ECONOMIC GROWTH AND DEVELOPMENT
Economic growth is the quantitative increase in national income produced in an economy.OR Economic growth is the increase in the market value of the goods and services produced by an economy over time.It is conventionally measured as the percent rate of increase of real gross domestic product, or real GDP.
Economic concerned with increase in size of national income / growth National product (GNP, Therefore economic growth concerned with increase in level of output produced in an economic without considering social and political aspects of the economic.
DETERMINANT OF ECONOMIC GROWTH
The level of economic growth may determined by various factor. There are:-
1. Availability of Natural resources (Natural endowment )
Natural resources may include all natural endowment such as soil, forests, minerals resources, climatic situation and so on. Therefore if country endowed with that resources and well used in production size of output will increase (economic growth) and if not available will course low level of economic growth.
2. Human factor / availability of quantity and quality labor force -country which has strange number of labor force and high quality(skilled labor), these labor may engage in production activities and make effective utilization of Natural resources which lead to high economic growth , While unavailability of skilled and unskilled labor course low rate of economic growth.
3. Technology progress /state of technology. -Improvement in state of technology may cause people to use modern tools in production process which cause large production and economic growth while low level of technology also may lead to lower economic growth.
4. Availability of capital and capital accumulation. -Country with high level of capital and being able to accumulate capital will be able to produce more goods and services while country with less capital will produce less and lead to low level of economic growth.
5. Political situation: – This includes political stability and instability, country with political and social stability create conducive environment for investment and production which lead to high rate of economic growth , while political and social instability discourage investment and production which cause low rate of economic growth.
6. Investment and economic policies of government formula, conducive economic and investment policies such as low tax increase in subsidies, less documentation and procedure in investment may encourage investment and cause high rate of economic growth and poor policies may hinder economic growth, economic policies also includes improved economic infrastructure, economic stabilization policies etc.
7. Availability of entrepreneur and entrepreneurial ability -country with large number of entrepreneurs and many people with entrepreneurial ability will be able to establish and run successful business unit that will produce more goods and services and high rate of economic growth while less number of entrepreneur reduce investment and economic growth in an economy.
EFFECTS OF ECONOMIC GROWTH IN AN ECONOMY
Economic growth in a country like Tanzania may have both positive and negative effects.
1. POSITIVE EFFECTS OF ECONOMIC GROWTH
1. Increase in per capital
Economic growth cause increase in output produced and National income (GNP) this may cause rise in per capital income which may be associated with improved living standards.
2. High level of employment
Increase in production of goods and services cause increase in demand for factors of production which lead to the increase in employment level i.e. employment of labor
3. Rapid industrialization
Economic growth facilitate increase in demand for industrial goods and increase in production will may cause increase in industrial activities in an economy
4. Improvement in economic infrastructure
Population/ government may enjoy improved infrastructure due to their economic growth because government and private sector may improve road, railways, airways and communication system when economic growth occur.
5. Diversification of an economy
When there is economic growth, country may enjoy diversified economy. Because, economy may grow well if there is diversified economy i.e. economy composed of many sectors which are almost equally development.
6. Increase in utilization of resources
High economic growth means resources are well utilized in production, therefore these may give effects of effective/high utilization of resources.
7. Growth of town / urbanization
Due to economic growth of economic activities such as industrial and trading activities may cause growth of towns or urbanization in an economy.
NEGATIVE EFFECTS OF ECONOMIC GROWTH
Apart from positive effects economic growth may have Negative effects in an economy, these are:-
1. Environmental degradation
Due to rapid economic growth and industrialization, environmental degradation such as pollution, deforestation, soil erosion may occur in a country.
2. Over exploitation and wasteful utilization of resources.
Economic growth cause excessive demand for economic resources like soil, mineral, which then cause over exploitation and exhaustion of such resources.
3. Income inequality and unequal development
Economic growth does not consider how income distributed among people in a nation and unequal distribution of industries and development in a country.
4. Rural – urban irrigation
This may occur due to increase in economic activities in urban areas while rural area lag behind, this will attract many people to leave rural to urban so as to get employment and enjoying urban area, this reduce level of economic activities in rural areas.
ECONOMIC DEVELOPMENT
This is the quantitative and qualitative improvement in an economy it includes improvement in welfare of people.
Some of definitions by different economists.
According to Higgins
‘Economic development is a permanent rise in total and per capital income of a country, widely diffused throughout occupational income groups continuing at least for two generation and becoming cumulative’
According to Adleman who provide broads definition
“The process by which an economic development transferred from one whose rate of growth of per capital income is small or negative to one in which a significant self –
sustained rate of increase of per capital income is a permanent long run feature.”
Therefore economic development measured by change in National income of an economy over a long period of time and changes in per capital income.
INDICATORS OF ECONOMIC DEVELOPMENT