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Is Economic Growth Necessary for Economic Development?

Economic growth is a necessary but not sufficient condition of economic development.

There is no single definition that encompasses all the aspects of economic development. The most comprehensive definition perhaps of economic development is the one given by Todaro:

‘Development is not purely an economic phenomenon but rather a multi – dimensional process involving reorganization and re orientation of the entire economic and social system.

Development is a process of improving the quality of all human lives with three equally important aspects. These are:

1. Raising peoples’ living levels, i.e. incomes and consumption, levels of food, medical services, education through relevant growth processes.
2. Creating conditions conducive to the growth of peoples’ self esteem through the establishment of social, political and economic systems and institutions which promote human dignity and respect.

3. Increasing peoples’ freedom to choose by enlarging the range of their choice variables.’

Economic growth may be defined as an increase in a country's ability to produce goods and services. Economic growth merely refers to an increase in the real Gross Domestic Product, or GDP per capita over a period of time.

It is natural to be misled by the idea that economic growth is the key to economic development and perhaps a condition of development itself, but development is more than simply increasing economic output i.e. GDP per capita. It is a wider concept than economic growth. A country's economy may experience real growth of GDP with no economic development taking place. Nevertheless, wider more meaningful indicators of development are often correlated with GDP per capita, such as The Physical Quality of Life Index, Human Development Index, Human Poverty Index and the Human Suffering Index, which help us include the non-monetary factors of development.

Amartya Sen defines economic development in terms of personal freedom, freedom to choose from a range of options. While economic growth may lead to an increase in the purchasing power of people, if the country has a repressed economy, there is lack of choice and hence personal freedom in restricted. Hence once again growth has taken place without any development.

While economic growth may result in an improvement in the standard of living of a relatively small proportion of the population whilst the majority of the population remains poor. It is how the economic growth is distributed amongst the population that determines the level of development.

Taking into consideration the trickle-down theory of...

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