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ECONOMIC GROWTH AND
DEVELOPMENT
Alarcon, Frich Thea Marie
Azucena, Ira Marie
Delmoro, Krizzle Christy Karen
Dorgu, Elizabeth
Pimentel, Joyzy Faith
An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation.
For comparing one country's economic growth to another, GDP (Gross Domestic Product) or GNP (Gross National Product) per capita should be used as these take into account population differences between countries.
Economic growth is
usually associated with
technological changes.
An example is the
large growth in the
U.S. economy during
the introduction of the
Internet and the
technology that it
brought to U.S.
industry as a whole.
The growth of an
economy is thought of
not only as an increase
in productive capacity
but also as an
improvement in the
quality of life to the
people of that
economy.
The Rostow's Stages of Growth model is
one of the major historical models of economic
growth. It was published by American
economist Walt Whitman Rostow in 1960. The
model postulates that economic growth occurs in
five basic stages, of varying length:
Traditional society
Preconditions for take-off
Take-off
Drive to maturity
Age of High mass consumption
Traditional society
characterized by subsistence agriculture
or hunting and gathering; almost wholly
a "primary" sector economy
limited technology
A static or 'rigid' society: lack of class or individual economic mobility, with
stability prioritized and change seen
negatively
Pre-conditions to "take-off"
external demand for
raw materials initiates economic change;
development of more productive, commercial agriculture and cash crops not consumed by producers and/or largely exported
widespread and enhanced investment in changes to the physical environment to expand production (i.e. irrigation, canals, ports)
increasing spread of
technology and advances in existing technologies
changing social structure, with previous social equilibrium now in flux
individual social mobility begins
development of national identity and shared economic interests
Take off
Urbanization increases, Industrialization proceeds, Technological breakthrough occurs
the "secondary" (goods-producing) sector expands and ratio of secondary vs. primary
sectors in the economy shifts quickly towards
secondary
textiles and apparel are usually the first "take-off" industry, as happened in Great Britain's
classic "Industrial Revolution"
Drive to maturity
diversification of the industrial base; multiple industries expand and new ones take root
quickly
manufacturing shifts from investment-driven (capital goods) towards consumer durables
and domestic consumption
rapid development of transportation infrastructure
Large-scale investment in social infrastructure (schools, universities, hospitals, etc.)
Age of mass consumption
the industrial base dominates the economy; the primary sector is of greatly diminished
weight in economy and society
widespread and normative consumption of high-value consumer goods (e.g.
automobiles)
consumers typically (if not universally), have disposable income, beyond all basic
needs, for additional goods
Economic Development
Progress in an economy, or
the qualitative measure of this. Economic
development usually refers to the adoption of
new technologies, transition from agriculture-
based to industry-based economy,
and general improvement in living standards.
Development indicators and indices
There are various types of macroeconomic and socio-cultural indicators or "metrics" used by economists and geographers to assess the relative economic advancement of a given region or nation. The World Bank's "World Development Indicators" are compiled annually from officially-recognized international sources and include national, regional and global estimates.
GDP per capita - Growing development population
Income distribution
Literacy and education
Access to healthcare
Social security and pensions
Formula use to compute
Economic Growth
The growth rate of real GDP is the
percentage change in real GDP from one
year to the next.
We can express the rate of growth in, for example, the period 2004-2005, as follows:
U.S. real GDP in 2004 was 10.76 trillion and in 2005 it was 11.13 trillion. Thus the growth rate of real U.S. GDP from 2004 to 2005 was
(11.13 10.76) / 10.76
= (0.37) / 10.76
= 0.034 or 3.4%
Formula use to compute Gross
National Product (GNP)
GNP helps to measure the contribution of residents of a country to the flow of goods and services within and outside the national territory. Hence, GNP is the core concept of national income accounting.
The general formula used for Gross National Product is:
GNP = GDP + Net factor income from abroad
Methods of assessment of Economic
Development
The Expenditure Approach
This method of determining GDP adds up
the market value of all domestic
expenditures made on final goods and
services in a single year, including
consumption expenditures, investment
expenditures, government expenditures,
and net exports. Add all of the
expenditures together and you determine
GDP.
