What Is the Relationship between Technology and Economic Development?

Developing countries generally see a close relationship between technology and economic development and look for technology transfer by means of networking, foreign direct investment, joint ventures or licensing of technology. The use of technology is seen as increasing productivity and enabling the country to achieve a higher output from the same number of labor hours. Technology also is seen as essential to improving critical infrastructure such as healthcare, education, transport and telecommunications. In the drive toward development, the adverse effects of technology may be ignored, with potentially harmful consequences for the environment and human health. Technology may be used to achieve economic growth, but sustainable development for the whole population requires the correct decisions on suitable technology and economic development.

Historically, technology has been an important factor in economic growth as the introduction of new technology into manufacturing processes increases productivity, enabling each labor hour to produce a greater output. This increases national output and national income where the producers have access to international markets for their products. The industrial revolution in the United Kingdom, for example, was built on groundbreaking inventions in industries such as textiles and iron and steel, leading to developments in transport such as railways and increasing national income to create the largest economy in the world in the 19th century.

Developing countries in the early 21st century now look to technology to similarly increase efficiency of production and diversify industrial output so as to reduce reliance on primary industries and just a few products. New technology also may help to increase the health of the nation, boost educational facilities and enhance transport and communications, and developing countries see a close link between technology and economic development.

The achievement of sustainable development requires careful use of sustainable technology so as to avoid the damaging effects to health and the environment that accompanied the introduction of technology and economic development in Europe and North America. Sustainable development requires the use of green technologies and careful planning for employee welfare to avoid detrimental effects to the standard of living and the inequality between rich and poor. Conventional economic measures such as gross domestic product (GDP) do not take into account these adverse consequences of growth, and countries may prefer to use a measure such as the United Nations Development Programme's Human Development Index (HDI). The HDI takes into account life expectancy, access to education and the standard of living of the population. These may be brought about by the use of technology and pursuit of economic growth, though care is typically necessary to ensure the technology doesn't do more harm than good.