At the end of this topic student will be able to:
i) Analyse different theories of economic growth.
ii) Explain basic characteristics of developing nations.
iii) Know the reason why economic growth can not lead to economic
development.
3.0 Main Content
3.1 Major Characteristics of less developed countries
The common characteristics of developing nations could be discussed under the
following six sub -headings, which are: low levels of living, low level of
productivity, high rates of population growth and dependency burdens, high and
rising levels of unemployment and under
-employment, substantial dependence on agricultural production and primary
products exports, and dominance, dependence and vulnerability in international
relations. These are discussed below.
Low levels of livings: In developing nations, general-levels of living tend to be
very low for the vast majority of people. This is true not only in relation to their
counterparts in rich nations but often also in relation to small elite groups within
their own societies. These low levels of living are manifested quantitatively and
qualitatively in the form of:
(a) Low income (poverty);
(b) Inadequate housing;
(c) Poor health facilities;
(d) Limited or no education;
(e) High infant mortality;
(f) Low life and work expectancy; and
(g) In many cases a general sense of malaise and hopelessness.
The Gross National Product (GNP) per capital tend to be very low for most
developing countries. It is often used as a summary index of the relative
economic well beings of the people in different nations. The GNP itself is the
most commonly used measure of the overall level of economic activity.
Also there is relative slower growth rate in the GNP per capita of developing
countries when compared to their developed counterpart. Not only these, the
absolute income gap between rich and poor nations continues to widen.
Low level of productivity: In addition to low levels of living, developing."
countries are characterized by relatively a low levels of labour productivity. The
level of labour productivity (i.e. output per worker) is extremely low compared
with those in developed countries.
To raise productivity, domestic savings and foreign finance must be mobilized to
generate new investment in physical capital goods and also to build up the stock
of human capital (e:g. management skills) through investment in education and
training.
High rates of population growth and dependency burdens: The population
rate of developing nations is high when compared to the developed nations. This
could be accounted for by low birth rate and a striking increase in crude birth rate
for developing countries.
Death rates in the third world countries are also high relative to the more
developed nations' but because of the improved health conditions and the control
of major infectious diseases, the less developed countries and developed
countries death rates differences are substantially small than the corresponding
differences in birth rates.
The major implication of high less developed countries birth rates is that children
under the age 15 are more in less developed countries than in developed
countries. Therefore most active labour in less developed countries has to
support children more than in developed countries. On the other hand, the
proportion of people over the age 65 and above are more in developed countries.
Older people as well as children are often referred to as an•
economic/dependency burden in the sense that they are non-productive members
of the society and therefore must be supported financially by a country's labour
force.
The overall dependency burden is more in less developed countries than in
developed countries. Therefore, the less developed countries would not only contend with high rates of population growth but they also must struggle with
greater dependency burden than the rich nations.
High and Rising Levels of Unemployment and Under-Employment:
One of the principal manifestations of factors contributing to the low levels of
living in 'developing nations is their relatively inadequate or inefficient
utilization of labour in comparison with the developed nations.
Under-utilization is manifested in two forms; first, it occurs as under�employment of those people who are working less than they could. Under�employment also include those who are normally working full time but whose
productivity is so low that a reduction in hours would have a negligible impact
on total output.
The second form is open unemployment of those who are able and often eager to
work but for whom no suitable jobs are available. Substantial dependence on
agricultural production and primary products exports: The vast majority of
people in third world nation‘s lives and work in rural areas. Almost 80 per cent
are rural based, compared with less than 35 per cent in economically developed
nations. Similarly, 66 per cent of the labour force is engaged in agriculture,
compared with only 21 per cent in developed nations. Agriculture contributes
about 32 per cent of the GNP of developing nations versus only 8 per cent of the
GNP of developed nations.
The basic reason for the concentration of people and production in agricultural
and other primary production activities in developing countries is the simple fact
that at low level of income the first priorities of any person are food, clothing and
shelter.
Agricultural productivity is low not only because of large numbers of people in
relation to available land but also because less developed countries agriculture is
often characterized by primitive technologies, poor organization and limited
physical inputs.
PRODUCTION = Limited Land + Insufficient Capital + Primitive Technology+
Poor Organization Dominance, Dependence and Vulnerability in International
Relations: For many less developed countries a significant factor contributing to
the persistence low levels of living, rising unemployment and growing income
inequality is the highway unequal distribution of economic and political power
between the rich and poor nations.
These unequal strengths are manifested not only in the dominant power of rich
nations to control the pattern of international trade but also in their ability often
to dictate the terms' of technology, foreign aid and private capital transferred to
developing nations.
