Economic Growth and Economic Development

Economic Growth and Economic Development

Economic Growth and Economic Development

Economics is the social science which teaches us how to make optimum use of scarce resources. The economic system adopted by various countries can be capitalism, socialism and mixed economy. Each economy has to take three important economic decisions which are:

1. What to produce?

2. How to produce?

3. for whom to produce?

In capitalism such economic decisions are taken by private entrepreneurs and they are guided by profit motive. Consumer is supposed to be the king in capitalist economy. Only those goods are produced which are demanded by consumers. Producers use such raw materials and adopt the method of production which will cut down their cost of production. Goods will be produced for those consumers who have effective demand. The success of capitalist economy depends on competition between various economic entities. In the absence of competition, capitalist economic system can become monopolistic and lead to exploitation of consumers.

In the socialist economy, the three important economic decisions are taken by state or government and it is guided by public or community or social welfare in its decision making. The mixed economy is the combination of capitalism and socialism, with the objective of reaping gains of both economic system and eliminating or avoiding their weakness.

We are living in the border less world economy which ischaracterizedby privatization, liberalization and globalization. Then there are certain international economic organizations which are working to make international trade transparent, reduce and eliminate tariff and non-tariff barriers to international trade.

Some other international economicorganizationsare helping and assisting the developing economies and less developed economies to implement the programmes of economic development and social welfare. The ultimate objective is to promote environment friendly sustainable development, increase gainful employment opportunities, improve standard of living, eradicate poverty, eradicate hunger and illiteracy, and increase production and international trade.

But what we find today is that with all noble objectives and efforts, developing economies face the huge problem of unequal distribution of income and wealth. There has been economic growth in the form of increase in Gross National Income and Gross per capita income but then economic development is yet to be properly achieved. If one look at literacy, employment opportunities, and standard of living in the developing economies, then still lot needs to be done and achieved. The unequal distribution of income if it is coupled with high inflation rate is a sure problem for the bulk of the population in developing countries. The increase in the price of necessities like food items and fast moving consumer goods reduces the real income of consumers, adversely affect their savings and diminishes their standard of living. The only solution is to increase the production of food grains, develop irrigation facilities, adopt modern farming techniques, and eliminate hoarding, adulteration, speculation and black marketing. Economic development needs to gets equal significance with economic growth.

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