Some economists hold a view that the
economic development is not much
different from economic growth. For
them, both are processes of long-term
increase in per capita income. Some
other economists believe that
development is distinctly different
process than growth and covers other
dimensions of change besides growth.
Still others hold that, development is
nothing but the level of per capita income
achieved in a particular year.
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Whole human history may be
thought of as a succession of
developments or changes, largely in
positive direction. Looking from a
distance, we find that production
structure of the economy has changed:
from hunting-gathering to settled
agriculture, from agriculture to
manufacturing, from manufacturing to
automatic production, from production
of goods to production of services. It does
not mean services were not produced,
say thousand years ago; it only means
that its relative importance has changed
and that this might have occurred
with increase in all activities in a broad
sense.
However, economics takes most of its
lues from the economic history of the
West during the last two centuries or so.
During this period, a variety of sweeping
changes took place in Europe, which may
broadly be categorized as technological
and institutional. Early economists
working in the field of development
economics took notice of change in the
composition of output and deployment of
labour in activities. They called it
structural change. Structural change
meant relative increase in terms of
proportion of non-agriculture/nonprimary
output and concomitant
changes in proportion of employment of
labour in non-agricultural activities (and
also in that of allocation of capital and
land). However, this structural change
has to take place along with increase in
output of all (or majority of) goods, not
with decrease. They defined economic
development as economic growth with
structural change in favour of nonagricultural
activities. And structural
change was understood in terms of
composition of GDP and industrial distribution
of labour. This was a reflection of
changing demand for goods and services
on the one hand and changing demand
for labour by production technology in
different sectors on the other.
Most of the mainstream economists
believed that all economies in the West
traversed the same path and believed
that other economies would also follow
the same path. When they did not find
it happening they pointed out that
institutional changes are equally important.
Institutional changes could mean
emergence of new institutions in
governance, as also in capital market and
money market. Some pointed out
necessity of attitudinal changes in people
� a leap from traditional value system to
modern value system. In order to
accommodate this thought, economic
development could be defined as
economic growth plus, that is, something
more than economic growth.
There were attempts to emphasize
technological dimension of development.
It was pointed out that economic growth
should be accompanied by rise in
productivity. Then, we could define
economic development as economic
growth accompanied by rise in
productivity.
Development is, however, just not
concerned with description of economic
history. It is to be pursued as a deliberate
mechanism of deliverance of the masses
from poverty and idleness in a relatively
short period of time. Developments in the
fifties and sixties did not perceptibly
change the scene in these crucial areas.
Many economists felt disillusioned and
started showing their anguish. One such
Western economist who had been dealing
with problems of development asserted
in a World Conference in Delhi: �The
questions to ask about a country�s
development are: What has been
happening to poverty? What has been
happening to unemployment? What has
been happening to inequality? If all three
of these have declined from high levels,
then beyond doubt this has been a period
of development for the country
concerned. If one or two of these central
problems have been growing worse,
especially if all the three, it would be
strange to call the result �development�
even if per capita income doubled.�
Indeed, here is a reference to
conscious attempts made to develop an
economy by adopting a strategy. If the
strategy brings in growth in capacity to
produce more and in actual output,
transformation in structure of economy
in terms of composition of output of
goods and services or even in deployment
of labour force, emergence of institutions
in terms of variety of banks, and
technology making use of machines and
power instead of men and cattle, but
makes no significant dent on basic
problems of underdeveloped countries,
what use are the efforts or the strategy?
This implies that development has
to be related to welfare of people. It was
suggested much earlier that welfare of
people depends on the size of the cake
as well as its distribution. One is entitled
to one�s wages when one is employed. One
should get adequate wages, if employed
or should get remunerative prices for
what one produces, if self-employed. Mass
poverty was one particular problem we
attributed to the colonial rule and wanted
to secure self-governance in order to
eradicate it. If that scourge still persists
on a large scale, we have a cause to worry
about. In short, the suggestion is that
the income should get redistributed in
favour of relatively worse-off. Keeping this
in view, some economists prefer to define
economic development as economic growth
with redistribution of resources in favour
of the relatively worse off. In this concept,
it is believed that reduction in inequality
will reduce poverty and will lead to
reduction in unemployment too.