Development is more than growth
Economic growth means a rise in real output, while economic development is a wider idea covering living standards, health, education and reduced poverty. Countries differ enormously: some are high-income and others low-income, and these gaps have deep and lasting causes.
Key idea
Growth = more output. Development = growth plus improvements in the quality of life, such as better health, education and a fairer spread of income.
Why development differs
Several factors explain the gaps between countries:
- Investment and capital: low income means low saving, so less funds new machinery and infrastructure.
- Education and skills: a better-educated workforce is more productive.
- Health: illness reduces the ability to work and learn.
- Natural resources: some countries have valuable resources, others few.
- Trade and debt: reliance on a few primary exports and heavy debt can hold countries back.
Example
A country that depends on exporting one crop suffers badly when its world price falls, cutting income and the funds available for investment. This slows development.
Closing the gap
Development can be supported by investment in education and health, better infrastructure, diversifying production away from a single export, borrowing wisely and receiving aid or foreign investment. Progress is usually gradual and depends on stable government.
Remember
- Development is broader than growth.
- Capital, education, health and trade shape development.
- Reliance on one export is risky.