What does economic development mean?

What is Human Development?

“Human development is the expansion of people’s freedom to live long, healthy and creative
lives; to advance other goals they have reason to value; and to engage actively in shaping
development equitably and sustainably on a shared planet. People are both the beneficiaries and
the drivers of human development, as individuals and in groups”

Source: Human Development Report, November 2010

What does economic development mean?

Michael Todaro specified three objectives of development:

1. Life sustaining goods and services: To increase the availability and widen the
distribution of basic life-sustaining goods such as food, shelter, health and
protection.
2. Higher incomes: To raise levels of living, including, in addition to higher
incomes, the provision of more jobs, better education, and greater attention
to cultural and human values, all of which will serve not only to
enhance material well-being but also to generate greater individual and
national self-esteem
3. Freedom to make economic and social choices: To expand the range of
economic and social choices available to individuals and nations by freeing them
from servitude and dependence not only in relation to other people and nation-
states but also to the forces of ignorance and human misery.

Note the emphasis placed on cultural and human values, self-esteem and freedom
from ignorance; it is important to remember that development is about more than
advancing economic growth. Many economists believe development should be less
about growth, more about inclusive well-being and about building capacities and
resilience in a fast-changing and unpredictable world.

The most common measurement of development is the Human Development Index

published each year by the United Nations Development Programme

Dudley Sears has defined development as “the reduction and elimination of poverty,
inequality and unemployment within a growing economy”

Nobel Economist Amartya Sen writing in “Development as Freedom”, sees development

as being concerned with improving the freedoms and capabilities of the disadvantaged,
thereby enhancing the overall quality of life - what really matters are the capabilities of
people, that is, the extent of their opportunity set and of their freedom to choose among
this set, the life they value
Amartya Sen pursues the idea that development provides an opportunity to people to
free themselves from deep suffering caused by

 Early mortality
 Persecution
 Starvation / malnutrition
 Illiteracy

For many, economic development should be about increasing political freedom, cultural
and social freedom and not just about raising incomes

Amartya Sen on India

In An Uncertain Glory, Sen argues that India’s main problems lie in the lack of attention
paid to the essential needs of the people, especially the poor

Despite considerable economic growth and increasing self-confidence as a major global

player, modern India is a disaster zone in which millions of lives are wrecked by hunger
and by pitiable investment in health and education services. Economic growth without
investment in human development is unsustainable – and unethical

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Can Economic Growth help

Development?

Sustained growth can spur development in several ways:

 Lifts per capita incomes and raises people out of extreme poverty
 Increased per capita GDP/GNI gives households and businesses greater
financial resources to save (see the Harrod Domar growth model)
 Creates new jobs providing a flow of incomes for people in work
 Higher incomes can also reduce income and wealth inequality
 Faster economic growth generates higher profits which can then be reinvested –
promoting increased productivity and capacity
  Growth can accelerate changes in patterns of production e.g. a shift away from a
dual economy towards investment in manufacturing and services such as
business services and tourism
 Economic growth can generate higher tax revenues for the government –
providing more funds to finance public and merit goods and welfare spending

However – it is important to realise that there are disadvantages from economic growth
i.e. economic and social costs.

Growth is probably a necessary but insufficient condition for sustained human

development – it can underpin gains in health, education and per capita incomes but
many factors determine the development process.

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