Economic development – definition and meaning

Economic development – definition and meaning

Economic development is a concept that refers to a country's ability to generate wealth. In addition, this should be reflected in the quality of life of residents.

That is, economic development is a term related to the productive capacity of a nation. But it is also linked to the well-being of citizens.

Some signs of development are:

  • High quality of life for residents
  • Distribution of income relatively evenly.
  • Sustainable economic growth.

Features of economic development

Some of the key features of the development are:

  • Production capacity close to its potential: The country uses its potential resources. That is, there is very little idle capital.
  • Sustainability: Economic growth is sustainable and has good fundamentals
  • Income redistribution: There may be inequality in income distribution. However, this does not prevent the majority of the population from enjoying a high quality of life. Thus, the most disadvantaged people receive assistance to improve their situation.
  • Environmental awareness: Maintaining the level of quality of life does not mean mortgaging/amortizing the natural resources used in production.
  • Human capital development: People's professional skills are not only developed but also empowered.
  • There is a social system: Public institutions perform their functions appropriately and citizens can trust them.

Determinants of economic development

Below, we present several factors that affect a country's ability to achieve development. Although it is not all necessary.

  • Natural Resources: Access to raw materials and energy sources.
  • Political stability: There is a small possibility that the authorities will not serve their term.
  • Efficiency of state administration: The public administration was able to achieve its goals.
  • Control corruption: Prevent and punish acts such as bribery of public officials in exchange for services.
  • Participatory residents: A community interested in participating in the political and economic decisions taken in the country.
  • Access to education and Basic needs are covered. This is the first step towards achieving a good level of human capital.
  • Investing in innovation and development: The government allocates resources to support, for example, new business ideas.
  • Openness to foreign trade: Actions such as signing trade agreements that allow increased exchange of goods and services with other countries.
  • Environmental care: The government and the private sector are developing plans with sustainable development in mind. Hence, it is expected, for example, that natural resources are exploited wisely, avoiding their extinction.
  • Legal security: The government guarantees the protection of the rights of residents.

There is no single formula for achieving and maintaining development. But in general, the countries that achieved this had a long-term vision. Therefore, they mainly invested in their population to enhance their economic and social growth.

Example of economic development

Some countries considered developed are Switzerland, Finland, and Germany. These have a population with access to education and the potential to develop personally and professionally.

The vast majority of the population of developed countries have their basic needs. Moreover, they understand the importance of protecting the environment.

In contrast, countries such as Uganda, Kenya, Bolivia and Venezuela did not achieve development. In these places, a certain group of the population has unmet basic needs, leading to health problems and malnutrition. Moreover, technology is outdated, and natural resources are underutilized.

Study of economic development

Development economics is a branch of economics. Its purpose is to study the process by which countries achieve greater well-being. Thus, microeconomic and macroeconomic analysis techniques are combined.

The aim of this topic is to analyze the factors that determine development. In this way, it includes not only quantitative aspects (production, wealth or productivity), but also qualitative aspects (such as quality of life, security or environment).

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