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ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT
Tashkent State University of Economics
Associate Professor of the Department of Economic Theory
Allaberganov Zakir Gaibovich
Abstract:
The article examines the scientific approaches of leading researchers to defining the
essence of the categories of "economic growth" and "economic development", as well as the
factors that shape their quality. The dialectic of the relationship between economic growth and
economic development is explored, their comparability and opposite directions are argued.
Key words:
economic growth, economic development, gross domestic product, welfare,
technological progres
Economic growth is an indicator of the performance of the national economy, one of the
most important tasks of sustainable development and improving the standard of living of the
population, and the study of its essence has a significant evolutionary path. In his work "An
Inquiry into the Nature and Causes of the Wealth of Nations" (1776), Adam Smith notes that
economic growth is associated with investment, population growth and expansion of land area .
In his opinion, economic growth depends on supply factors, and the volume of national product
on such factors as labor, capital and land . Smith calls investments, which are determined by the
level of savings and are carried out mainly by entrepreneurs, having an impact on economic
growth and accelerating it, endogenous variables. Savings stimulate investments and,
accordingly , economic growth; population growth, which depends on the well-being and
satisfaction of the needs of the growing labor force; growth of land area; technological progress.
A. Smith's views on economic growth are continued to be developed by D. Ricardo. He argued
that the barriers to economic growth associated with the use of land (increasing rent, decreasing
income of tenants, narrowing opportunities for capital investment, workers' demands for higher
wages) can be overcome by using technological progress in mechanical engineering and
specialization in trade. In their studies, A. Smith, D. Ricardo, T. Malthus somehow mention the
connection between growth and well-being .
T. Malthus believed that the rate of population growth can exceed the rate of growth of
life 's benefits and cause an increase in poverty [7]. A new view of the essence of economic
growth was developed by Karl Marx, focusing on the consideration of the economic process,
which changes according to the laws of its own internal logic and at the same time affects the
social structure of society as a whole. K. Marx did not use the term "economic growth", but
considered social reproduction, which is "any process of social production in a constant flow of
its reproduction " [ 8]. The scientist also analyzes the expanded reproduction and accumulation
of capital (individual and social). In his understanding, the variables of growth were savings
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and accumulation of capital, and the engine of its acceleration was technological progress in the
form of automation of production and division of labor.
Although the latter also had a negative side - with the help of technological innovations,
capitalists could increase their pressure on workers, threatening them with dismissal. I.
Schumpeter is trying to develop the classical theory of economic growth . Considering
economic growth, he turned to the analysis of supply factors and forms the image of an
innovative entrepreneur who can accelerate the growth process through an effective
combination of resources and the introduction of new technologies. I. Schumpeter introduced a
distinction between economic growth and economic development and was one of the first in
science to define the category of " economic development " ("Theory of Economic
Development ", 1912). In his opinion, economic development is an innovation, a manifestation
of something new, previously unknown, and economic growth is an increase in the production
and consumption of goods and services, most often the same ones over a certain period.
According to J. Schumpeter , the incentives for economic development are exclusively
innovative in nature. The main factor of economic development, in his opinion, is
entrepreneurial innovation, which is a means of overcoming economic crises . The scientist
believes that the main source of economic growth is an innovative entrepreneur, and technical
progress is directly related to the profitability of enterprises and the more they implement
innovations , the greater the profit in the economy will be.
The modern understanding of economic growth was introduced into scientific
circulation by the American economist, Nobel Prize laureate Simon Kuznets. He believed that
economic growth is economic development in which long-term production growth rates exceed
population growth rates and this process began at the end of the 18th century. By economic
growth S. Kuznets also meant a long-term increase in the ability to satisfy the diverse needs of
the population through the results of economic activity. He concluded that economic growth is
largely the result of the influence of the total productivity of production factors and noted that
“the distinctive feature of modern economic growth is the high rate of growth of production per
capita, which is determined by the high rate of growth of productivity and is inevitable” .
Professor S. Kuznets identified the characteristic features of economic growth inherent in all
developed countries : high rates of income per capita; high rates of factor productivity; high
rates of structural transformation of the economy; high rates of social and ideological
transformation of society; the ability of developed countries to find markets and sources of raw
materials abroad; the results of such growth should cover less than 1/3 of the world's population.
Determining the contribution of various factors to the economic growth of the USA for a
certain period, S. Kuznets found that in the periods 1889-1929, 1929-1957, 1950-1962 the ratio
of the factors capital - labor - technical progress were as follows: 34:32:34, 8:14:78, 25:19:56.
Almost from the beginning of the scientific and technological revolution, the contribution of
such a factor as technical progress to economic growth is significant and unconditional. Thus,
technical progress and innovations, which are its basis, become the most important factor in
economic growth. The main factors of economic growth, according to P. Samuelson, W.
Nordhaus are capital, technology, natural and human resources. The above-mentioned scientists
understand economic growth as "an increase in the potential GDP or output of the country",
which occurs when the boundaries of production possibilities expand. Economic growth, on the
one hand, is associated with the positive dynamics of the real volume of production, and on the
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other - with the improvement of the technological, economic and social aspects of society
development. It is expressed in the increase in the real gross domestic product (GDP) and gross
national product (GNP) per capita and is displayed by a statistical indicator - the annual GDP
growth rate in percent. Economic growth quantitatively characterizes the volume of the national
product, and qualitatively - structural changes in it. In addition, the qualitative side is formed by
the standard of living of the population. Economic growth, according to V. Thomas, G.