Another important aspect of international transfer process serve to inhibit the
development of poor nations very significantly contributing to the persistence
underdevelopment is the transfer of values attitudes institutions, standard of
behaviour, structures, cultures, etc. from developed to developing nations. All
these usually stimulate corruption and economic plunder by the privilege
minorities.
Finally, the penetration of rich countries attitudes, values and standards also
contribute to a problem widely recognised and referred to as the international
brain drain - the migration of professional and skilled personnel who were often
educated in the developing countries at great-expenses to the various these
nations e.g. doctors, nurses, engineers, lecturers, economists, etc.
Self Assessment Exercise
i. Highlight the major features of less developed countries.
ii. What do you understand by basic developmental objectives.
iii. Appreciate government activities in building the economic.
3.2 Major Characteristics of developed countries
The common characteristics of developed nations could be discussed under the
following six sub -headings, which are: High levels of standard of living, High
level of productivity, low rates of population growth, low levels of
unemployment and under-employment, high and sophisticated technology. These
are discussed below.
High levels of standard of livings: In developed world, general-levels of livings
tend to be very high for the vast majority of people. These high levels of living
are manifested quantitatively and qualitatively in the form of:
(h) Higher per capita income ;
(i) adequate housing;
(j) Rich health facilities;
(k) High and affordable education;
(l) Low infant mortality;
(m) High life expectancy;
Others characteristics are direct opposite of the less developed economies
Self Assessment Exercise
i. Highlight the major features of developed countries.
ii. Differentiate between developed and developing nations
3.3 Reasons Why Economic Growth May Not Lead to Development
According to Bakare (1998), economic development is a gradual process and as
such one can discuss it in terms of relativity. It is on this basis that countries over
the world are classified into developed, developing or Less Developed Countries
(LDC).
The circumstances or situation whereby economic growth win fail to promote
economic development can be stated and explained below:
Inadequate growth in comparison with population.
Widening inequality in the distribution of income.
Imbalance in inter-sectorial development.
Environmental degradation and ecological disturbances,
Moral, intellectual, spiritual and social decadence.
Economic dependence.
Inadequate Growth in Comparison with Population
If economic growth is not growing significantly relative to population, it may fail
to promote economic development. For example, an economic growth of 3 - 4%
in comparison with population growth of 10% due to relaxation of immigration
law may not enhance development. Summarily:
G (GNP) > G (POP) = Development.
G (GNP) = G (POP) = No Development.
G (GNP) < G (POP) = Under Development
Where:
G Growth
GNP Gross National Product
POP Population
> Greater than
< Less than
Income Distribution: Even if the growth in GDP exceed the population growth
and income is not well distributed, the unequal income distribution will lead to
widening gap between the rich and the poor, therefore, violating one of the
objectives of economic development.
Hypothetically, let us assume that the richest people in an economy constitute
10% of the whole population and their income can be increased' by 50%. If the
economy grows at 7% P. A., the growth rate in the income of the majority can be
calculated using the formula below:
Imbalance in Sectorial Development
The industrial sector, the oil sector among others may be in a country, but when
facilities such as housing, health, water, law and order, among others are not
developing, may not witness development. Moreso, if the per capital increases
from expansion in the oil and industrial sectors, not cannot be said to have
occurred because poor health could lead to dehumanising ailments such as
typhoid, tuberculosis, etc. which hinders development.
Environmental Degradation and Ecological Disturbances
When ecological balance is disturbed, through oil spillage, air, water and land
pollution and industrial pollution through puffing of toxic gas, carbon monoxide,
lead etc. It may cause health problems such as migraine, high blood pressure,
cancer, etc.
When there is ecological disturbance such as blockage of water canals, etc., it
makes it impossible for water to enter and this way cause flooding. Cutting of
too many trees cause desert encroachment. These goes to long way to
development.
Moral, Intellectual, Spiritual and Social Decadence
We must be compassionate, be objective, not violent, seek for intellectualism,
etc. We must be considerate to our e must not be impatient. Man must be kind hearted and discipline himself. In contrast to these, in Nigeria, there is high
desire examination malpractices, cult practices, injustice, lack of accountability
and transparency, undue favouritism, redtappism, among others. All these cannot
promote development.
Economic Development Dependence
In international trade relations, the third world is worse off as they are exporters
of primary products which are highly income inelastic while the manufactured
products they import have high income elasticity. Thus, the price of primary
products does not increase rapidly and at times faces price fluctuation. The poor
economic relations is the case of Nigeria
Self Assessment Exercise
i. Highlight the major features of less developed countries.
ii. What are the reasons why economic growth may not lead to economic
development.
