Economic development Essay

economic using and sparingal egress be twain indicators of the economic position of the solid ground. Economic under essential is the maturement in un crowinge aimd home(prenominal) product and economic learning is related to harvest-festival in the standard of living and poverty. As you dismiss see economic growth and economic increment ar not the same thing, economic growth is far to a greater extent than just growth in GDP as it involves indicators that atomic number 18 not purely economically related.However economic growth is an indicator of economic schooling hardly there be overly some(prenominal)(prenominal) new(prenominal) factors that represent economic growing. These indicators are life forecast at birth, infant mortality array, daily calorie go forth per capita, adult literacy rate, number of doctors per 1000 people, amount long time of schooling, approach capacity of clean water, license of press, immunisation rates and levels of discri mination. As you can see these are broadly not economic indicators but when they are combined they form the economic development figure.thither are fifteen restrictions to economic development, the primary of these be a neediness of physical superior. Lack physical capital is a significant parapet to the development of a country for some(prenominal) primings. there is already a shortage of capital that further leads to slight capital being produced this wee-wees significant capers for developing countries. In these countries the income levels are low spark advance to low savings and indeed detailed m cardinaly for enthronisation in capital. This leave out of capital furthers the low productivity therefore the employment dust low.This likewise leads to a insufficiency of hire for favorables and services the low demand means that lilliputian needs to be produced therefore little(prenominal)(prenominal) capital needs to be produced. This then forces the co untry into a cycle of underdevelopment. This so creates a breastwork for the country to develop. An example of this is in close to slight amplyly-developed countries where they are in aeonian propagation of struggle and polite unrest. Their capital is destroyed finished cont subvert devising it difficult for the country to produce to a greater extent capital. Also, Sierra Leone, the valets least developed country, as shown by the human development index, has a GDP per capita of US$159 this creates significant troubles for the economy and its development.A overleap of human capital is the beside barrier to development. This barrier is created finished and through a overleap of education and training of the world. It as well relates to the command heath and wellbeing of the tribe. If the get-force are getting sick then they are unable to work and therefore decreasing the excavate capital. A incumbent example of this blot is in South Africa. In South Africa t he micro-economic disturb of AIDS is very sober and is getting worse.Among skilled workers HIV prevalence is expected to peak between a fifth and a hindquarters percentage by the year 2000, which is thus dep allowing the number of skilled workers creating the lack of capital development barrier. These problems are as well stellar(a) to a cram in insurance bills and the costs of health benefits rise. This therefore diverts organization activityal sympathies savings to pay for health care and as a result the availability of livestocks for investment forget fall. AIDS is predicted to knock 0.3 to 0.4 pct tally the annual growth rate. As you can see this is a utter(a) barrier to development in these less developed countries. A scheme to this barrier is human resource development.The next barrier to development is a lack of savings. This also ca drug abuses low levels of investment ascribable to the low income leading to low savings. This low level of savings is also ca apply by several other suits much(prenominal) as poorly developed financial markets, holding of savings in traditional non-money forms, the purchase of unnecessary luxury items, audacious family cranch reducing the incentive to save for investment and the general duty of the commonwealth. The low incentive to reinvest profits by businesses also centers the savings.Budget shortages by the government to bother up for the low levyation revenue are also decreasing the amount being saved. When there is a lack of savings caused by each of these causes it forces the need to borrow form contrasted that consequently leads to problems with the balance of payments. An example of lack of savings exists in Nigeria. In Nigeria there are severe problems with their notes. These begin with significant fraud problems also the majority of trading is crap for grantede with cash in which until recently the currency did not exceed the equivalent of 50 cents.The next problem is tha t they dont opine in banks, the notwithstanding use of banks is to exchange alien currencies for tourists, which leads to a lack of funds for investments. Also, Local traders keep all working capital stuffed in coca jars, as they believe business opportunities testamenting disappear in the time it takes to make a withdrawal. bevels do not allow credit overdue to the fear of not being repaid. all of these factors contribute to a large barrier to development simply due to a lack of savings. This could be take ind through improve the financial system. some other(prenominal) barrier to development is a lack of valueation revenue. A lack of taxation creates barriers as it means the government has little finances to use on economic development. The graduate(prenominal) unemployment, very low-income levels and difficulties in tax exhibition cause this lack of tax revenue. The government is then compel to collect tax in the first place from customs duties, sales taxes and ex cises. These taxes can arouse to be very inflationary and are also regressive. some other(prenominal) problem with these taxes is that they discourage investment and the creation of employment. Nigeria also has a problem with the collection of taxation. Most Nigerians that can afford to avoid paying taxes, as they believe that their money go out be flinched by the corrupt government. This creates severe problems for the country, as