ECONOMIC DEVELOPMENT is the process by which a nation improves the
economic, political, and social well-being of its people. The term has
been used frequently by economists, politicians, and others in the
20th and 21st centuries. The concept, however, has been in existence
in the West for centuries. Modernization,
Westernization , and
Whereas economic development is a policy intervention endeavor with
aims of economic and social well-being of people, economic growth is a
phenomenon of market productivity and rise in
* 1 Type
* 2 History
* 2.1 Growth and development
* 3 Economic Development Goals
* 4 Regional policy
* 4.1 Organization * 4.2 International Economic Development Council
* 5 Development indicators and indices
The scope of economic development includes the process and policies by which a nation improves the economic, political, and social well-being of its people.
University of Iowa
Although nobody is certain when the concept originated, some people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism .
Mansell and When also state that economic development has been
understood since the
World War II
There have been several major phases of development theory since
1945. From the 1940s to the 1960s the state played a large role in
promoting industrialization in developing countries, following the
idea of modernization theory . This period was followed by a brief
period of basic needs development focusing on human capital
development and redistribution in the 1970s.
Neoliberalism emerged in
the 1980s pushing an agenda of free trade and removal of Import
In economics, the study of economic development was borne out of an
extension to traditional economics that focused entirely on national
product , or the aggregate output of goods and services. Economic
development was concerned in the expansion of people’s entitlements
and their corresponding capabilities, morbidity , nourishment ,
literacy , education , and other socio-economic indicators. Borne out
of the backdrop of
Keynesian , advocating government intervention, and
neoclassical economics , stressing reduced intervention, with rise of
high-growth countries (
It has also been argued, notably by Asian and European proponents of infrastructure-based development , that systematic, long-term government investments in transportation , housing , education , and healthcare are necessary to ensure sustainable economic growth in emerging countries.
GROWTH AND DEVELOPMENT
Dependency theorists argue that poor countries have sometimes experienced economic growth with little or no economic development initiatives; for instance, in cases where they have functioned mainly as resource-providers to wealthy industrialized countries. There is an opposing argument, however, that growth causes development because some of the increase in income gets spent on human development such as education and health.
According to Ranis et al., economic growth and development is a two-way relationship. According to them, the first chain consists of economic growth benefiting human development, since economic growth is likely to lead families and individuals to use their heightened incomes to increase expenditures, which in turn furthers human development. At the same time, with the increased consumption and spending, health, education, and infrastructure systems grow and contribute to economic growth.
In addition to increasing private incomes, economic growth also
generate additional resources that can be used to improve social
services (such as healthcare , safe drinking water , etc.). By
generating additional resources for social services, unequal income
distribution will be mitigated as such social services are distributed
equally across each community , thereby benefiting each individual.
Concisely, the relationship between human development and economic
development can be explained in three ways. First, increase in average
income leads to improvement in health and nutrition (known as
Capability Expansion through Economic Growth). Second, it is believed
that social outcomes can only be improved by reducing income poverty
(known as Capability Expansion through
Yet others believe that a number of basic building blocks need to be in place for growth and development to take place. For instance, some economists believe that a fundamental first step toward development and growth is to address property rights issues, otherwise only a small part of the economic sector will be able to participate in growth. That is, without inclusive property rights in the equation, the informal sector will remain outside the mainstream economy, excluded and without the same opportunities for study.
ECONOMIC DEVELOPMENT GOALS
The development of a country has been associated with different concepts but generally encompasses economic growth through higher productivity, political systems that represent as accurately as possible the preferences of its citizens, the extension of rights to all social groups and the opportunities to get them and the proper functionality of institutions and organizations that are able to attend more technically and logistically complex tasks (i.e. raise taxes and deliver public services). These processes describe the State’s capabilities to manage its economy, polity, society and public administration. Generally, the goals of economic development policies attempt to solve issues in these topics.
With this in mind, economic development is typically associated with improvements in a variety of areas or indicators (such as literacy rates , life expectancy , and poverty rates), that may be causes of economic development rather than consequences of specific economic development programs. For example, health and education improvements have been closely related to economic growth, but the causality with economic development may not be obvious. In any case, it is important to not expect that particular economic development programs be able to fix many problems at once as that would be establishing unsurmountable goals for them that are highly unlikely they can achieve. Any development policy should set limited goals and a gradual approach to avoid falling victim to something Prittchet, Woolcock and Andrews call ‘premature load bearing’.
