ECONOMIC GROWTH AND DEVELOPMENT

Group 8Cawagas, Fedelene JoyDeleste, Krisha Nicole

De Juan, RoevarcFalsis, Hamuel Illiel

Gaitan, Aurora Demi Doreen

Tumabotabo, Anne Rae

What is Economic Growth?• Increase in a country's

real level of national output.

• Increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy.

• Does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. 

• Measures an increase in Real GDP. (real Output). ▫ GDP is a measure of the

national income / national output and national expenditure. It basically measures the total volume of goods and services produced in an economy.

Economic Development

• Increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice.

• Most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth.

• Leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment.

• Implies an increase in the per capita income

•  Is concerned with how people are actually affected.

• Looks at the actual living standards of every citizen.

Economic Development versus Economic GrowthEconomic Development

Economic Growth

Implications

Economic development implies changes in income, savings and investment along with progressive changes in socio-economic structure of country (institutional and technological changes).

Economic growth refers to an increase in the real output of goods and services in the country.

Factors

Development relates to growth of human capital indexes, a decrease in inequality figures, and structural changes that improve the general population's quality of life.

Growth relates to a gradual increase in one of the components of Gross Domestic Product: consumption, government spending, investment, net exports.

Measurement

Qualitative.HDI (Human Development Index), gender- related index (GDI), Human poverty index (HPI), infant mortality, literacy rate etc.

Quantitative. Increases in real GDP.

Continuation…

Effect

Brings qualitative and quantitative changes in the economy

Brings quantitative changes in the economy

Relevance

Economic development is more relevant to measure progress and quality of life in developing nations.

Economic growth is a more relevant metric for progress in developed countries. But it's widely used in all countries because growth is a necessary condition for development.

ScopeConcerned with structural changes in the economy

Growth is concerned with increase in the economy's output

Stages of Economic Growth and Development

Rostow's stages of growth•Walt Whitman Rostow•Born 1916•American economist and political theorist•Johnson’s Special Assistant for National

Security Affairs•A staunch anti-Communist•A champion of capitalism and free

enterprise•Author ofThe Stages of Economic Growth:

A non-Communist Manifesto (1960)

•Rostow’s stages of economic growth identifies 5 stages of development, applicable to all societies, but viewed from a market perspective.

•The Stages of Economic GrowthModernization occurs in five basic stages

▫Traditional society▫Pre-conditions for take-off▫Take-off▫Drive to maturity▫Age of high mass consumption▫All countries go through these stages fairly

linearly

TRADITIONAL SOCIETIES• Fatalistic • Norms of economic growth are completely

absent in a traditional society• Believing that humans have limited capacity to

change the world• Weak national government

PRECONDITIONS TO TAKE-OFF• A strong national government• Popularization of secular education • Capital mobilization for productive purposes• Rise of entrepreneurial class• Start of manufacturing

TAKE-OFF•Start of sector-led growth•Society driven by economy rather than

traditions•Society in transition to a modern economy

DRIVE TO MATURITY•Diversification of production•New sectors taking shape•Reduced poverty & rising living standards

AGE OF HIGH MASS CONSUMPTION•A society of general affluence •Durable goods as opposed to subsistence

concerns•Arts and music as opposed to money and

prestige

Backwardness model

n Alexander Gerschenkronn"If you don't move forward, sooner or

later you begin to move backward."nIs often contrasted with Rostovian take-off

model, which is more linear ans structuralist - planning it out with different stages.

The more backward the economy:

•The more likely intervention by special institutions will be necessary to properly channel physical capital and human capital to industries.

•The greater the emphasis on the production of producer goods than consumer goods.

•The greater the emphasis on capital-intensive production rather than labor-intensive production.

The more backward the economy:•The greater the scale of production and

enterprise.•The greater the reliance on borrowed

rather than indigenous technologies.•The smaller the role of the agricultural

sector as a market for new industries.•The greater the reliance on productivity

growth.

