Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area. Economic development can also be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, regional competitiveness, environmental sustainability, social inclusion, health, safety, literacy, and other initiatives. Economic development differs from economic growth. Whereas economic development is a policy intervention endeavor with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist Amartya Sen points out: “economic growth is one aspect of the process of economic development.
The scope of economic development includes the process and policies by which a nation improves the economic, political, and social well-being of its people.
The University of Iowa’s Center for International Finance and Development states that:
‘Economic development’ is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industrialization are other terms people have used when discussing economic development. Although no one is sure when the concept originated, most people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism.
Mansell and Wehn also state that economic development has been understood since the World War II to involve economic growth, namely the increases in per capita income, and (if currently absent) the attainment of a standard of living equivalent to that of industrialized countries. Economic development can also be considered as a static theory that documents the state of an economy at a certain time. According to Schumpeter (2003), the changes in this equilibrium state to document in economic theory can only be caused by intervening factors coming from the outside.
The study of economic development by social scientists encompasses theories of industrial/economic modernization causes, the historical phases or waves of economic development, and the organizational aspects of enterprise development in modern societies. Economic development embraces sociological research on a variety of topics including: business organization, enterprise development, evolution of markets and management, and cross-national comparisons of industrial organization patterns. One example inquiry would be: “Why are levels of direct foreign investment and labour productivity significantly higher in some countries than in others?” In economics, the study of economic development was borne out of an extension to traditional economics that focused entirely on national product, or the aggregate output of goods and services. Economic development was concerned in the expansion of people’s entitlements and their corresponding capabilities, morbidity, nourishment, literacy, education, and other socio-economic indicators. Borne out of the backdrop of Keynesian, advocating government intervention, and neoclassical economics, stressing reduced intervention, with rise of high-growth countries (Singapore, South Korea, Hong Kong) and planned governments (Argentina, Chile, Sudan, Uganda), economic development, more generally development economics, emerged amidst these mid-20th century theoretical interpretations of how economies prosper. Also, economist Albert O. Hirschman, a major contributor to development economics, asserted that economic development grew to concentrate on the poor regions of the world, primarily in Africa, Asia and Latin America yet on the outpouring of fundamental ideas and models.[
In River state, economic growth and economic development are two synonymous factors which outlined competitiveness as the driving factor for successful economic development in government and industry. By addressing technology directly, to meet customer needs, competitiveness was fostered in the surrounding environment and resulted in greater economic performance and sustained growth
Economic development typically involves improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates. GDP does not take into account other aspects such as leisure time, environmental quality, freedom, or social justice; alternative measures of economic well-being have been proposed (more). Essentially, a country’s economic development is related to its human development, which encompasses, among other things, health and education. These factors are, however, closely related to economic growth so that development and growth often go together.
In its broadest sense, policies of economic development encompass three major areas:
• Governments undertaking to meet broad economic objectives such as price stability, high employment, and sustainable growth. Such efforts include monetary and fiscal policies, regulation of financial institutions, trade, and tax policies.
• Programs that provide infrastructure and services such as highways, parks, affordable housing, crime prevention, and K–12 education.
• Job creation and retention through specific efforts in business finance, marketing, neighborhood development, workforce development, small business development, business retention and expansion, technology transfer, and real estate development. This third category is a primary focus of economic development professionals.
One growing understanding in economic development is the promotion of regional clusters and a thriving metropolitan economy. In today’s global landscape, location is vitally important and becomes a key in competitive advantage. The cluster of similar industries, specialties, skilled laborforce, and technologies help lower transaction costs and foster a growing environment of commerce, entrepreneurship, exports, and other market productive activities. Additionally, local services such as restaurants, stores, and trades experience growth as well, helping to develop a vibrant region for the wider community. Even the U.S.’s Economic Development Administration recognizes the importance of clusters with their continued Regional Innovation Clusters initiative which aims to “create jobs and grow the economy” through the geographic concentrations of industries and firms in their need for talent, technology, and infrastructure.
International trade and exchange rates are a key issue in economic development. Currencies are often either under-valued or over-valued, resulting in trade surpluses or deficits.
Economic development has evolved into a professional industry of highly specialized practitioners. The practitioners have two key roles: one is to provide leadership in policy-making, and the other is to administer policy, programs, and projects. Economic development practitioners generally work in public offices on the state, regional, or municipal level, or in public-private partnerships organizations that may be partially funded by local, regional, state, or federal tax money. These economic development organizations (EDO’s) function as individual entities and in some cases as departments of local governments. Their role is to seek out new economic opportunities and retain their existing business wealth.
There are numerous other organizations whose primary function is not economic development work in partnership with economic developers. They include the news media, foundations, utilities, schools, health care providers, faith-based organizations, and colleges, universities, and other education or research institutions.
One unintended consequence of economic development is the intense competition between communities, states, and nations for new economic development projects in today’s globalized world. With the struggle to attract and retain business, competition is further intensified by the use of many variations of economic incentives to the potential business such as: tax incentives, investment capital, donated land, utility rate discounts, and many others. IEDC places significant attention on the various activities undertaken by economic development organizations to help them compete and sustain vibrant communities.
Additionally, the use of community profiling tools and database templates to measure community assets versus other communities is also an important aspect of economic development. Job creation, economic output, and increase in taxable basis are the most common measurement tools. When considering measurement, too much emphasis has been placed on economic developers for “not creating jobs.” However, the reality is that economic developers do not typically create jobs, but facilitate the process for existing businesses and start-ups to do so. Therefore, the economic developer must make sure that there are sufficient economic development programs in place to assist the businesses achieve their goals. Those types of programs are usually policy-created and can be local, regional, statewide and national in nature.
There is no doubt that no group of people can live in isolation of the other. No state or region can completely ignore her neighbours. The political and economic survival of any state depends on the type of relationship she maintains with her neighbours. The group relation implies series of contacts between different states or peoples, usually in form of trade, diplomatic ties, management of trade routes, boundaries and water resources and was among others. The need for such inter group relations in the early times was to ensure good relations with one another. To ensure this, a state would have to recognize the territorial integrity of other states in its neighbourhood. Also, it would have to promote peaceful relations through trade, inter-state tours by the rulers or their representatives, inter-marriages and the establishment of diplomatic relations.