Question: What government policies can encourage rapid and sustainable economic development? Is development possible without government intervention?

Answer: Economic development, a measure of welfare, not only in monetary terms, but also in terms of social indicators in the fields of education and health, is often brought about by government policies. Policies a government would mainly be interested in implementing will be aimed at improving education for its, health care, infrastructure and political stability, along with policies that will result in sustainable economic growth, or growth that meets the need of the present without comprising the ability of future generations to meet their own needs. Economic development can be represented through the following diagram.
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In a diagram of any given economy, economic development is represented by a rightward shift in long-run aggregate supply from LRAS to LRAS1. The shift in the LRAS-curve enables an increase in short-run aggregate supply, as production is made more efficient through the improvements in the labour-factor of production. This increase in short-run aggregate supply is represented by an outward shift of the SRAS-curve from SRAS to SRAS1. As a result, the economy’s real output increase from Y to Y1, and the average price level in the economy increases from APL to APL1. Therefore, economic development encompasses economic growth.

Methods by which the government could bring about sustainable economic development are through implementing a better public education system, enabling education for a larger portion of the population. As a result, labour forces can reach specialisation. According to figures demonstrating correlations between women’s education and improved child survival rates, allowing women to obtain an education, also has brings about positive economic development. A government spending a higher portion of GDP on health tends to boast higher life expectancies, reflecting another factor of economic development. Finally, improved infrastructure can also have a positive impact on economic development. As a result of improved infrastructure in the form of roads, railways and bridges, production within the economy can be rendered more efficient, leading to economic growth, another factor of economic development.


Usually, infrastructure is the responsibility of a government and development is only possible with government intervention in this sector. However, in some other areas, multinational corporations can help to bring about economic development. Examples would be companies specialised in the private education or health sectors. However, it would be hard to accept these as public goods, because often only the richer portion of a population would be able to afford these, diminishing possible economic development. However, the aid of non-government organisations, whose aim is to help the population as a whole, is more likely to stimulate expansions in economic development. Therefore, economic development without government intervention is possible, but rare.