there is no money for the government to use in investment to erect economic development. upward(a) the financial system will also back up solve this barrier.The next barrier to entry is a lack of stand. Less developed countries rarely film a sufficient supply of necessities much(prenominal) as roads, ports, sewerage, power schools or water- facilities etc. The main reason that this fundament is not being made is that the government simply cannot fire the funds to finance them due to their lack of taxation revenue. Another reason maybe that the g overnment has chosen to finance defence spending or if they are in time of war, in which nigh LCDs are. A lack of infrastructure restricts the free flow of goods and services and reduces the productivity of the labour force that further restricts the economic development of the country. In Africa infrastructure is very underdeveloped compared to the other less developed regions. They be possessed of 6 phone lines for every 1000 people compared to the fairish of 54 for other developing regions. Also their power supply is far less than the average of 300kw per 1000 peoples with 80kw this significantly stops their development.In Nigeria there are real problems with infrastructure causing business uncertainty. Telephones rarely work and the electric comes in periodic vengeful surges. Nigerian firms, particularly the state-owned ones due to the lack of taxation, sacrifice little effort into maintaining their infrastructure and it therefore ends up breaking down. unquestionable firm s are so hard to come by that firms barter contacts well let you share the electricity from our generator if you can swear out us pay back spare parts for it. Firms motivationing to set up in Nigeria wait the problem known locally as BYOI (bring your own infrastructure) this shows how much of a problem infrastructure is in Nigeria. A lack of infrastructure could be solved in numerous counsels such as support enterprise, human resource development or modify the financial system.A lack of entrepreneurs is another barrier to economic development. Enterprise is essential in order for development to occur, as it is one of the key factors to production. In the less developed countries there tens to be a lack of entrepreneurs for several reasons. The first of these is the fact that there is a limited opportunity to make a profit, due to the lack of demand. The next reason is that the businesses not easily financed due to the low level of savings. The lack of infrastructure availabl e also distracts these entrepreneurs.Another reason to the lack of entrepreneurs is that cultural beliefs often place little richness on monetary gain and entrepreneurs are thus given little status. The number of entrepreneurs is also reduced by the lack of education in these countries. The last-place reason is that it is risky for an entrepreneur due to the political and economic instability. An example of a lack of entrepreneurs is also in Nigeria as it close relates to the lack of the infrastructure. The lack of infrastructure adds at least 25 percent onto a firms operating costs if it choses to set up in Nigeria, this is a significant deterrent for firms to set up and should be solved if the county wants to carry out economic development. A dodging that could be adopted to help this situation is encouraging enterprise.The next barrier to economic development is a lack of technology. There are several reasons why these less developed countries are not more technologically m ature(a). The first reason being that most new technology will involve some investment in capital that is lacking in these less developed countries. Also another problem is that the new technology will need skilled labour to operate it but skilled labour is also of shortage in a LCD. The next reason is that companies dont really want to adopt labour saving technology when they already gestate audacious labour and there are high unemployment rates.The final reason that there is a lack of technology is that new technology is used to relieve the procurement of economies of scale and the small markets in LCDs reduce the incentive to mass-produce. The governments however, squander managed to encourage technology into these LCDs and most currently use modern technology that compliments the labour so workers maintain their jobs. A lot of the modern technology used in these counties is generally used in the alien owned industries where they mass-produce in order to exportation to adv anced markets.Over people and rapid population growth is another factor that causes a barrier to development. In these less developed countries the birth rates are often five times higher than in the more developed countries. The advances of medicine turn over also caused a fall in the deaths, which leads to a higher population growth. The growth of these countries is generally around 2 percent and their growth is usually to a lower place this figure, which therefore worsens the situation, and the real GNP per capita often falls. In the more advanced countries they generally have population growth of around 0.5 percent and their economic growth will usually be higher than that.This is where the widening fault occurs pushing less developed countries further a counselling from more advanced countries. This high growth of the population also has the effect of increasing the labour force, but as there is little demand for labour the unemployment rate will tend to rise. Also, most of this population is below 15 or above 65 meaning they are unable to contribute o production but still need things such as food, water, robes and shelter. This creates a problem known as dependency burden making development even harder. Governments in these LDCs fight a operose battle with a rapid growing population and are evermore trying to slow this rate but they face several problems such as poor education, communication, lack of contraception and cultural attitudes.Africa is currently the meteoric growing of all the developing regions with a growth rate of 3 percent over the past decade but with this high growth rate comes several associated problems. Africa has one doctor for every 20,000 people compared to an average 5000 people in developing countries and its infant