3.4 The Core Values and Objectives of Development.
The Core Values of Development
The core values of development are three and with them it is possible, to define
or broadly conceptualize what we mean when we talk about development as the
sustained elevation of an entire society and social system towards a "better" or
"more humane" life? What constitutes the good life is a question as old as
philosophy, one that must be periodically re-evaluated and answered afresh in
the changing environment of world society. The appropriate answer for
developing nations today is not necessarily the same as it would have been in
previous decades. But at least three basic components or core value serves as a
conceptual basis and practical guideline for understanding the inner meaning of
development. These core values - sustenance, self esteem, and freedom represent
common goals sought by all individuals and societies. They relate to
fundamental human needs that find their expression in almost all societies and
cultures at all times. Let us therefore examine each in turn.
Sustenance: The Ability to Meet Basic Needs All people have certain basic
needs without which life would be impossible these life -sustaining basic human
needs includes foods, shelter, and protection. when any of this is absent or in
critically short supply, a condition of absolute underdevelopment exist a basic
function of all economic activity , therefore is to provides as many people as
possible with means of overcoming the helplessness and misery arising from
lack of food , shelter, health, and protection. To this extent, we may claim that
economic development is a necessary condition for improvement in the quality
of life that is development. Without sustained and continuous economic progress
at the individual as well as societal level, the realization of the human potential
would not be possible. one clearly has to "have enough in order t be more." rising
per capital incomes, the elimination of absolute poverty, greater employment
opportunities, and lessening income inequalities therefore constitute the
necessary but not the sufficient condition for development.
Self- Esteem (To be a Person): A second universal component of the good life
is self-esteem - a sense of worth and self-respect, of not being use by tools by
other for their own ends. All people and societies seek some basics form of self�esteem, although they may call it authenticity, identity, dignity, respect, honour,
or recognition. The nature and form of this self-esteem may vary from society
to society and from culture to culture. However, with the proliferation of the
"modernizing values" of developed nations , many societies in developing
countries that have had a profound sense of their own worth suffers from serious
cultural confusion when they come in contact with economically and
technologically advanced societies. This is because national propensity has
become an almost universal measure of worth. Due to significance attached to
material values in developed nations, worthiness and esteem are nowadays
increasingly conferred only on countries that posses economic wealth and
technological power those that have "developed".
As Denis Goulet put it, "Development legitimized as a goal because it is an
important, perhaps even an indispensable, way of gaining esteem.
Freedom from Servitude (To be able to choose): A third and final universal
value that we suggest should constitute the meaning of development is the
concept of humane freedom here is to be understood in the sense of
emancipation from alienating material condition of life and from social servitude
to nature, other people, misery, oppressive institution, and dogmatic beliefs,
especially that poverty is predestination. Freedom involved expanded range of
choice for societies and their members together with a minimization of external
constraint in the pursuit of some social goal we call development. Amartya Sen
write of "Development as freedom." W. Arthur Lewis stressed the relationship
between economic growth is not the wealth increases happiness, but that it in
increase the range of human choice." wealth can enable people to gain greater
control over nature and the physical environment (e.g. through the production of
food, clothing, and shelter) than they would have it if they remained poor. It also
give them freedom to choose greater leisure, to have more goods and services, or
to deny this importance of these materials wants and to choose to live a life of
spiritual contemplation. The concept of humane freedom should also encompass
various component of political freedom, including, but not limited to personal
security, the rule of law, freedom of expression, political participation, and
equality of opportunity. although attempt to rank countries with freedom indexes
have proved highly controversial, studies co reveal that some countries that have
achieved high economic growth rates or high incomes, such as china, Malaysia,
Saudi Arabia, And Singapore, have not achieved as much on human freedom
criteria.
The Core Objectives of Development.
From the foregoing it could be said that, development is both a physical reality
and a state of mind in which society has, through some combination of social,
economic, and institutional process, secured the means for obtaining a better life.
Whatever the specific component of this better life, development in all societies
must have at least the following three objectives
1. To increase the availability and widen the distribution of basic life-sustaining
goods such as food, shelter, health, and protection
2. To raise levels of living, including, in addition to higher incomes, the
provision of more jobs, better education, and greater attention to cultural and
human values, all of wish will serve not only to enhance materials well-being
but also to generate greater individuals and national self-esteem.
3. To expand the range of economic and social choice available to individuals
and nations by freeing them from servitude and dependence not only in
relation to other people and nation-state but also to the forces of ignorance
and human misery.
Self Assessment Exercise
i. Highlight the major core values of development.
ii. Differentiate each from another.
iii. What are the basic objectives of development
3.5 SOME BASIC INDICATORS OF DEVELOPMENT
Income is an important indicator of development, it is also important to go
beyond income, even as adjusted for purchasing power parity, to get a board
picture of a national's development levels.
