.396

Measures of Economic

Development

Here is the list of the most commonly used

measures of economic development:

GNP per capita

Population Growth

Occupational Structure of the Labor

Force

Urbanization

Consumption per capita

GNP per capita GNP is the total market value of

all final goods and services produced by a country in one year. It is a measure of economic activity, or how much is produced in a country. The more that a country produces per person , the more "developed" it is assumed to be.

Which country produces more (has a higher GNP), India or Switzerland? Which is more "developed"?

The GNP of India is $336 billion and the GNP of Switzerland is $288 billion. India produces more than does Switzerland, but everybody would agree that Switzerland is more economically advanced. Why?

The answer is population. the population of India is 988 million and the population of Switzerland is 7 million. Therefore we must compare GNP PER CAPITA. To calculate GNP per capita (or income per person) we divide the GNP by the population. The GNP per capita of Switzerland is $40,630 and the GNP per capita of India is $ 340.

Remember, always use GNP PER CAPITA when comparing the economic conditions of different countries..

Population Growth In general, poorer countries have more rapid

rates of population growth. Compare the

following maps to verify that this general trend

is true. You may have to go back a forth

between them several times checking a

different region of the world each time.

After comparing the maps look here for a

graph showing population growth rates by

realm

Even though population growth rates seem

small (1%, 2% 3%, or maybe 4%) they have a big

impact. a useful way to see this is by using the

"Rule of 70". the rule of 70 is a way to

ESTIMATE the number of years it takes for

something to DOUBLE if you know the annual

percentage growth rate. Therefore, the

population of the United States with an annual

population growth rate of 1% will double in

about 70 years IF THE POPULATION

GROWTH RATE REMAINS AT 1%.

The population of the country of Mozambique,

Southern Africa, with an annual population

growth rate of 4% will double in 17.5 years,

quadruple in 35 years and increase by a factor

of 8 in 70 years IF THE POPULATION

GROWTH RATE REMAINS AT 4%. So a small

change in the population growth rate results in

significant increase in population.

You shoud now examine appendix A of your

textbook and see how well the rule of 70

calculates the population doubling time. (Note:

the textbook uses the rate of "Natural

Increase" to measure the population growth

rate.)

Occupational Structure of the

Labor Force Economic geographers divide

economic activities into primary activities, secondary activities, and tertiary activities. (Some add quaternary activities and quinary activities, but we will not.)

PRIMARY ACTIVITIES are those that directly remove resources from the earth. Generally they include AGRICULTURE, MINING, fishing, and lumbering.

SECONDARY ACTIVITIES involve converting resources into finished products. These are the MANUFACTURING activities.

TERTIARY ACTIVITIES comprise the SERVICE sector of the economy. The tertiary activities include retailing, transportation, education, banking, etc.

As countries develop the occupational structure of the labor force changes. In LDCs most people are engaged in primary activities. In high income countries like the United states most people are involved with the tertiary sector.

Urbanization

Urbanization is the percentage of a country's population who live in urban areas. Urban areas generally means in towns and cities of 2,500 or more people. Currently just less than half of the worlds population live in

urban areas. Generally as countries develop urbanization increases.

Note the high urbanization found in the more leveloped countries and in South America.

Consumption per capita

Consumption per person is a good

indicator of development. The richer a

country is, the more its citizens consume.

This map shows the energy consumption

patterns for the world. Similar maps could

be made for "televisions per capita" or

"cars per capita".

The Problems and Issues of

Economic Growth

The macroeconomic goal of economic

growth is generally acknowledged as a

beneficial pursuit. Almost everyone gains

from economic growth. Unlike other

economic goals, conservatives and liberals

usually agree that economic growth is good

for society.

However, everything has a down side

and economic growth is no exception.

Lifestyle Losses:

One concern with economic growth is

the loss of traditional lifestyles. New

products, new technologies, faster

transportation, and other changes that

accompany economic growth also tend to

disrupt traditional ways of living. For

example, families might find themselves

scattered across the country.

Generational Transfers:

Another concern with economic growth is the transfer of income and wealth from one generation to the next. One generation makes the investment in capital, technology, or education, but the next generation then reaps the reward of this growth.

One example is public education for the young financed by taxes on the elderly. Some question whether or not it is fair for some, like the elderly, to sacrifice with no prospects of personally benefitting from the investment.

Disamenities:

A third problem with economic growth is

an increase in disamenities, such as

pollution, congestion, and natural

resource depletion. In that economic

growth means more production of

"goods", it also means the generation of

more "bads." The automobile, for

example, improves travel but causes air

pollution.

The spectrum of tasks for health promotion has widened since the Ottawa Charter was signed. In 1986, infectious diseases still seemed in retreat, the potential extent of HIV/AIDS was unrecognized, the Green Revolution was at its height and global poverty appeared less intractable.

Global climate change had not yet emerged as a major threat to development and health. Most economists forecast continuous improvement, and chronic diseases were broadly anticipated as the next major health issue.

Today, although many broadly averaged measures of population health have improved, many of the determinants of global health have faltered. Many infectious diseases have emerged; others have unexpectedly reappeared.

Reasons include urban crowding, environmental changes, altered sexual relations, intensified food production and increased mobility and trade. Foremost, however, is the persistence of poverty and the exacerbation of regional and global inequality.

Few, if any, Millennium Development Goals (MDG), including those for health and sustainability, seem achievable. Policy-makers generally misunderstand the link between environmental sustainability (MDG #7) and health.

Many health workers also fail to realize that social cohesion and sustainabilitymaintenance of the Earth's ecological and geophysical systemsis a necessary basis for health.

In sum, these issues present an enormous challenge to health. Health promotion must address population health influences that transcend national boundaries and generations and engage with the development, human rights and environmental movements.

The big task is to promote sustainable environmental and social conditions that bring enduring and equitable health gains.

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