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COURSE LEARNING MODULE ECON 1023 (Economic Development) AY 2024-2025 Lesson 3: Economic Growth and Economic Development Topic: Eco...

COURSE LEARNING MODULE ECON 1023 (Economic Development) AY 2024-2025 Lesson 3: Economic Growth and Economic Development Topic: Economic Growth and Economic Development Learning Outcomes: At the end of this module, you are expected to:  Identify the differences of economic growth and economic development;  Compare and contrast old and new economic development concepts;  Recognize the three waves of economic development. LEARNING CONTENT Introduction: Week 2’s lessons dealt on economic efficiency and economic equity. To reiterate, The market place is often efficient, but not necessarily equitable. That’s why there are these so-called market failures such as the problem on public goods and services, the existence of spillovers, problems on equity, the presence of market power, and he lack of stability in our economy. Despite the benefits of a market economy, most economists recognize that the marketplace can also fail. The existence of many market failures does not necessarily imply that the marketplace itself is a failure. Rather, it points to ways that the government may become involved in the marketplace to assure that all societal needs are met. An important issue is the role of the government versus the free market. At this present time of ours, we cannot do otherwise with the tremendous increases in prices of goods and services. Face masks for example, has had its tremendous increase in price due to its increasing demand in the market. What caused its price increase? You know the answer definitely! Economic liberals prefer a large role for government in the economy, and economic conservatives prefer a small role. As you continue your reading, you will make your own decisions about whether you are the liberal or conservative on certain issues. Finally, you will consider your role within our world economy. This module will be presenting additional information regarding economic growth and economic development. Lesson Proper: Economic Development As noted earlier, when we speak of economic development, we usually mean economic growth accompanied by an improvement in the peoples’ quality of life. To a large degree, economic development results from economic growth. However, the experiences of many economies have shown that economic growth can occur without any improvement in the quality of the lives of its people. ECON 1023-Economic Development | 1  ADDITIONAL INFORMATION: Questions to ponder: How do you define economic development? What do you view as an economic development success? An extensive amount of research work has focused on these mega-trends impacting the global economy. Economic Downturn: The downturn in the U.S. and global economy has shifted how we measure wealth (e.g., a home may no longer be a stable investment in some areas), changed how people view savings (we see an increase in the personal savings rate in the country), and slowed job creation dramatically. The challenges that some European Union counties are experiencing, the fledgling movement toward democracy in countries like Egypt, high oil and gas prices, and the emergence of China, etc. are all challenging our traditional approaches to economic development. Loss of manufacturing jobs and growth in service industry: For example, if you examine industry in many parts of the world, you’ll discover the lifeblood of their economies has historically been manufacturing and agriculture. Increasingly, the growth industry in many countries is now service-related industries. Polarization of work reflecting knowledge, skills and abilities: Employment and jobs are being polarized where wages tend to reflect the unique knowledge, skills and abilities of workers. Unskilled production and assembly jobs are becoming more and more scarce. Outsourcing that divides ‘value-chain’: Many of the business activities traditionally done in-house are now being outsourced. Auto ‘manufacturers’ today are really ‘assemblers’ as they manufacture very few of ECON 1023-Economic Development | 2 the components of a car. Instead, most are purchased from other vendors. Even in the non-manufacturing sector outsourcing can be seen through payroll, human resources, marketing, graphic design, programming, etc. Importance of creative/knowledge economies: If you’ve read any of the works of Richard Florida over the past few years, then you know he has offered a very compelling argument that the future health of local economies is linked to a community’s ability to attract creative and knowledge-based workers, or to generate jobs that seek these types of talented individuals. Specialization of regions and communities: Regions and communities are becoming more specialized and connected to other non-contiguous places. Places are more frequently connecting to other places with complementary specializations. Focus is on the industry/businesses that can use the region or community’s skilled workforce, resources and assets. Expanded growth of entrepreneurs and the self-employed: Across the world, a growing number of people are starting their own businesses, many as self-employed people. For example, over the past two decades, the number of self-employed people in rural America has grown by 2 million and now represents over 20 percent of its workforce. Estimates suggest this rate will continue to accelerate over the next decade or more. Now, let’s look at some of the mega-trends that deal specifically with economic development. You may note that not all of these trends are necessarily ‘good things’ happening in the economic development arena. Instead, some actually discuss some of the traditional ways we have approached economic development – approaches that may not work very well in today’s global environment. Where do you see disconnects between these mega-trends in economic development and the global economy mega-trends? Where do you think they complement one another? Here are some comments you might want to make on some of these items: Continued focus on companies rather than industries and people: Every morning when economic development leaders wake up and get on with their work, many are still focusing on attracting a major company to their community. It doesn’t matter to them what