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Economic Development: Defined and Explained What is development? The term means different things to different people. To economists, it is same as economic growth & rising per capita GDP. To sociologists, health care professionals, etc., it encompasses more than just economic growth. 1. Traditional view of development that lasted from post-WWII through the 1960’s) The ability of a nation which has been stagnant, to begin generating and sustaining annual increases in its output or GDP at rates of 5-7% or higher year after year. Annual increase in per capita GDP (i.e., ratio of total GDP to population size) Reallocation of labor from agriculture to manufacturing & services. In strictly traditional (economic) terms, it means the capacity of a nation -- whose economic condition has been more or less static for a long time -- to generate & sustain an annual increase in its output or GDP at rates of perhaps 5 – 7% or more. Or an annual increase in its per capita GDP . DE in the past also typically seen in terms of a planned reallocation of resources (i.e., labor) from the agricultural sector to the manufacturing & services industries. Development strategies therefore focused on rapid industrialization – at the expense of rural development. 2. “Basic Needs” View of Development (or, the UN Development Program view of development): Development is about human welfare and improvements in human well-being. In terms of human welfare, we mean the achievement of a longer, healthier life higher adult literacy rate (or level of education) as well as a higher per capita GDP or income. Can’t measure development on the basis of per capita GDP alone because glaring income inequalities may exist between the richest 20% and the poorest 40-50% of a population. For instance, a large percentage increase in a nation’s GDP may be
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mainly attributed to a sizeable increase in the incomes of the top 20%, and this may offset or “mask” a decline in the lifestyle and real per capita income of the bottom 40- 50%. So, to measure development, must also look at what is referred to as a composite index ” comprised of several variables. Several of the variables included in the index are somewhat qualitative or normative. By social system, we mean the interdependent relationships between economic & non-economic factors such as attitudes toward life, work, family, & authority; legal and administrative structures, religion, cultural traditions, systems of land tenure or property rights, political economy, authority & integrity of government agencies, cohesiveness of society (pluralistic vs. homogeneous); degree of popular participation in development decisions & activities; & flexibility or rigidity of social classes. Reasons why growth rate of GDP is a misleading indicator of development:
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This note was uploaded on 11/10/2011 for the course ECON 4310 taught by Professor Staff during the Fall '08 term at Kennesaw.

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