Economic development is the expansion of national capital stock primarily by modernizing all economic activities using technology.
Economic development meaning
Here's how we can define economic development. Economic development is when a low-income country undergoes a process of gradual accumulation and growth of national capital over a time-span, primarily by modernizing all economic activities using technology. First, we need to look into a particular type of classification of a nation’s wealth stock or capital stock to understand the meaning of economic development.
The national capital stock of a country can be classified capital into these four types:
1) Housing capital
2) Public infrastructure capital
3) non-Industrial business capital
4) Heavy Industry business capital.
Economic development in developing countries can be achieved through the following two routes. Economic development through the industrialization route involves the process of industrialization and modernization. The economy is transformed during this process, driven by investment in resource and innovation. The accumulation of Heavy Industry business capital represents the process of industrialization, wherein the resource and technology is acquired and assimilated helping the modernization process of the country. South Korea, Taiwan, and China have expanded investment and national wealth, grew their national incomes by many times, through this route of economic development.
Economic development through the non-industrial route involves modernization alone. Modernization of developing countries through this route is achieved on the back of the industrialization (and therefore the heavy industry) of foreign nations, wherein technology (in the form of heavy industry machinery and equipment) is imported. The economy of Chile belongs to this category. Other examples include Botswana, UAE, and New Zealand.
The concept of economic development explained
The concept of economic growth and development is pertinent in the context of low income counties such as the Sub Saharan African countries and South Asian nations. These low income countries usually have low life expectancy, weak labour force, poor health care, high birth rates, extreme income inequality, and gross inequity in income distribution. They are further characterized by a weak private sector, high poverty levels, inflation, bloated government expenditure and government corruption.
Economic development is a real process involving real people, real products and the government. So what exactly do the processes of industrialization and modernization mean and what do they accomplish in developing countries?
Simply, industrialization serves the process of modernization, the two processes together constitute economic development.
Economic development = industrialization + modernization
First let’s understand the meaning of modernization within this context. Modernization is the gradual accumulation of Housing capital, Public infrastructure capital and non-Industrial business capital, which involves the introduction of technology into, and the expansion of, all traditional economic activities in both scope and size. The term ‘modernization’ has a definite and useful meaning to it. It connotes the idea of installation of materials, product machinery and equipment—all supplied from heavy industry, to perform traditional activities in the modern form.
Heavy industry supplies materials such as cement, glass, steel, etc. and machines such as cranes, excavators, bulldozers, etc. for performing construction activity. Heavy industry supplies product machinery such as textile machinery to perform light industry manufacturing of textiles; supplies pulp and papermaking machinery to perform light industry manufacturing of paper and paperboard; supplies power generation machinery such as boilers, turbines and electric generators to enable electricity generation in power plants (utilities); supplies fertilizers and farm machinery to produce agricultural output.
Accordingly, heavy industry serves to modernize the traditional activities of a nation. The product output coming out of a nation’s heavy industry is in and of itself not useful. It is when that product (machinery or equipment) enables men to perform such traditional activities that make it useful and productive; hence the better the product of heavy industry, the better will be the provision and performance of traditional activities including all kinds of services activities. The economy during this process transitions from one that is composed of purely traditional activities to one that involves traditional activities performed with the latest technology and also a novel industry that produces that technology.
Rapid economic development explained
A nation’s efforts to accumulate Heavy Industry business capital and in effect enabling the accumulation of housing capital, public infrastructure capital and non-industrial business capital completes the process of economic development through the industrialization route. The rapid march of such a process of accumulation of capital, in extension, represents the process of economic development through rapid industrialization.
(Rapid) economic development = rapid industrialization + (rapid) modernization
Rapidity in the modernization process derives from rapidity in the industrialization process, which by definition, fuels the pace of economic growth and development.
A country’s efforts to accumulate housing capital, public infrastructure capital and non-industrial business capital based on the industrialization of other countries represent the process of economic growth and development through the non-industrial route. The rapid march of such capital accumulation process, in extension, represents the process of rapid economic development through the non-industrial route.
There exist many obstacles to economic development but the latest work The General Theory of Rapid economic development helps you understand them in detail and shows how a nation can achieve success at economic development.