The Production Approach
This method also called the Net Product
or Value added method requires three
stages of analysis. First gross value of
output from all sectors is estimated. Then,
intermediate consumption such as cost of
materials, supplies and services used in
production final output is derived. Then
gross output is reduced by intermediate
consumption to develop net production.
The Income Approach
This method of determining GDP is to
add up all the income earned by
households and firms in the year. The total
expenditures on all of the final goods and
services are also income received as
wages, profits, rents, and interest income.
By adding together all of the wages,
profits, rents, and interest income, you
determine GDP
HDI - A comparative measure of life
expectancy, literacy, education, standards of living and quality of life for countries worldwide. It is a standard means of measuring well-being, especially child welfare. It is used to distinguish whether the country is a developed, developing, or under developed and also to measure the impact of economic policies on quality of life.
a sovereign state that has a highly
developed economy and advanced
technological infrastructure relative
to other less industrialized nations.
Country HDI 1 Norway 0.944
2 Australia 0.933
3 Switzerland 0.917
4 Netherlands 0.915
5 USA 0.914
6 Germany 0.911
7 New Zealand 0.910
8 Canada 0.902
9 Singapore 0.901
10 Denmark 0.900
also called a lower developed
country, is a nation with a
lower standard of living. Developing
countries are, in general, countries
that have not achieved a significant
degree of industrialization relative
to their populations.
Country HDI
1 Maldives 0.698
2 Mongolia 0.698
3 Turkmenistan 0.698
4 Samoa 0.694
5 Palestine 0.686
6 Indonesia 0.684
7 Botswana 0.683
8 Egypt 0.682
9 Paraguay 0.676
10 Gabon 0.674
Underdeveloped countries suffer
conditions of extreme developed,
ongoing and widespread conflict
(including civil war or ethnic clashes),
extensive political corruption, and lack
political and social stability. Resources
are not used to their full socio-
economic potential, with the result
that local or regional development is
slower in most cases than it should be.
Country HDI
1 Niger 0.337
2 Congo 0.338
3 Central African Republic 0.341
4 Chad 0.374
5 Sierra Leone 0.381
6 Eritrea 0.388
7 Burkina Faso 0.389
8 Burundi 0.392
9 Guinea 0.393
10 Mozambique 0.396
Measures of Economic
Development
Here is the list of the most commonly used
measures of economic development:
GNP per capita
Population Growth
Occupational Structure of the Labor
Force
Urbanization
Consumption per capita
GNP per capita GNP is the total market value of
all final goods and services produced by a country in one year. It is a measure of economic activity, or how much is produced in a country. The more that a country produces per person , the more "developed" it is assumed to be.
Which country produces more (has a higher GNP), India or Switzerland? Which is more "developed"?
The GNP of India is $336 billion and the GNP of Switzerland is $288 billion. India produces more than does Switzerland, but everybody would agree that Switzerland is more economically advanced. Why?
The answer is population. the population of India is 988 million and the population of Switzerland is 7 million. Therefore we must compare GNP PER CAPITA. To calculate GNP per capita (or income per person) we divide the GNP by the population. The GNP per capita of Switzerland is $40,630 and the GNP per capita of India is $ 340.
Remember, always use GNP PER CAPITA when comparing the economic conditions of different countries..
Population Growth In general, poorer countries have more rapid
rates of population growth. Compare the
following maps to verify that this general trend
is true. You may have to go back a forth
between them several times checking a
different region of the world each time.
After comparing the maps look here for a
graph showing population growth rates by
realm
Even though population growth rates seem
small (1%, 2% 3%, or maybe 4%) they have a big
impact. a useful way to see this is by using the
"Rule of 70". the rule of 70 is a way to
ESTIMATE the number of years it takes for
something to DOUBLE if you know the annual
percentage growth rate. Therefore, the
population of the United States with an annual
population growth rate of 1% will double in
about 70 years IF THE POPULATION
GROWTH RATE REMAINS AT 1%.
