Economic Growth versus Economic Development: Toward a Conceptual Clarification

Article excerpt

Institutional and heterodox economists have long since drawn the conceptual distinction betwee economic growth and development. This paper will further clarify this distinction, one not usually incorporated in the mainstream of modern economic analysis.

Given the paradigmatic boundaries of mainstream economics, it is assumed that the quantitative statics of economic growth are synonymous with the processes of economic development. Problems and questions relevant to the dynamics of institutional adjustment, to the transformation of values, and to the impact of technology on cultural evolution, among others, are kept outside the boundaries of analysis and policy formulation.

Scientific Conception and Paradigmatic Boundaries

Some ecognition of the problem is evident in the older literature of development economics. A frequent distinction was made in which growth referred to a quantitative increase in GNP/capita and development entailed something more. Usually development was conceptualized as qualitative changes in institutions and structure, relevant to the "noneconomic" variables emphasized (among others) by Gunnar Myrdal. The current orthodoxy, as a variant of the "neoclassical synthesis," avoids this distinction and tends to treat the two terms as conceptual equivalents.(1)

In the post-World Was II era, it was often assumed that since the ACs (advanced countries) were already developed, their principal problem was that of economic growth. The mainstream theories of economic growth were then considered to suffice for the nations already developed. Consequently, ". . . in Western postwar thinking and writing, economic development was interpreted as virtually synonymous with economic growth" [Arndt 1987, 2, 49-88]. "Distinguishing between the two concepts does not seem worth while . . ." [Dorfman 1991, 573; Henry 1987].

The neoclassical methodology is clearly representative of a static analysis or, at best, one of comparative statics. But the analysis fails to explain the dynamics of transformation (development), or the processes of flux, which take place between each equilibrium position. Fundamental to the objectives of this paper is a conceptual distinction between "statics" and "dynamics."(2) As used in theis paper, a static analysis deals with changes within a structure but does relate to atransformation of the structure. By comparison, a dynamic analysis deals with asequential pattern of structural transformation as a process through which one structure gives rise to the next.

Macroeconomics, in the framework of the Keynesian cross, also pertains to "comparative statics" as one equilibrium position is compared to another. It is not simply the short-run focus of the analysis that makes Keynesian economics static in nature.(3) The prerequisite dynamics of technological and structural transformation are clearly outside the paradigmatic boundaries of the Keynesian matrix. Consequently, it is inadequate to explain the social and cultural transformation structure that would be necessary in any theory of the dynamics of economic development and evolution.

Roy Harrod and Evsey Domar sought adynamic theory to overcome the comparative statics inherent in the Keynesian approach. But the Harrod-Domar theory of economic growth was not really meant to engage the dynamics of technological change, in an holistic sense, or to be atheory of economic development.(4) The economics profession was "caught off guard" in the immediate post-World War II period in that ". . . they had no readily available conceptual apparatus . . ." to deal with the Third World.(5) A theory of development was very much needed and desired.

One way to make the Harrod-Domar theory of economic growth relevant to economic development woukd be to assume that economic growth is the conceptual equivalent ofeconomic development. Assuming the conceptions to synonymous meant that theories of economic growth could then be considered, ipso facto, to be theories of economic development. …