What is Economic Development? Our first order of business will be trying to define what “Economic Development” really is and of course how to measure it. This already seems incredibly hard, when one thinks of Economic Development multiple things come to mind such as overall income, income equality, healthcare and infrastructure, just to name a few things. Of course there are some official definitions as well, the one I personally find most accurate goes as follows:
However even this definition is still somewhat limited, it for example fails to take into account factors such as sustainable development. What use is Economic Development after all if it erodes a country’s resources, causing it to collapse a few generations later. Therefore I think we shouldn’t get to hung up about a definition, and rather keep the big picture in mind which I see as the overall improvement of the well-being of a country’s population through sustainable means.
Now that we have a definition or idea of what Economic Development is, we of course have to find a way to measure it. And once again we run into a problem, do we just look at a country’s GDP per capita? Of course this gives us an idea about the level of income a country’s people have, and with higher income generally comes a higher standard of living. However it doesn’t tell us anything about income equality, what if the top 1% own 80% of the nation’s wealth and the rest struggles to survive. It doesn’t tell us anything about informal economies either, what if many of those people with no statistical income are making a living with under-the-table work. Neither does it necessarily tell us anything about people’s education, health or happiness.
So it is important we use various statistics to measure Economic Development. Economic growth tells us how the economy is doing and how profitable a country is, Shared economic growth looks at the equity that is involved in that growth and whether it is fair and sustained economic growth tells us how good the growth is for the future. Two important numbers in measuring these are GNP (Global National Product) and HDI (Human Development Index)
Another useful way of looking at the level of development within a country can be done by taking a closer look at its industries. Depending on how far developed a country’s Primary (Agriculture), Secondary (Industry), and Tertiary (Services) sectors are we can divide countries in the categories undeveloped, developing and developed. Generally speaking the more developed a country the higher it’s Tertiary sector. However this method has its problems as well, what if a country’s Primary sector makes up only 10% of its GDP versus 60% in its Tertiary, but over 60% of the actual population works in the Primary sector while only 10% does in the Tertiary? The numbers would tell us this country is most likely developed, or at least developing. The largest part of the population however would most likely be living in poverty.
The last way to measure economic development I’ll discuss is HDI, or the Human Development Index. Although it is by no means perfect either I find this to be quite a good way of measuring. HDI looks at various factors such as literacy, life-expectancy, human-rights and other social aspects that influence quality of life to a great deal. It of course also takes into account economic aspects through the PPP (Purchase Power Parity) which looks at how much an average household’s income is worth within the country. If I were to pick a single statistic to measure development it would be this, however luckily we are not limited by such things and as such I’d recommend using a variety of statistics to determine development such as HDI, GDP, PPP, Doctors per capita, Economic data per sector, income equality, upward mobility and freedom indexes.
Do you agree or disagree with me, or have anything to add? Please tell me, because I’m always interested in other people’s perspectives.
Economic Development in Tanzania 