What is the difference between growth and development, and how can poorer countries develop?
The difference between economic growth and economic development, measures of development, the barriers to development, and the strategies used to promote it.
An answer to AQA A-Level Economics 4.2.8, covering the difference between economic growth and economic development, measures of development such as the HDI, the barriers to development, and the strategies used to promote it.
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What this dot point is asking
AQA wants you to distinguish economic growth from economic development, explain how development is measured, identify the barriers to development, and evaluate the strategies used to promote it. This is a synoptic topic that draws on growth, trade and exchange rates.
Growth versus development
Growth is usually necessary for development but not sufficient: growth can occur without development if its gains are narrowly distributed, come at the cost of health and the environment, or rely on depleting natural resources. Conversely, the income generated by growth provides the tax revenue and savings that fund the schools, hospitals and infrastructure that development requires.
Measuring development
The HDI's strength is that it captures more than money, but it still omits inequality, gender, political freedom and environmental sustainability. Wider measures such as the Inequality-adjusted HDI, the Multidimensional Poverty Index and the Gender Inequality Index address some of these gaps. The lesson for the exam is to use several indicators rather than relying on GDP per capita alone.
Barriers to development
Common barriers include low savings and investment (the savings gap, central to the Harrod-Domar model, where low incomes mean low saving, low investment and low growth), poor infrastructure and human capital, weak institutions and corruption that deter investment, dependence on primary product exports with volatile prices (the Prebisch-Singer hypothesis of declining terms of trade), high external debt burdens that divert revenue to interest, rapid population growth that dilutes capital per person, and conflict and political instability.
Strategies to promote development
- Market-oriented. Trade liberalisation and export promotion, attracting foreign direct investment, expanding microfinance and access to credit, and removing barriers to enterprise and property rights.
- Interventionist. Investment in education, healthcare and infrastructure to build human and physical capital, industrial policy to develop manufacturing, and the use of aid and debt relief to fund development.
Each strategy involves trade-offs. FDI brings capital and jobs but can repatriate profits and be footloose; aid can fund essentials but may foster dependency or be misused; trade can drive growth but can also expose a country to volatile world prices. The best mix depends on a country's specific barriers.
Exam-style practice questions
Practice questions written in the style of AQA exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
AQA 20196 marksExplain why a rise in real GDP per capita may not indicate an improvement in economic development.Show worked answer →
A 6 mark question rewards several distinct, developed reasons.
- Distribution
- A higher average can mask widening inequality, so the poor may gain little if growth accrues to a small elite.
- Composition and quality of life
- GDP ignores health, education, freedom and environmental quality; growth from polluting industry may lower well-being.
- Non-marketed activity and the informal economy
- Subsistence and informal output are poorly captured, so the figure misstates real living standards.
Markers reward at least two or three of these, each developed, and a clear link back to development being broader than income. The HDI is a good supporting reference.
AQA 20229 marksAssess whether attracting foreign direct investment is the best strategy for promoting development in a low-income country.Show worked answer →
A 9 mark assessment question needs both sides and a judgement.
- Benefits of FDI
- Brings capital to fill the savings gap, creates jobs and incomes, transfers technology and skills, and can boost exports and tax revenue.
- Drawbacks
- Profits may be repatriated, multinationals may exploit cheap labour or resources, capital can be footloose, and it may crowd out domestic firms.
- Alternatives
- Compare with investment in human capital and infrastructure, trade liberalisation, microfinance, aid and debt relief.
- Judgement
- FDI can be powerful but works best alongside investment in education, infrastructure and institutions; the best strategy depends on the country's barriers. Markers reward comparison and a supported stance.
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Sources & how we know this
- AQA A-level Economics (7136) specification — AQA (2015)