Economic development is a branch of economics in which states and societies are greatly concerned and focuses on developing and improving societies and states, so it radically affects societies and causes structural and radical changes in the economic dimensions of society. This article will present the concept of economic development, its indicators, and its importance.

What is economic development?

Economic development is a branch of economics that focuses on improving the financial, economic, and social conditions of countries. Economic development takes into account various factors that affect this improvement and its quality, such as health, education, working conditions, local and international policies, and market conditions. Economic development is also concerned with macroeconomic and microeconomic factors. and the structures of the economies of developing countries and local and international economic growth. Economic development is a structural or radical change in the economic dimensions of society. It also seeks to transform developing or emerging countries into more prosperous ones. Economic development may be a reason for improving health factors, education, literacy rates, and poverty levels.

What are the indicators of economic development?

Economic development indicators are used to predict the state of the economy in a country so that it reflects the strength of the economy and the extent of the development of the economic sectors. The most important of these indicators are:

Real gross domestic product (GDP) per capita: The indicator expresses the contribution of economic development to an increase in the per capita GDP due to the increase in the gross domestic product of the country as a whole, which is equal to the state’s income.
GDP at purchasing power parity (PPP): This indicator indicates the domestic purchasing power of a currency and is the best indicator of actual living standards.
Levels of absolute poverty: The indicator expresses the contribution of economic development to decreasing levels of absolute poverty, i.e., the percentage of the population whose income is less than the minimum necessary to meet the basic needs of life.
Malnutrition levels: The indicator expresses the contribution of economic development to reducing levels of malnutrition in the country, and the level of malnutrition expresses the percentage of the population suffering from a lack of food.
Access to safe water: This indicator indicates the percentage of the population that has access to potable water supplies and sanitation infrastructure, and this percentage increases with the increase in economic development in the country.
Openness of economy to international trade: The greater the economy’s openness to international trade and the higher the levels of foreign direct investment, the greater the achievement of economic development.
Average life expectancy: It generally increases with economic development.
Quality of the nation’s infrastructure: the quantity and quality of roads, railways, and airports.
Share of agriculture in the economy.
Literacy rate.
Years of education.
Number of doctors per 1,000 of the population.
Political stability and security.
Wildlife Diversity.

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What are the factors affecting economic development?

There are two main types of factors that affect economic development in the country, which are economic factors and non-economic factors, and the following is their explanation:

Economic Factors

There are many economic factors that affect economic development, and they are as follows:

Capital Formation

The role of capital in economic development is highlighted in raising the level of production, and countries that aim to achieve development and accelerate the pace of growth seek to increase capital by saving from their income in order to raise the level of investment because reliance on foreign aid largely carries a kind of risk that countries desire. By avoiding it, capital is the only obstacle to growth, and development plans will not succeed without an adequate supply of capital.

Natural Resources

The main factor affecting economic development is natural resources, and these natural resources include land area, soil quality, forest wealth, river systems, mineral and oil resources, a good climate, and others.

Marketable Surplus of Agriculture

Increasing agricultural production accompanied by a rise in productivity is important for economic development, but more importantly, the surplus in marketable production of agriculture is increasing, and the term “marketable surplus” refers to the surplus production in the agricultural sector in addition to what is required to allow the rural population to maintain its standard of living. The importance of the marketable surplus in the developing economy stems from the fact that the population of urban industry lives on it. In urban areas, development and growth will stop.

Conditions in Foreign Trade

Foreign trade has proven to be beneficial for countries that have managed to establish industries in a relatively short period, because sooner or later these countries will seize the international markets for their industrial products. Develop its industries to a high level over time so that its manufactured goods replace products and raw materials as the country’s main exports.

Economic System

The economic system and the historical framework of the state determine the prospects for development in it to a large extent, and it is necessary for states today to find an economic system in it that puts them on their own path of economic development because many countries cannot collect the resources necessary for economic development, whether through colonial exploitation or through foreign trade. The optimal solution to achieve economic development under economic regimes lies in two options:

First, that countries follow the capitalist evolutionary path that requires an effective market system supported by a rational and rational way of life in the state.
Second: Effectively work on economic planning and develop an economic plan that is commensurate with the state’s situation and circumstances so that it does not change with the change of its officials but is implemented in full without being linked to people, because most economic plans are long-term plans that need time until the features of their results become clear.

Non-Economic Factors

There are many non-economic factors that affect economic development, as follows:

Desire to develop.
Corruption.
Political Freedom.
Technical know-how and general education
Human Resources.

What is the importance of economic development?

Economic development is one of the most important elements that lead to the development of societies and the economy, as it is a major reason for creating jobs and facilitating the quality of life. Therefore, the importance of economic development emerges in the following:

Job creation

Economic development in the country is accompanied by the creation of new job opportunities, which contribute to reducing unemployment rates, raising workers’ wages, and improving their incomes.

Industry diversification

An essential part of economic development is diversifying the economy, with the aim of diversifying industries in the country and reducing the risk of focusing on one industry. Countries try to diversify industries such as those in innovative technologies, digital media, life sciences, health care, aviation, space, defense, advanced manufacturing, and business services.

Business retention and expansion

Economic development is concerned with local businesses and companies and seeks to preserve and expand them, due to the importance of these companies in creating jobs and moving the wheel of the economy.

Economy fortification

Economic development helps protect the local economy from economic downturns by attracting and expanding domestic and foreign investors.

Increased tax revenue

Due to the expansion of businesses and the creation of new companies, the amount of tax revenue collected from these companies will increase, and this tax revenue will often be used for community projects and infrastructure.

Improved quality of life

This is done by improving the infrastructure and providing more jobs, which will improve the economy and raise the standard of living in the country.

Contributing factors to economic development