Economic development and development economics

Economic development and development economics are related concepts that refer to our efforts to understand and eradicate the economic disparities that exist between nations, as well as between regions within individual countries, and even between neighboring communities. While socioeconomic inequality has existed since the establishment of human settlements, our current understanding of these concepts emerged after World War II, primarily as a result of the American perspective that part of its post-war obligation/mission was to modernize the so-called underdeveloped nations of the world. This initiative became the mandate of the so-called Bretton Woods organizations (World Bank, International Monetary Fund, and what would later be known as the World Trade Organization).

Economic development is the action of increasing the socioeconomic status of a group, as a result of the establishment of enabling policies, or through community-based initiatives. Both the mechanisms and the products of development can include such aspects as increasing the stock of human capital through education and training programs, or building the critical infrastructure necessary to support economic activity. In all cases, organizational development, adoption of appropriate technologies, and access to supportive institutions are critical to success.

When evaluating economic development, it is critical to recognize that it is distinct from economic growth. It is quite possible, and actually all too common, for the financial status of a nation or region to increase rapidly, without experiencing a parallel increase in the overall standard of living of its people, or developing mechanisms through which the area can become self-sustaining. The primary factor driving this sort of skewed development is most often the exploitation of natural resources, such as oil or, more recently, rare earth minerals used in the production of microelectronic devices.

Development economics refers to the branch of economics devoted to creating and testing theories and methods that can explain, measure, and potentially offer courses of action to raise global levels of prosperity. Conventional development theories have been criticized as being ethnocentric (US/European) and universalistic (only one way). In contrast, post-development theory, which is based on the experience of initiatives in Africa, India, and Latin America, proposes that effective solutions need to be local and pluralistic. Beyond standard economic measures, such as per capita GDP, development economists are now advocating the use of the genuine progress indicator (GPI), which is a more holistic and inclusive measure because it balances conventional productivity indices with estimates of environmental and cultural costs, such as resource depletion, environmental damage, health impact, and the percentage of the population relying on government support.

Even at the level of the individual organization, both economic development and development economics are critical to successful change management initiatives, and therefore to establishing long-term sustainability. One way to think about this is to view economic development as reflecting a rather isolationist perspective, while development economics represents more holistic concerns. Too much of a focus on either of these perspectives, at the expense of the other, will result in long-term failure, even in the presence of outstanding short-term gains. At least in part, Donald Trump was elected on a platform of economic development that demonized development economics. As a result, both America and the rest of the world will suffer.


About Robert A. Campbell, PhD

Robert A. Campbell, PhD, teaches courses in change management, leadership, and organizational behavior, as part of the MBA program in community economic development, for the Shannon School of Business at Cape Breton University.
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