Many times the economic development goals of specific countries cannot be reached because they lack the State’s capabilities to do so. For example, if a nation has little capacity to carry out basic functions like security and policing or core service delivery it is unlikely that a program that wants to foster a free-trade zone (special economic zones) or distribute vaccinations to vulnerable populations can accomplish their goals. This has been something overlooked by multiple international organizations, aid programs and even participating governments who attempt to carry out ‘best practices’ from other places in a carbon-copy manner with little success. This isomorphic mimicry –adopting organizational forms that have been successful elsewhere but that only hide institutional dysfunction without solving it on the home country –can contribute to getting countries stuck in ‘capability traps’ where the country does not advance in its development goals. An example of this can be seen through some of the criticisms of foreign aid and its success rate at helping countries develop.
Beyond the incentive compatibility problems that can happen to foreign aid donations –that foreign aid granting countries continue to give it to countries with little results of economic growth but with corrupt leaders that are aligned with the granting countries’ geopolitical interests and agenda –there are problems of fiscal fragility associated to receiving an important amount of government revenues through foreign aid. Governments that can raise a significant amount of revenue from this source are less accountable to their citizens (they are more autonomous) as they have less pressure to legitimately use those resources. Just as it has been documented for countries with an abundant supply of natural resources such as oil, countries whose government budget consists largely of foreign aid donations and not regular taxes are less likely to have incentives to develop effective public institutions. This in turn can undermine the country's efforts to develop.
In its broadest sense, policies of economic development encompass three major areas:
* Governments undertaking to meet broad economic objectives such as
price stability, high employment , and sustainable growth . Such
efforts include monetary and fiscal policies, regulation of financial
institutions , trade , and tax policies.
* Programs that provide infrastructure and services such as highways
, parks , affordable housing , crime prevention , and K–12 education
One growing understanding in economic development is the promotion of regional clusters and a thriving metropolitan economy . In today’s global landscape, location is vitally important and becomes a key in competitive advantage .
International trade and exchange rates are a key issue in economic
development. Currencies are often either under-valued or over-valued ,
resulting in trade surpluses or deficits. Furthermore, the growth of
globalization has linked economic development with trends on
international trade and participation in Global Value Chains (GVCs)
and international financial markets. The last financial crisis had a
huge effect on economies in developing countries.
Main article: economic development organization
There are numerous other organizations whose primary function is not economic development that work in partnership with economic developers. They include the news media, foundations, utilities, schools, health care providers, faith-based organizations, and colleges, universities, and other education or research institutions.
INTERNATIONAL ECONOMIC DEVELOPMENT COUNCIL
With more than 20,000 professional economic developers employed worldwide in this highly specialized industry, the International Economic Development Council (IEDC) headquartered in Washington, D.C. is a non-profit organization dedicated to helping economic developers do their job more effectively and raising the profile of the profession. With over 4,500 members across the US and internationally, serving exclusively the economic development community, IEDC membership represents the entire range of the profession ranging from regional, state, local, rural, urban, and international economic development organizations, as well as chambers of commerce, technology development agencies, utility companies, educational institutions, consultants and redevelopment authorities. Many individual states also have associations comprising economic development professionals, who work closely with IEDC.
DEVELOPMENT INDICATORS AND INDICES
There are various types of macroeconomic and sociocultural indicators
or "metrics" used by economists and geographers to assess the relative
economic advancement of a given region or nation. The
LITERACY AND EDUCATION
ACCESS TO HEALTHCARE
SOCIAL SECURITY AND PENSIONS
European development economists have argued that the existence of
modern transportation networks- such as high-speed rail infrastructure
constitutes a significant indicator of a country’s economic
advancement: this perspective is illustrated notably through the Basic
One unintended consequence of economic development is the intense competition between communities, states, and nations for new economic development projects in today's globalized world . With the struggle to attract and retain business, competition is further intensified by the use of many variations of economic incentives to the potential business such as: tax incentives, investment capital, donated land, utility rate discounts, and many others. IEDC places significant attention on the various activities undertaken by economic development organizations to help them compete and sustain vibrant communities.
Additionally, the use of community profiling tools and database templates to measure community assets versus other communities is also an important aspect of economic development. Job creation, economic output, and increase in taxable basis are the most common measurement tools. When considering measurement, too much emphasis has been placed on economic developers for "not creating jobs." However, the reality is that economic developers do not typically create jobs, but facilitate the process for existing businesses and start-ups to do so. Therefore, the economic developer must make sure that there are sufficient economic development programs in place to assist the businesses achieve their goals. Those types of programs are usually policy-created and can be local, regional, statewide and national in nature.
Factors of production
* ^ O'Sullivan, A. and Sheffrin, S. M. (2003). Economics:
Principles in Action. Pearson Prentice Hall, Upper Saddle River, New
* ^ R. Conteras, "How the Concept of Development Got Started"
University of Iowa
* Vâsquez, Ian (2008). "Development, Economic". In Hamowy, Ronald .
The Encyclopedia of Libertarianism. Thousand Oaks, CA: SAGE ; Cato
Institute . pp. 120–23. ISBN 978-1-4129-6580-4 . LCCN 2008009151 .
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