Formula for calculating

Economic Growth

where GDP = previous year GDP GDP₂ = present year GDP

We can express the rate of growth in, for example, the period 2004-2005, as follows:Growth rate of GDP = [GDP(2005) -

GDP(2004)]/ GDP(2004) × 100

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 used in calculating the

Gross National Product

Gross national product (GNP) is the total value of final goods and services produced during a given period by the citizens of a country no matter where they live. The goods and services are produced by the “nationals” of a country.

GNP are expressed in monetary terms, thus rely on the markets to establish the relative values of goods and services.

The formula for GNP is:

GNP = Consumption + Government Expenditures + Investments + Exports + Foreign Production by U.S. Companies – Domestic Production by Foreign Companies

How it works :GNP includes income earned by citizens

and companies abroad, but does not include income earned by foreigners within the country.

The figures used to assess GNP include the manufacturing of tangible goods (cars, furniture and agricultural products) and the provision of services (education, healthcare, and business services).

GNP does not include the services used to produce manufactured goods because their value is included in the price of the finished product.  However, GNP does include depreciation and indirect business taxes like sales tax.

Methods used to assess Economic Development

Methods used to assess Economic Development•GNP per capita•Population Growth •Occupational Structure of the Labor Force•Urbanization •Consumption per capita•Infrastructures

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.

Population Growth

In general, poorer countries have more rapid rates of population growth thus affecting their economic development in a way that there is an unequal distribution of goods and services especially among large, poor families.

Occupational Structure of the Labor Force As countries develop, the occupational

structure of the labor force changes. In least developed countries, most people are engaged in primary activities like agriculture, fishing, mining and lumbering. In high income countries like the United states most people are involved with the tertiary sector like retailing, transportation, education and banking. The better the labor force opportunities signifies a more developed country.

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.

Consumption per capita

Consumption per person is a good indicator of development. The richer a country is, the more its citizens consume. 

InfrastracturesA country's infrastructure is defined by our

author as "the foundations of a society: urban centers, transport networks, communications, energy distribution systems, farms, factories, mines, and such facilities as schools, hospitals, postal services, and police and armed forces."

For instance, the development of the transportation system as a measure of its length per area of land has a greater degree of economic development assumed because of its transportation infrastractures.

Issues and Problems on Economic Growth

•Garbage • Pollution

•Over Population

• Corruption

•Depletion of our natural resources

• Congestion

• Cheap imports and developing market of exports

• Loss of Biodiversity

List of Countries according to Stages of Economic Growth.

Rank Country Value

1 Switzerland 5.7

2 Singapore 5.6

3 United States 5.5

4 Finland 5.5

5 Germany 5.5

6 Japan 5.5

7 Hong Kong SAR 5.5

8 Netherlands 5.5

9 United Kingdom 5.4

10 Sweden 5.4

Top 10 Competitive Countries in the World 2014-2015 report

Source: http://reports.weforum.org/global-competitiveness-report-2014-2015/

Rank

Country HDI Score

1 Norway 0.944

2 Australia 0.933

3 Switzerland 0.917

4 Netherlands 0.915

5 United States 0.914

6 Germany 0.911

7 New Zealand 0.910

8 Canada 0.902

9 Singapore 0.901

10 Denmark 0.900

10 Most Developed Countries in the World 2015 (HDI)

Source: http://www.richestlifestyle.com/10-most-developed-countries-in-the-world/

Rank Country GDP per Capita (est.)

1 Qatar $145,894

2 Luxembourg $90,333

3 Singapore $78,762

4 Brunei $73,823

5 Kuwait $70,785

6 Norway $64,363

7 United Arab Emirates

$63,181

8 San Marino $62,766

9 Switzerland $53,977

10 United States $53,001

Top 10 Richest Countries 2015

Source: http://mixtopten.com/top-10-richest-countries-for-2015/