Economic Development

Chapter-19

Economic development involves growth in the economic wealth of a region, country or
group of countries to improve the well-being of inhabitants. In other words, economic
development is a qualitative growth of living standards in a country.
Economic Growth refers to an increase in the capacity of an economy to produce goods
and services compare to a period of time.
Objectives of Economic development
1. To produce more necessities such as food, shelter and healthcare.
2. To make sure they reach more people in need, raising living standard.
3. To expand economic and social choice.
Characteristics of Developed Economies.
1. Have large modern farms
2. Have many firms of different sizes producing and selling a variety of goods and services.
3. Have a well-developed road and rail network and modern communication systems.
4. Produce great majority of output.
5. Stable government
6. Healthy, wealthy and educated population
7. Income and employment are created by their service sector
Characteristics of Developing Economies.
1. Farming methods are poor
2. Few firms producing and selling goods and services
3. Road, rail and communication networks are underdeveloped
4. Most people are poor
5. People live in poor housing conditions
6. People do not expect to live to old age
7. Lack access to clean water
8. Scarcely enough food for a rapidly growing population to eat
Emerging economies or newly industrialized economy
Some countries are developing rapidly, but they have yet to display the full range of
characteristics of modern developed economies. These are often grouped under the headings
emerging economies or newly industrialised countries.

Reasons for low economic development-
1. An overdependence on agriculture to provide jobs and incomes
More people in less developed economies work in farming than in industry and many of
them produce food for themselves and their families to live on and very little surplus
they can sell to earn money. Over farming and drought due to global climate change
makes land no longer any good for growing crops for people to survive on.
2. Domination of international trade by developed nations
Rich countries import food crops from poorer nations at very low prices, and then
produce goods and services by those resources. Then they export back to the same less
developed countries at much higher prices. Moreover, subsidies implied on mining and
agricultural industries of rich countries increased the global supply of these products
and forced down world prices.
3. Lack of capital
The lack of capital for investing in building factories and purchase of machinery and
equipment to develop an industrial base to produce more of the goods and services the
less developed countries need and which they could export to earn money.
4. Insufficient investment in education skills and health care
No access to basic education, training and healthcare in many less developed countries
prevent people from becoming healthier, more productive and more innovative works.
5. Low levels of investment in Infrastructure
Road, rail and communication networks are often poor in many less developed
countries. This makes travel and access to rural areas, and the sharing of information,
very difficult.
6. Lack of efficient production and distribution systems for goods
and services
Lack of industries and services low income little incentive for businesses to set up
different shops and retail centres. difficult transport
7. High population growth
Many underdeveloped countries have rapidly expanding populations because birth rates
remain high. This means available goods and services have to be shared among more
and more people over time.
8. Other factors
Unstable and corrupt governments, and wars with neighbouring nations or between
different religious groups, have often blighted the development of some less developed
countries. Misuse of money that could be used to invest in economic development by
corrupt officials also interrupts economic development of the country.
Development indicators
UN development millennium goals
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development
Developing Measures
1-GDP per capita
Gross Domestic Product per capita, or average income per person, is the most commonly used
comparative measure of development. Developed countries tend to have relatively high GDP
per capita. However, GDP is a narrow measure of economic development or welfare in a
country. Calculating average GDP tells us nothing about how incomes are distributed between
populations.
2-Population on less than one $ a day
The proportion of people living on very low incomes is a better measure. Indicators of poverty
other than income include levels of malnutrition, numbers of underweight children, levels of
unemployment, and people living in slums.
3-Life expectancy at birth
People in developed countries tend to live longer than people in less developed countries
because they tend to have better standards of living and access to good food and healthcare.
Life expectancy from birth is therefore a good measure of economic development in a country
or region.
4-Adult literacy rate
A good measure of education provision in an economy is the proportion of the adult population
that is able to read and write. Other education-related indicators include school and college
enrolment and completion rates among children and young people.
5-Access to safe water supplies and sanitation
Clean water is a necessity and safe, clean sanitation can help stop the spread of disease. There
are generally available services to most people living and working in developed country.
6-Ownership of consumer goods
Low incomes and the lack of an efficient production and distribution system for goods and
services in many less developed economies means ownership of consumer goods such as
washing machines, cars, telephones and personal computers in low compared to many
developed countries.
7-Proportion of workers in agriculture compared to industry and
services
High incomes in developed economies mean that people have money to spend on shops, eating
out at restaurants and leisure activities. They also want banks, insurance, public transport,
holidays and many other services. As a result, most employed people in developed countries
work in services while most employees in less developed countries work in agriculture.
8-Human development index
Human development index combines a number of development indicators into one index with
a maximum possible value of 1. Changes in the index over time can hence show whether a
country has improved or reduced the economic wealth of its people regarding standard of living
measured by GDP per capita, access to education and knowledge measured by the adult
literacy rate and school enrolment rates, and health, diet and lifestyle measured by life
expectancy at birth.