Growth and Development in Community Economic Development

Introduction to Community Economic Development

Development and growth are among the most commonly used terms in the field of community economic development (CED). This field focuses on promoting community involvement when working with public and private sectors toward the creation of strong markets, industries, and communities. CED also encourages the use of local resources in ways that enhance economic opportunities while improving social conditions in a sustainable manner. Common examples of CED initiatives include expanding opportunities for disadvantaged community members and undertaking measures to overcome social and economic challenges.

Distinguishing Growth from Development in CED

Given the focus of community economic development, growth and development are two central terms in this field. They are sometimes used interchangeably because they share certain similarities, and because economic development is widely regarded as a crucial aspect of economic growth. Despite this common practice, the two represent distinct concepts within CED.

Growth refers to the increase in the amount of products and services generated within a specific period of time. CED initiatives promote growth by identifying economic, social, and environmental challenges that hinder the optimal generation of desired quantities of goods and services. Growth is therefore measured in terms of output produced within a given period. For growth to be achieved, a community must invent, invest, and reorganize its activities through improved collaboration with the public and private sectors (Committee for Economic Development, 2003).

Development, by contrast, refers to actions undertaken by policymakers to address the economic, social, and environmental challenges facing a community. These actions are geared toward promoting the community's political, health, and social well-being. Policymakers create suitable frameworks for development by engaging in initiatives centered on improving standards of living and economic well-being. As a result, growth is properly understood as a component of development, since development is the broader concept — one that focuses on promoting the overall well-being of a community across political, health, social, environmental, and economic dimensions. According to the Committee for Economic Development (2003), development refers to public policies that shape the process of growth. This means that growth cannot occur without development, because development establishes the framework within which a suitable environment for growth is created.

There is a suggestion by some that community economic development is simply about jobs and income. While this is true to some extent, it is insufficient as a description of the entire field. As noted above, CED is a broader field that focuses on promoting community involvement across the public and private sectors. Job creation and income generation are important, but CED also encompasses the development of appropriate policies that address wider community challenges, including efforts to localize communities in order to strengthen their social and economic foundations. The suggestion that CED is simply about jobs and income fails to account for its other essential dimensions. The core of community economic development is promoting the social, economic, ecological, and environmental well-being of a community.

Economic Growth and Income Convergence or Divergence

Economic growth refers to the increase in the amount of products and services generated over a certain period of time. It is most commonly measured as an increase in a country's gross domestic product (GDP), representing the actual level of national output attributable to growth in resources and technological improvements. Economic activities within a specific area are generally geared toward enhancing economic growth, which is a crucial factor in improving standards of living.

One of the ways economic growth affects standards of living is through its impact on income. An important question is whether economic growth contributes to income convergence or divergence. Convergence refers to incomes growing together, while divergence refers to incomes moving apart as an economy expands.

According to Global Economy Guide (2017), incomes tend to converge as an economy grows, but primarily in developed or wealthy nations. European and other developed countries experience income convergence following economic growth, in contrast to developing or third-world countries. This difference stems largely from income inequality between developed and developing nations at the global level. Income convergence occurs in developed countries because economic growth in these nations generates a suitable environment for the financial advancement of all citizens. These countries have established the economic infrastructure and conditions that allow incomes to grow together.

In developing countries, however, income convergence following economic growth is far less evident, for several reasons. First, the rate of economic growth in these countries is relatively low compared to that of developed nations. Second, developing countries have not yet fully established the economic infrastructure and conditions that would allow growth to raise income levels across the population. Poor and developing countries in Latin America, Africa, and other regions have experienced income divergence as their economies have grown (Global Economy Guide, 2017). In these cases, economic growth has widened the gap between the rich and the poor. It is projected that poor countries will experience income convergence when their economies grow faster than those of rich nations, and that convergence will occur over time due to technology spillover and diminishing returns on investment in wealthier countries relative to poorer ones.

Despite this contrast between developed and developing nations, incomes generally tend to converge rather than diverge as an economy grows. However, the extent of convergence depends on the prevailing economic conditions in a given country or region. For poor countries, the occurrence of income divergence is often attributable to poor economic conditions rather than to the nature of economic growth itself.

Conclusion

Despite the differences between developed and developing countries, incomes generally tend to converge rather than diverge as an economy grows, though the degree of convergence is shaped by prevailing economic conditions. Economic conditions play a critical role in determining income distribution outcomes during periods of growth. For developing nations, income divergence is often a symptom of poor economic infrastructure rather than an inherent feature of economic growth. As economies mature and conditions improve, convergence becomes increasingly likely — supported by forces such as technology spillover and shifting returns on capital investment.

References

Committee for Economic Development. (2003, May). How economies grow: The CED perspective on raising the long-term standard of living. Retrieved September 27, 2017, from

Global Economy Guide. (2017). Economic growth and development. Retrieved September 27, 2017, from http://www.theglobaleconomy.com/guide/article/108/

Villamil, J. C. (2009, October). How do agglomeration economies affect the development of cities? Retrieved from North University website: http://rcientificas.uninorte.edu.co/index.php/economia/article/view/1926/6111