The population of the country of Mozambique,
Southern Africa, with an annual population
growth rate of 4% will double in 17.5 years,
quadruple in 35 years and increase by a factor
of 8 in 70 years IF THE POPULATION
GROWTH RATE REMAINS AT 4%. So a small
change in the population growth rate results in
significant increase in population.
You shoud now examine appendix A of your
textbook and see how well the rule of 70
calculates the population doubling time. (Note:
the textbook uses the rate of "Natural
Increase" to measure the population growth
rate.)
Occupational Structure of the
Labor Force Economic geographers divide
economic activities into primary activities, secondary activities, and tertiary activities. (Some add quaternary activities and quinary activities, but we will not.)
PRIMARY ACTIVITIES are those that directly remove resources from the earth. Generally they include AGRICULTURE, MINING, fishing, and lumbering.
SECONDARY ACTIVITIES involve converting resources into finished products. These are the MANUFACTURING activities.
TERTIARY ACTIVITIES comprise the SERVICE sector of the economy. The tertiary activities include retailing, transportation, education, banking, etc.
As countries develop the occupational structure of the labor force changes. In LDCs most people are engaged in primary activities. In high income countries like the United states most people are involved with the tertiary sector.
Urbanization
Urbanization is the percentage of a country's population who live in urban areas. Urban areas generally means in towns and cities of 2,500 or more people. Currently just less than half of the worlds population live in
urban areas. Generally as countries develop urbanization increases.
Note the high urbanization found in the more leveloped countries and in South America.
Consumption per capita
Consumption per person is a good
indicator of development. The richer a
country is, the more its citizens consume.
This map shows the energy consumption
patterns for the world. Similar maps could
be made for "televisions per capita" or
"cars per capita".
The Problems and Issues of
Economic Growth
The macroeconomic goal of economic
growth is generally acknowledged as a
beneficial pursuit. Almost everyone gains
from economic growth. Unlike other
economic goals, conservatives and liberals
usually agree that economic growth is good
for society.
However, everything has a down side
and economic growth is no exception.
Lifestyle Losses:
One concern with economic growth is
the loss of traditional lifestyles. New
products, new technologies, faster
transportation, and other changes that
accompany economic growth also tend to
disrupt traditional ways of living. For
example, families might find themselves
scattered across the country.
Generational Transfers:
Another concern with economic growth is the transfer of income and wealth from one generation to the next. One generation makes the investment in capital, technology, or education, but the next generation then reaps the reward of this growth.
One example is public education for the young financed by taxes on the elderly. Some question whether or not it is fair for some, like the elderly, to sacrifice with no prospects of personally benefitting from the investment.
Disamenities:
A third problem with economic growth is
an increase in disamenities, such as
pollution, congestion, and natural
resource depletion. In that economic
growth means more production of
"goods", it also means the generation of
more "bads." The automobile, for
example, improves travel but causes air
pollution.
The spectrum of tasks for health promotion has widened since the Ottawa Charter was signed. In 1986, infectious diseases still seemed in retreat, the potential extent of HIV/AIDS was unrecognized, the Green Revolution was at its height and global poverty appeared less intractable.
Global climate change had not yet emerged as a major threat to development and health. Most economists forecast continuous improvement, and chronic diseases were broadly anticipated as the next major health issue.
Today, although many broadly averaged measures of population health have improved, many of the determinants of global health have faltered. Many infectious diseases have emerged; others have unexpectedly reappeared.
Reasons include urban crowding, environmental changes, altered sexual relations, intensified food production and increased mobility and trade. Foremost, however, is the persistence of poverty and the exacerbation of regional and global inequality.
Few, if any, Millennium Development Goals (MDG), including those for health and sustainability, seem achievable. Policy-makers generally misunderstand the link between environmental sustainability (MDG #7) and health.
Many health workers also fail to realize that social cohesion and sustainabilitymaintenance of the Earth's ecological and geophysical systemsis a necessary basis for health.
In sum, these issues present an enormous challenge to health. Health promotion must address population health influences that transcend national boundaries and generations and engage with the development, human rights and environmental movements.
The big task is to promote sustainable environmental and social conditions that bring enduring and equitable health gains.
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