In the first column of table 7.2.1, incomes are measured at market or official
exchange rates and suggest that income of a person in the united state is 363
times that of a person in the democratic republic of Congo! But again, this is
literally unbelievable, as many services cost much less in the DRC than in the
united state. The PPP rates gives a better sense of the amount of goods and
services that could be bought evaluated at U.S. price and suggest that real U.S.
Income are closer to 58 times of the DRC- still a level of inequality that stretches
the imagination. Overall, the average real income per capita of those in high�income countries is more than 13 times that of those in low - income countries.
Besides average incomes, it is necessary to evaluate a nation's average health
and education attainments. Table 7.2.1 shows some basics indicators of income,
health (life expectancy, the rate of undernourishment, the underr-5 mortality rate,
and crude birth rate), and education (male and female adult literacy). Life
expectancy is the average numbers of years newborn children would live if
subjected to the mortality risks prevailing for their cohort at the time of their
birth. Under nourishment means not consuming too little food to maintain
normal levels of activity; it is what is often called the problem of hunger. High
fertility can be both a cause and consequence of underdevelopment, so the birth
rate is reported as another basic indicator. Male female literacy are the fraction
reported or estimated to have basic abilities to read and write ; functional literacy
is generally lower than the rate reported numbers.
Table 7.2.1 shows these data for low -, lower-middle -, upper-middle-, and
upper-, income country groups. The table also shows average from five
developing regions (East Asia and the pacific, Latin America and the Caribbean,
the Middle East and North Africa, South Asia, and Sub-Saharan Africa) and from six illustrative countries: the DRC, India, Egypt, Brazil, Malaysia and the
United States.
NOTE that in addition to big differences across these income groupings, the low
income countries are themselves a very diverse group with greatly differing
development challenges, as the differences between India and the DRC illustrate.
Although the DRC and Indian are both low - income countries, India's real
income is nearly five times that of the DRC. Its overall life expectancy is a full
20 years longer. While nearly three - quarters are undernourished in the DRC,
about one fifth are undernourished in India of every 1,000 live births 205 of
these children will die before their fifth birthday in the DRC, compared with 75
in India. And the birth rate is about twice as higher level of both male and
female literacy than Indian does. If India appears to do better overall, both face
enormous development challenge as seen by comparing these statistics even to
upper-middle - income Malaysia
Source: Data from world bank, World Development Indicators, 2007 (Washington, D.C.:
World Bank, 2007), various tables. UNDP estimates. Micheal P. Todaro and Stephen C. Smith
(Economic Development)
4.0 Conclusion
The unit survey the major characteristics of developed and less developed
countries and examine the main reason why a country may witness growth and
not development. And conclude that less developed economies are highly
vulnerable to international competitiveness.
5.0 Summary
The unit review the major features of both developed and less developed
countries and explores reasons why growth may not lead to economic
development.
5.0Tutor-Marked Assignment
i) Differentiate between developed and less developed economic.
ii) List and explain major characteristics of less developed countries
iii) Enumerate and explain reasons why economic growth may no lead to
development
7.0 References/Further Readings
Attah B.O, Bakare, T.A. & Daisi, O.R., (2011); Anatomy of Economics
Principles, Q&A (Macroeconomics), Raamson Printing Press, Oke-Afa, Isolo,
Lagos, Nigeria
Amacher, R and Ulbrich, H, (1986); Principles of Economics, South Western
Publications Co. Cincinnafi, Oliso
Bakare –Aremu T.A, (2013); Fundamental of Economics Principles
(Macroeconomics), Raamson Printing Press, Oke-Afa, Isolo, Lagos, Nigeria
Bakare I.A.O, Daisi, O.R., Jenrola, O.A., & Okunnu, M.A., (1999): Principles
and Practice of Economics (Macro Approach), Raamson Printing Press,
Mushin, Lagos, NigeriaDennis R. A. et-al; International Economics, Mcgraw
Hill Irwin, 8th edition.
Familoni K.A, (1990); Development in Macroeconomics Policy, Concept
Publications, Lagos, Nigeria
Fashina E.O, (2000); Foundations of Economics Analysis (Macro Theories),
F.E.F International Company, Ikeja, Lagos, Nigeria
Jhingan M.L, (2010); Macroeconomics Theory, 12
th edition, Vrinda
Publications (P) Ltd. Delhi, India
Jhingan M.L, (2010); International Economics, Vrinda Publications (P) Ltd.
Delhi, India
Lipsey R.G, (1979); An Introduction to Positive Economics, Hayper & Raw,
London
Umo J.U, (1986); Economics; An African Perspectives , Johnwest, Lagos
Nigeria.
Gordon Robert J. (2009). Macroeconomics(Eleventh ed.). Boston: Pearson
Addison Wesley. ISBN 9780321552075
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