type of company they capture, they just want to get the number of jobs they have attracted to go up. Might it be a better strategy to recruit specific firms that ECON 1023-Economic Development | 3 can further strengthen and add value to one of the region’s key industrial sectors, especially if it’s a sector that is likely to enjoy stability or growth over the long-term? Need for talented workforce to be competitive: Manufacturing in the rural U.S. represents a great example of this point. Years ago, manufacturing plants that were located in rural areas were looking for cheap, low-skilled labor. In order to survive in today’s global environment, manufacturing plants have had to raise the skill requirements of their workers and have had to introduce technological innovations. Greater scrutiny of public economic development investments: The debate about the benefits and costs of offering incentives to companies to locate to a state or community remains pretty heated. Do publicly paid incentives for such purposes work? The research seems to be mixed, and with the increasing scrutiny by citizens on how taxpayer monies are used, this is a debate that is likely to rage on for some time. Another way to consider the changes in economic development is to look at the shift that is occurring, that is, from OLD to NEW. In the past, the primary approach was a focus on attraction (e.g., the effort to incent a company to move from an existing location to another location) with little focus on supporting and retaining existing businesses. Too often the message was that our location is a ‘cheap’ place to do business (e.g., we have cheap land, cheap labor [people who work for low wages], and low or non-existent taxes). A great physical environment (parks, bike paths, vibrant downtown, social activities, etc.) was considered a luxury, as we had to use available financial resources to attract the companies, not create a great community. Most communities and regions worked hard to develop a competitive advantage in a resource (wood, a particular industry, lots of water, workers with specific skill). They tended to ‘win’ because of this advantage. One example is regions that had a concentration in the auto industry. Because of that concentration, they tended to attract more linked businesses. Economic development was also always led by a state or local government agency with little input or involvement from the business community or the nonprofit sector. On the other hand, the NEW economic development presents the following: ECON 1023-Economic Development | 4  Economic development now focuses much more on creativity, entrepreneurial spirit and range of worker talent. Available land, low taxes and incentives are still factors, but not the primary factors as in the past. There is a strong focus on the region, rather than a single community. To be successful, these regions must have the ability to learn and adapt to the changing global economy. Most importantly, economic development today is successful only when a partnership between the business, government and nonprofit sectors exists. By working together, they can create a community/region that is attractive to new residents (workers) and businesses, while continuing to provide for the existing businesses and residents. Economic Growth This is the rise in the money value of goods and services produced by all the sectors of the economy per head during a particular period. Moreover, it can be expressed in terms of GDP and GNP that helps in measuring the size of the economy. Economic Growth Determinants include the following:  Human resources  Natural resources  Capital formation  Technological development  Political and Social factors Key Differences between Economic Growth and Economic Development 1. Economic growth (EG) is the positive change in the real output of the country in a particular span of time economy. Economic development (ED) involves a rise in the level of production in an economy along with the advancement of technology, improvement in living standards, etc. 2. Economic growth is one of the features of economic development. 3. EG is an automatic process. ED is the outcome of planned and result-oriented activities. 4. EG enables an increase in the indicators like GDP and per capita income. ED enables improvement in life expectancy rate, infant mortality rate, literacy rate, and poverty rate. ECON 1023-Economic Development | 5  5. EG can be measured when there is positive change in the national income whereas ED can be seen when there is increase in real national income. 6. EG is a short term process which takes into account yearly growth of the economy while ED is a long term process. 7. EG applies to developed economies to gauge the quality of life, but as it is an essential condition for the development, it applies to developing countries also. In contrast, ED applies to developing countries to measure progress. 8. EG results in quantitative changes but ED brings both quantitative and qualitative changes. 9. EG can be measured in a particular period. ED is a continuous process so that it can be seen in the long run. *** END of LESSON *** REFERENCES Textbook Dowling, J.Malcolm, Valenzuela, Ma.R.,Brux, J. (2019) Economic Development Philippine Edition. Cengage learning Asia Pte Ltd. Online References Economic Development Administration. (2011). Module 1: Collaborate RED framework. Know Your Region, Retrieved from http://www.knowyourregion.org/workshop-modules/collaborative-red-framework Blakely, E. & Bradshaw. T. (2002). Planning local economic development: Theory and practice (3rd ed.). Thousand Oaks, CA: Sage Publications. Drabenstott, Mark. (2006). Rethinking federal policy for regional economic development. Economic Review, 91(1), Retrieved from http://www.frbkc.org/Publicat/Econrev/PDF/1q06drab.pdf Hembd, J. (2005). Community sustainability, Foundations of practice in community development. Community Development Core Competencies for Extension Professional in the North Central region, Retrieved from http://srdc.msstate.edu/fop/levelone/trainarc/08fall/hembd.pdf WARNING: No part of this E-module/LMS Content can be reproduced, or transported or shared to others without permission from the University. Unauthorized use of the materials, other than personal learning use, will be penalized. Please be guided accordingly ECON 1023-Economic Development | 6