Social accounting and global trade – Part 3

IT IS always good to communicate with you all through this medium. I sincerely hope that you are doing well and that you are really getting into the principles of business syllabus. As we get closer to the final examination, it would be in your best interest to begin looking at and practising past-paper questions. It would also be good for you to do some serious revision, especially the areas that you find difficult to grasp. Let us now look at economic development and economic growth.

THE DISTINCTION BETWEEN ECONOMIC GROWTH AND DEVELOPMENT

Economic growth is a quantitative concept, i.e., it deals with numbers or figures or amounts. It refers to the real growth in, or expansion in, national output, and is most often measured in terms of real gross domestic product (GDP).

The concept of economic growth is positive; this means it always refers to an increase in output. Negative growth, while quantitative, as is economic growth, refers to a decrease in the national output.

The production possibilities frontier can be used to illustrate economic growth. A production possibilities curve is a curve showing all the possible combinations of two goods that can be produced using up all the resources and at a given state of technology. When economic growth takes place, the production possibilities curve shifts to the right.

The curve may shift to the right and economic growth results if either the productivity of labour or other factors of production improve, if there is an improvement in technology, or if there is an increase in resources.

Try to find a diagram of a production possibilities curve. Copy it into your notebooks and then shift the curve to the right. The first curve represents production possibilities for the country NOW and the second one will represent the production possibilities at a future date, for example, five years later.

Economic development is qualitative and refers to the process by which the standard of living and the well-being of the entire nation are improved by raising real per capita income. Economic well-being is concerned with the quality of housing, clothing, education, food, health, peace of mind, security, eradication of poverty and eradication of inequalities in income and wealth, etc. If any of these factors increase, there will be economic development.

Human resource development looks at improving the human resources of labour and the entrepreneur. Improvement of labour and the entrepreneur means that the productivity of both will increase. In turn, there will likely be an increase in economic growth and development.

The human resource can be improved through education, training or retraining, improved health facilities, improved working conditions and an improvement in the factors of production that they have to work with.

THE ROLE OF EDUCATION IN ECONOMIC GROWTH AND DEVELOPMENT

Improved education and training means that labour and the entrepreneur will now have more knowledge to increase the national output and improve the well-being of the nation. Through education and training, labour might learn new and more efficient methods of production and thereby increase the overall output. The entrepreneur may learn how better to organise and bear risks, thereby causing improved output and improved economic well-being. Education, thus, improves the productivity and efficiency of both of the human factors.

Now for your homework assignment: (a) Distinguish between economic growth and economic development. (6 marks)

(b) Why is economic growth regarded as a quantitative concept while economic development is regarded as a qualitative concept? (4 marks)

(c) Discuss TWO factors that might result in economic growth and TWO factors that might result in economic development. (8 marks)

(d) Explain ONE way in which education can cause economic growth and development. (2 marks)

Total marks: 20

See you next week.