WHAT IS ECONOMIC DEVELOPMENT?

You might have heard the term in an introductory class to

economics, or maybe you’ve seen it in passing on the doors of
offices around town: economic development.

It sounds like an area of economics meant for business people or

investors, related to growing profits. But economic development is
actually something more, requiring input from social workers just
as much as business leaders.

What does economic development really mean, and why is it

important?

ECONOMIC DEVELOPMENT IS NOT ECONOMIC GROWTH

It’s easy to confuse development with growth, considering they

have similar meanings and are often used interchangeably. Add
the fact that economic growth is an important part of economic
development, and you might feel like the room is spinning trying
to understand it all.

Economic growth is all about numbers. As the aptly named

Keydifferences.com points out: “Economic Growth is the positive
change in the real output of the country in a particular span of
time.”

Economic growth is a straightforward measurement of actual

economic output — things like gross domestic product (GDP) fall
into this measurement. It’s a pure numbers game.
But economic development is much broader in scope and
includes elements that you might not normally associate with
economics, like social welfare, early childhood education, and
criminal justice reform.

THE GOAL OF ECONOMIC DEVELOPMENT

Economic development is defined by Wikipedia as “the process

by which a nation improves the economic, political, and social
well-being of its people.” Like we said, it’s a broad scope.

But this definition doesn’t tell us much about the nuts and bolts of
economic development and how it can effect change in a positive
way on a big scale.

Because the scope is so broad, it can be difficult to discern what

the tangible goals of economic development are. Amy Liu, writing
for the Brookings Institute, argues that the goal for economic
development should be “to put a region on a path to higher growth
by improving the productivity of firms and people in ways that
leads to better incomes and living standards for all.”

The end game of economic development is not just growing the

economy, but growing it in a way that improves the quality of life
for everyone in the region.

Rather than projects benefitting a few investors, a successful

economic development project would benefit investors,
companies and people in need of economic relief. By doing so,
there is also a positive effect on the region and indirectly business
and citizens who live there.

This means a focus on innovation, skills and infrastructure, as

well as overall economic growth.
HOW ECONOMIC DEVELOPMENT WORKS

Now we know that the goal of economic development is to

improve the well-being of everyone, regardless of race,
background or class, but how does it actually work?

As Britannica.com points out, there is no single definition of what

constitutes the process of economic development. But there are
key indicators and learning that have shown success.

It might sound like a pretty big project to try to improve the social
and political well-being of a country through economic strategies,
and it is. That’s why it’s important to not try to solve it all at a
national or international level, but at the local and regional levels.

As Michael Porter, a professor at the Harvard Business School,

puts it: “While macro policies and regulatory reforms set important
conditions for growth and access to opportunity, it is ultimately the
role of local and regional actors and institutions to address the
unique market failures and opportunities in their community.”

This is why local and regional economic development

organizations are so vital. Every metropolitan area has its own
unique set of circumstances, and there’s no blanket approach that
will work across the diverse economic landscape of a country like
the United States (or anywhere else, for that matter).

Denver’s challenges in providing affordable housing, for example,

are going to be much different than in New York City.
Construction costs are different, timelines will vary based on
weather, and managing relationships between private and public
sectors will be subject to unique regional policies.

THE HIDDEN ECONOMIC BENEFIT OF INVESTING IN

QUALITY OF LIFE
Economic development takes many forms, and it’s not always
obvious which project will provide the biggest benefit. For
example, a 2016 report to the then president Obama cited early
childhood education as an important factor in stabilizing the
economy. How can something like early childhood education
improve the economy?

In the U.S. it’s anticipated that as many as 2 million manufacturing

jobs will go unfilled by 2025. Children are graduating into the
workforce without the skills needed to fill these often lucrative and
stable jobs. If business and educational leaders can build
partnerships and create pathways early on for students to pick up
much-needed skills, the workforce gets a big boost.

That’s economic development at work. It might not have a clear

impact on economic growth in the short term, but it will provide a
meaningful solution to a widespread problem, and one that will
improve the quality of life for many students who otherwise may
have ended up struggling to find a stable career.

ONE FOR ALL, AND ALL FOR ONE

It’s difficult to unwrap all of the compelling and intricate facets of

economic development without writing an entire book, or several
books — which several scholars have already done.

Building up economies around processes and strategies that

benefit the entire population, and not just a single segment of it,
has wide-reaching and long-term economic benefits. At its core,
this is what economic development is all about, whether it’s part
of government, private business or anywhere in between.

Like the Three Musketeers, it’s a philosophy of working together

to benefit one another — but unlike the Three Musketeers, there
is no candy bar named after it.