mortality rate is the highest at 96 per thousand births almost double the developing countries average. Africans also have a life expectancy of 52 historic period where the average for developing countries is 64. As you can see that the effects of a high population are not beneficial to a developing country. This barrier to development can be solved with the population control strategy.The next barrier to development is inflation. Inflation in these countries is caused by the scare amounts of goods and services proportional to the high population consequently causing demand pull inflation. The domestic supply is unable to match the domestic demand. The inflation rates in many of these countries gets above 200 percent compared to that of around 5 percent in most advanced countries. This high inflation has many undesirable effects such as decreased living standards and a reducing in real income, it also tends to redistribute the income from the poor to the wealthy therefore increasing the income inequality that already exists.A high inflation rate also causes the investment of non-productive assets such as antiques or gold, this money is therefore taken out of the economy reducing the fu nds available for investment. These high inflation rates also cause a reducing in the competitiveness of exporters and conditional relation competing firms that therefore leads to an increase in the countries current delineate deficit. Another effect that inflation will lead to is a go exchange rate, which if the country has a large foreign debt will make it even harder to pay. Inflation is very high in most of the African countries and causes severe problems to their economy and development progress.Balance of payments problems is also another barrier to development of these less developed countries. The majority of LCDs have problems with their external balance as the little income they do earn is used on imports and used to pay off interest on their foreign debts. As these countries are in deficit they are continually pressure to borrow from overseas to finance their payments downslope their current account deficit even more. Many of these countries are also suffering from w orsening impairment of trade that also decreases their export revenue and thus further worsening their balance of payments. The WTO worldwide reduction of tariffs will help to assist this but government policies need to be implemented to seriously boost export revenue and turn the consumers away from imports. The strategy to help the balance of payments is import replacing.The next barrier to development that LCDs face is a depletion of their graphic resources. Many of these countries are highly dependent on one major export to create export revenue, create growth, employment and income and the reduction in the current account deficit. This creates problems as they may deplete inborn resources without considering future production. This reduces the potential for further future development and growth. In Mauritius, they have cleared 25 percent of their forests in the last 19 long time purely for export. This causes massive environmental effects and also is a serious concern, as w hen the resources run out the countrys economy will fail to stay afloat. This is the same in many less developed countries including many African counties and their dependency on oil. It can be helped with export development to have a wider range of exports and less dependency on one major export.Another significant barrier to economic development in these less developed countries is corruption and poor administration by the government. Corruption is a very common problem in LDCs. The problem associated with this is that aid and government revenue is not all used in promoting growth, corrupt leaders and government officials take most of it. When a government is corrupt it causes most of their aid to be withdrawn forcing them to reclaim their political structures.This withdrawal of overseas assistance causes depletions in general living standards of the country. Another problem with these governments is that they know little or nothing about economics. These leads to several problem s including poor administration and efficiency these lead to a poor ability to force development. An example of this is in Nigeria where it has been estimated that in the last twenty years over two billion dollars of oil revenue from the country has been embezzled. This is mainly due to their last dictator who ordered the Nigerian Central hope to deposit 15 million dollars a day into his own Swiss bank account. This works out to twenty percent of GDP and when you take into consideration that their NFD is over 40 percent of GDP, the country is not remaining with much money. A strategy that has been put into place for this specific barrier is the refusal to lend money to Nigeria from IMF.Natural disasters are another barrier to development in less developed countries. The effects of natural disasters such as floods or droughts have a much greater impact on less developed countries compared to that of advanced countries. Most LCDs are prone to these natural disasters, which is a sig nificant factor to their underdevelopment. In India they have times of severe droughts and flooding where 80 million people were affected. This has seriously decreased their agriculture production and is consequently creating a barrier to their development. There is not much that can be make about natural disasters but do adjust to them and to adopt new ways to screw with them.Another significant factor preventing the development of less developed countries is war and civil unrest. Many LCDs are in constant war and civil unrest, this causes several problems with development. The first of these problems is that entrepreneurs are discouraged by the countries instability also important infrastructure is destroyed and governments spend their little taxation revenue on maintaining order or producing weapons. Economies in war torn countries are unlikely to be operating at over menstruum capacity making it hard for development to occur. In Rwanda civil wars in the nineties have claimed the lives of almost 1,000,000 Rwandans. Most of the aid to the country was invested in weaponry and therefore not used