Daylami, D. Kaufman, consists, on the one hand, in the accumulation of human, physical and
natural capital, and on the other - in ensuring the well-being of the population.
Physical capital is based on production (economic) capital; human is dominant in the
social component of development; natural capital is associated with the conservation of natural
resources and the environment. Thus, the main components of economic growth are
environmental, economic and social components. As we see, in this case V. Thomas, G.
Dailami and others characterize economic growth by the constituent indicators of economic
development . They do not significantly distinguish between the categories of “economic
growth” and “economic development ”. Economic development in the 1950s and 1960s, as A.
Weber notes, was actually considered a synonym for economic growth .
Attention was focused on increasing the rate of production of material goods and
services, and the difference between production growth and human well-being was ignored or
underestimated . There was an opinion that economic growth in itself leads to a reduction in
poverty, overcoming the gap between income levels and improving the well-being of the
population. Beginning in the 1970s, the idea of distinguishing between growth as quantitative
changes and development as qualitative ones has been asserted. Development is considered
from the point of view of the quality of human life, which is determined not only by the average
GDP per capita, but also by such parameters as life expectancy, health, level of education and
literacy, availability of social services, etc.. At the same time, growth remains an important
condition for development. Based on the above, we can define economic growth in a broad
sense: it is a condition and component of economic development and represents the formation
of economic, social and natural conditions to ensure a qualitative change in the standard and
quality of life of the population. The definition of the category of "economic growth" in a broad
sense is very close in meaning to the concept of the category of "economic development".
"Economic development" can be interpreted in different ways . In an elementary sense,
economic development is the ability of an economic system to maintain high growth rates,
ensuring the necessary changes in the economic sphere. Therefore, for a long time it was
identified only with economic growth, that is, with an increase in production volume in
accordance with the increase in population. Development can also be viewed in this
interpretation: it is a process that is associated with natural changes, the transition to improved
forms and a qualitative state. Economic development is "the process of functioning and
evolution of an economic system in the long term, which occurs under the influence of
economic contradictions, needs and interests". Investment, innovation and technological factors
play an important role in economic development. G. Myrdal made his contribution to the theory
of economic development [ 9]. He clearly distinguished between the categories of " economic
development " and "economic growth". In his opinion, development is associated with an
increase in the degree of satisfaction of the needs of all members of society, but this does not
mean that it occurs in the presence of economic growth. G. Myrdal draws attention to the fact
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that the mechanisms for ensuring economic growth developed by advanced countries are not
suitable for developing countries, due to the peculiarities of the latter's system of national
values. He believes that growth that is not accompanied by an improvement in the lives of the
majority of the population is not considered development , because it leaves the overwhelming
majority of the population aside and is carried out at their expense [11]. The concepts of
“economic development” and “ economic growth ” , according to J. Tinbergen , are comparable
(compatible), but not identical, because such simplification does not adhere to the main feature
of development - an increase in the well-being of the population. Analyzing the factors of
economic growth, J. Tinbergen discovered that only a quarter of GDP growth is associated with
an increase in the efficiency of the economy, the rest is an increase in the influx of investment
and labor . L. Balcerowicz's interpretation that economic growth is associated with increased
well-being and improved quality of life is quite interesting and is argued by the author. L.
Balcerowicz notes that economic growth is associated with "... systematic, long-term and
massive improvement in people's living conditions, that is, conditions in the field of nutrition,
home decoration , apartment interiors, transport and communications, the availability of various
services ..." . This is human well-being, the benefits he needs. By the concept of "development"
L. Balcerowicz understands the process as a result of which labor productivity grows, the
number of employed increases. By working, an employed person ensures better living
conditions for himself. In the book by A. Marshall "The Pure Theory of National Values" it is
indicated that a person's income is spent on the purchase of goods and services. In this way a
person satisfies his needs. But after all, according to A. Marshall, a person spends part of his
income and saves the other part. And he saves in order to buy labor and goods (which also
happens during the spending of the first part of the income) for constant accumulation, which
will be used to meet needs in the future, ensuring an appropriate quality of life and level of
well-being in the long term. So, in our opinion, economic development is a process that leads to
changes in social and public structures, human behavior, leads to a reduction in inequality, the
elimination of poverty, an increase in the level of education, literacy, availability of social
services, qualitative changes in society that are associated with modernization, progress ,
growth; the latter is its integral condition . Economic growth is the trajectory of the country's
movement in its economic development. Considering economic growth as a condition of
economic development, it should be noted that most researchers of this problem distinguish
between these two categories, which is certainly correct. Accepting this statement, and as
evidenced by our study , the content of these two categories is also different . Note that
economic development is possible even when there is no quantitative growth, but only certain
prerequisites for its existence and when it is reflected in structural transformations and
innovations. Modern economic growth is an unfinished process, a process that continues, which
is characterized by rapid changes in dominant trends, which significantly complicates the
economic development of the country.
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