What is Economic Growth and Development?

Economic growth and development may sound like two ways to describe the same thing, but what many people may not realize is that economic growth and economic development are actually two very different things which share a direct relationship. In short, economic development is a tool that is used to inspire economic growth. But what to these two terms mean?

Economic Growth

Economic growth is a simple concept with specific measurement of the increase in output by a given region’s economy or how much the monetary value of a country’s goods and services has increased over time. Measuring economic growth is purely quantitative. A finite measurement for economic growth is determined by examining the percentage increase of a country's Gross Domestic Product. If a country’s product output capacity grows over the course of a year, there will be economic growth.

While this sounds like a simple explanation, getting the actual growth to occur can be quite challenging depending on the number of circumstances and factors. Oftentimes it comes with the development of new technologies or industries. It can also be sparked by initiatives aimed at developing the economy to allow growth.

Economic Development

Economic development works differently from economic growth. The overall scope of economic development is far more broad than that of economic growth. Instead of measuring quantitative results, most economic development plans yield qualitative results; most of these results revolve around improving the quality of life of a given region. Economic development can be measured on a scale known as the Human Development Index (HDI), though other forms of measurement are used as well for specific cases when comparing results for initiative against poverty and literacy rates. These qualitative results are measured to gauge the success or failure of certain economic development programs, which will affect the potential for conditions that will eventually lead to economic growth. Since economic development relies on intangible results, different measurements are used to determine rates of failure and success.

The Relationship Between Economic Growth and Development

These two concepts are forever linked, and will require one another in order to both remain effective. Economic development is often a means to an end in the hopes of inspiring economic growth. With the increased capital that comes with economic growth, more money can be cycled into economic development, which leads to more growth, which leads to more development. If done well, the relationship between economic growth and development is cyclical. Measuring both growth and development is important since a country’s gross domestic product (GDP) does not factor many things, such as income distribution among the population, leisure time or mortality rates. Understanding the economic output as well as the quality of life will paint a clearer picture of a country or region.


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