Understanding the Differences in Economic Development and Economic Growth

Understanding the Differences in Economic Development and Economic Growth – Economic growth is an increase in Gross Domestic Product (GDP), without estimating whether it will have an impact on growth or population growth. Meanwhile, economic development is a multidimensional process of social change. Well, there are several differences between economic growth and development! Check out a more detailed explanation of the two below:

Definition of Development and Economic Growth

Economic development cannot be separated from economic growth; Economic development encourages economic growth, and conversely, economic growth facilitates the process of economic development. What is meant by economic growth is the process of increasing the production capacity of an economy which is manifested in the form of an increase in national income.

A country is said to experience economic growth if there is an increase in real gross national product (GNP, GNP) in that country. Their economic growth is an indication of the success of economic development.

The difference between the two is that the success of economic growth is more quantitative, namely an increase in income standards and the level of production output produced, while economic development is more qualitative in nature, not only increasing production, but also changes in the structure of production and the allocation of inputs to various sectors. economic sectors such as in institutions, knowledge, social and technical.

As discussed above, growth and economic development are two different things and Sinaumed’s can study these two things more deeply together with other economics through the book Introduction to Economics below.

Furthermore, economic development is defined as a process that causes the per capita income of the population to increase in the long run. Here there are three important elements related to economic development.

Development as a Process

Development as a process, means that development is a stage that must be lived by every society or nation. For example, humans are born, do not immediately become adults, but to become adults must go through the stages of growth. Likewise, every nation must go through stages of development towards a just, prosperous and prosperous condition.

Development as an effort to increase per capita income

As a business, development is an active action that must be carried out by a country in order to increase per capita income. Thus, the participation of the community, government, and all elements in a country is needed to actively participate in the development process. This is done because the increase in per capita income reflects an improvement in social welfare.

The increase in per capita income must take place in the long term

An economy can be said to be in a developing state if per capita income tends to increase in the long term. This does not mean that per capita income must increase continuously. For example, if a country experiences a natural disaster or political turmoil, it will cause the country’s economy to experience a setback. However, this condition is only temporary, the most important thing for the country is that its economic activity has increased on average from year to year.

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To better understand the existing economic development in Indonesia, Sinaumed’s can see the book Multilateral Policy and Indonesian Economic Development which was compiled by researchers from the Fiscal Policy Agency.


Differences in Economic Development and Economic Growth

Economic growth, namely the increase in national income, is a form of a process of increasing production capacity. So, in more detail, you can see the process of economic growth from the differences in the characteristics below:

  • Economic growth or economic growth is a condition in which economic activities or activities cause increases and increases in goods or services produced by the community.
  • Economic growth is characterized by an increase in per capita output, and in the long term.
  • Economic growth is a process and not a picture of the state of the economy at a certain time.
  • In Economic Growth there are 2 sides that must be considered, namely total output (GNP) and the second side is the number of occupations.
  • Economic growth is an indicator of successful development.

Economic Development Economic development is always identified with an increase in the per capita of society, this is also called a fundamental change or fundamental change.

  • Economic of Development) namely efforts to increase the standard of living of a nation based on real per capita income.
  • Economic development is a process or situation in which a transition occurs from a simple to a more advanced level.
  • For economic development, visible change is a multidimensional process which must cover societal attitudes, social structures, and even national institutions.
  • Economic development stimulates or stimulates an increase in national income and per capita income as a form of economic growth.
  • Economic development is always a process that can increase economic growth.

Factors Influencing Development and Economic Growth

There are several factors that influence economic growth and development, but in essence these factors can be grouped into two, namely economic factors and non-economic factors.

1. Economic Growth Factors

Factors that influence economic growth and development include natural resources, human resources, capital resources, and expertise or entrepreneurship.

Natural resources, which include land and natural resources such as soil fertility, climate or weather conditions, forest products, mining and marine products, greatly influence the growth of a country’s industry, especially in terms of supplying raw materials for production. Meanwhile, expertise and entrepreneurship are needed to process raw materials from nature, into something that has a higher value (also known as the production process).

Human resources also determine the success of national development through the number and quality of the population. A large population is a potential market for marketing production results, while the quality of the population determines how much productivity there is.

Meanwhile, capital resources are needed by humans to process these raw materials. The formation of capital and investment is aimed at exploring and processing wealth. Capital resources in the form of capital goods are very important for the development and smooth running of economic development because capital goods can also increase productivity. Non-economic factors include socio-cultural conditions that exist in society, political conditions, institutions and systems that develop and apply.

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In understanding economic growth better, the Convergence of Economic Growth book below can be studied by Sinaumed’s which contains an analysis after the implementation of regional autonomy in Indonesia.



2. Economic Development Factors

Economic Development Factors include Natural Resources (SDA) in question are such as land, water, air and everything in it. In the sense of all available resources and can be utilized. Human Resources (HR), namely Human Resources who are qualified, competitive, and have soft skills in developing creativity, as well as:

  • Empowerment of human resources, if development makes humans as objects as well as subjects, then it is carried out by humans and for the welfare of humans themselves. So, humans as objects must be productive in producing products that are creative and have high competitiveness and selling power.
  • Sources of Capital – The size of capital is also a factor that will affect economic growth, usually there is an increase in the addition of production activities. Economic growth is usually supported by several aspects such as increased production aspects, technological and educational developments, increased investment, increased national income, growth in population quantity, and management quality.
  • Infrastructure – The link between growth and economic development is the existence of the right infrastructure for and on target so it can facilitate economic growth. This condition has resulted in economic development as an alternative for equalizing economic growth and development. Economic activity is oriented towards growth and development which is based on noble character, has spiritual material elements, elements of the world and even elements of the hereafter.
  • Socio-Cultural – Independent development whose purpose is independent is to avoid dependence. For example, you cannot rely on a country for the supply of weapons, so you have to be independent so you can meet their needs independently.
  • Government System – Continuation development, of course, has plans and measures so that development is not redundant or lacking, of course it is sustainable step by step. Not big on one side and little on the other. Improvement and growth as well as economic development can also increase world confidence in the existence of a nation. Preferably, the quality and quantity of educational institutions is the most highlighted indicator in a nation. Human development and empowerment are subjects in economic development activities.

Recommendations for Economic Books and Articles

For those of you who are studying economics, here are some recommendations for studying economics that you can have:

1. Globalization, Constitutional Economics, and the Economics Nobel

2. Monetary Economy: Case Study of Indonesia

3. Indonesian Economic Politics