Difference Between Economic Growth and Development

by John Willis; Updated September 26, 2017
recovery and recession on green road sign

Economic growth and economic development are closely related but not synonymous. Growth can exist independent of the state of economic development. Conversely, development can exist independent of economic growth. The distinction is often one of timing. Economic development is essentially investment in an economy; economic growth is increased production of an economy.

Economic Growth

Economic growth is a measure of increased productivity; productivity, in turn, is measured by the dollar value of goods and services produced. Nationally, economic growth is most often measured in terms of the gross national product. Because economic growth attempts to measure productivity by showing the total dollars paid for goods and services, GNP, or total productivity, typically rises due to inflation, so economic growth is adjusted for inflation.

Economic Development

Economic development is the process of investing in an economy in anticipation of economic growth. Examples of economic development range, from building roads and bridges for commerce to supporting universities for research and innovation. Economic development is generally geared toward helping businesses start up, grow or relocate to a specific area.

Why Economic Growth is Independent of Development

In economics, the term "leading indicator" refers to a measurable financial factor, such as inflation, which tends to predict a future economic event, for example, a decrease in the money supply. Conversely, a trailing indicator is a quantified measure that indicates something has already happened. For example, job growth is a trailing indicator of economic expansion. These concepts are important in describing economic sequences, cause and effect. Economic growth generally follows economic development. For example, a third world country may be suffering economic recession (decreasing total incomes) while attempts at economic development are taking place. So, economic growth is often a trailing indicator of economic development.

Why Economic Development Is Independent of Growth

Businesses and economies have always been subject to business cycles. Economists do not fully understand why business cycles happen, but they are predictable. Products have a life cycle. Things come in and go out of vogue. Capital equipment, such as buildings and machinery, wear out. Technology and intellectual property become obsolete. An economy may be having an enormous surge in growth (income) while there is little or no investment in the renewal of the economy.

About the Author

John Willis founded a publishing company in 1993, co-writing and publishing guidebooks in Portland, OR. His articles have appeared in national publications, including the "Wall Street Journal." With expertise in marketing, publishing, advertising and public relations, John has founded four writing-related ventures. He studied economics, art and writing at Portland State University and the Pacific Northwest College of Art.

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