Economic development according to Schumpeter (1961), involves transferring capital from established methods of production to innovative, new and productivity-enhancing methods. Schumpeter’s conceptualization was based on understanding the origins of the business cycle and the conditions that gave rise to new opportunities that propelled the economy forward to a higher economic growth trajectory. In Schumpeter’s view, economic development involves, a fundamental transformation of an economy. This includes altering the industrial structure, the educational and occupational characteristics of the population, and the entire social and institutional fabric. Porter (1998: 19-20), considers that economic development seeks to achieve long-term sustainable development in a nation’s standard of living, adjusted for purchasing power parity. The term, sustainable, as defined by Tatyana Soubbotina at the World Bank (2004: 9- 10), could be otherwise called equitable and balanced, meaning that, in order for development to continue, it should balance the interests of different groups of people in three major interrelated areas; economic, social and environmental. Economic development is also a professional practice that uses definitions more inclusively than those of academic economists’ two influential American planers, Fitzgerald and Leigh (2002:33), propose that, economic development preserves and raises the community’s standard of living through a process of human and physical infrastructure development, based on principles of equity and sustainability. In this conceptualization, economic development is about creating choice or expanding the opportunity set for both consumers and businesses. According to Sen (1991), economic development is;
The expansion of capacities that contribute to the advancement of society through realization of individual, firm and community potential. Economic development is measured by a sustained increase in prosperity and quality of life through innovation, lowered transaction costs, and the utilization of capabilities towards the responsible production and diffusion of goods and services. Economic development requires effective institutions grounded in norms of openness, tolerance for risk, appreciation for diversity, and confidence in the realization of mutual gain for the public and private sector. Economic development is essential to creating the conditions for economic growth and ensuring our economic future. By capacity, this implies the conditions conducive to promoting favourable outcomes that set the stage for the realization of potential. This potential could be realized at multiple levels; for an individual, a firm or set of firms or industry, a place or community of people. One lesson that history teaches is that the limits of potential are unbounded and lie in unchartered domains. Building capacities allows for a better platform to accommodate an uncertain future and the ability to meet many possible contingencies.
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- Spring '17