Difference Between Growth and Development
Even before an economist named Simon Kuznets developed the gross domestic product (GDP) in 1934, the difference between what is economic growth and what is development has confronted numerous economists around the planet.
In this sense, the most used indicator to measure economic growth is the gross domestic product (GDP) . The renowned index, coined in 1934 by the North American economist cited above, has been the reference for measuring the growth of an economy , and this is because said indicator is responsible for periodically measuring the production of an entire economy during a period of time. certain period of time.
Thus, GDP measures the total production of an economy, while it is responsible for comparing these measurements with past measurements. And it does this to, through a variation rate , know what the growth of an economy has been. Understanding as growth, yes, an increase in production, or what would be the aggregate production by applying the formula that Kuznets indicates for the calculation of GDP.
However, there have been many economists who consider that the fact that an economy grows does not mean that it develops, so a clear difference must be established between economic growth and development. In fact, there have been many economists who have given examples of how an economy can grow uninterruptedly and, nevertheless, present increasingly intense inequality. Inequality that, ultimately, makes life in said territory worse and, therefore, presents less development.
For this reason, many experts in the field have requested that new indicators be generated to complement the measurement and establish the distinction. Indicators such as the human development index (HDI) prepared by the UN , which allow us to measure that development that, in the measurement established by the GDP, is overlooked. And it is that, for this, other indicators complement production with life expectancy, income, as well as other variables that, together with growth, show us authentic development.
With that said, let's look at the differences between these two concepts.
Difference Between Growth and Development
To understand these two concepts, let's see, first of all, what we economists understand by economic growth and what we understand by development.
In the first place, economic growth is understood as the positive evolution of the living standards of a territory, usually countries, measured in terms of the productive capacity of its economy and its income within a specific period of time. In other words, the positive evolution of a series of indicators, such as GDP, which show that production and, therefore, the income of the population grow over time.
On the other hand, and secondly, economic development is a concept that refers to the capacity of a country to generate wealth. However, this growth must be reflected in the quality of life of the inhabitants. In other words, development must be perceived with greater life expectancy, less economic inequality , a total reduction in poverty , as well as the favorable behavior of another series of variables that growth does not take into account.
Therefore, as can be seen in both definitions, we are talking about two closely linked concepts, but which present clear differences that should be underlined.
In a certain way, by way of conclusion, we can say that economic growth is part of development, but that economic growth, by itself, is not development.
Indicators to measure development and growth
To finish, we end with a small recommendation to know how the evolution of economic growth and the development of a territory is being. In this sense, we offer the indicators that will allow knowing this evolution, as well as distinguishing it.
Therefore, to measure economic growth, we will observe indicators such as the gross domestic product (GDP), the unemployment rate , the GDP per capita , among others.
On the other hand, to measure economic development, we will be more attentive to indicators such as the human development index (HDI), the Gini index , as well as other indices that complement the conclusions drawn by growth indicators.