in promoting economic development, as it should have been. This is how civil wars can create barriers to development. The only solution to this is to end the wars and focus the spending into promoting economic development.The final barrier to development is a lack of press freedom. Press freedom involves the exchange of ideas, criticism of government and increased awareness of world events and developments. This is something that most LCDs do not have and therefore their economic development is limited. In Mexico the government allowed Televisa to have a monopoly in the television market if they didnt work any anti-government shows and supported the government. In the eighties journalists were killed by the police in Mexico City if they published any anti-government articles. This is serious problem in these less developed countries and is usually the result of go vernment corruption.The first strategy to promote economic development in these less developed countries is export development. This strategy involves assisting those producers who export to overseas markets. An increase in export development will earn foreign exchange and create unemployment and income and also help to solve problems with the balance of payments.The next strategy to promoting development is import replacement. Import replacement involves the shifting of demand away from imports and towards the domestically produced products. This can be done in several ways including the induction of tariffs on imports making them more expensive relative to the domestic product. This also encourages foreign investment as the foreign firms wish to have the same protection. Assisting domestic producers financially is another way of promoting this economic development, by subsidising and offering tax incentives to local producers it will increase their competitiveness with imports by the lower costs of production. However, replacing imports is only a short-term solution and therefore policies promoting long-term development moldiness be applied.Human resource development is the next strategy to development. This development involves improving the size of the labour force and also the skills of the labour force. The labour force can be increased through im prove health care and skills can be attained through things such as training and education. In Nigeria the domain of a function Bank is currently funding an $80 million project into their education as well as twist a better and more consistent water supply. Also In Malaysia education investment has been amongst their highest priorities for decades, they have spent $731 million on improving their education levels to the level they are currently atAnother way to promote economic development in these less developed countries is through encouraging enterprise. In most LDCs there is a lack of entrepreneurs, in ord er to increase the quantity there are several solutions such as improving management and leadership training and tax incentives, subsidies and free loans. Cuba has introduced a group of people called the cuentapropistas, 170,000 entrepreneurs marking the arrival of a new business sector in the islands socialist economy. They account for 8% of the labour force and manage to put food on the dishearten for one in ten Cubans. These new small businesses have been a result of reduced subsidies to state enterprises, increased foreign investment, and foundation garment of incentives in the agricultural sector and the legalisation of dealings in foreign currency. This has already had positive signs on the Cuban economy with growth in 1998 at 8 percent some 31percent higher than two years previous.Population control is another strategy to economic development. Rapid population growth is unwanted as it creates problems such as inflation and scarceness and therefore more poverty. There are p lenty of methods that can be put into place to slow population growth. Some of these methods include utmost pip-squeakren policy such as Chinas one child policy and free supplies of contraception. The Grameen bank is another contributor to helping population control in Bangladesh. The bank issue loans to woman and as part of the conditions to borrowing the money they must agree to have small families. This has proved to be a successful program all across the world and has helped to promote the small-scale development of many less developed countries.The next strategy to promote economic development is increasing the agricultural productivity. tillage is usually a major sector in the less developed countries and thus improving its productivity will significantly promote development. Improving the agriculture productivity can be done in many ways. Some of these include merging small farms to create larger more efficient ones and encouraging owner operators to increase the incentive to improve productivity there also several other ways in which these countries can improve their agricultural productivity. With 75 percent of the population living in rural areas, improving the efficiency of Indias agriculture is the key to attaining high growth and reducing poverty.Accelerating rural development and poverty reduction requires barren spending on input subsidies investing in rural infrastructure providing more effective rural services, especially to the poor and socially excluded improving management of water, forests, and other natural resources liberalizing the rural economy, including the rural financial system. In the heart of Indias poorest region, the Bihar Plateau Development Project is increasing feeler to much-needed irrigation and safe drinking water by tribal communities and raising their incomes through the diversification of rural livelihoods. The project aims to reach 4.5 million people through a variety of institutional mechanisms, including water and sanitation committees, water exploiter associations, and income generation schemes, all aiming to transfer skills and enhance peoples capabilities so that the benefits may be sustained once the project ends. This is one way in which India is proving to increase its agricultural productivity.Another strategy to promoting economic development is by adopting intermediate technology. If a less developed country invested in new technology it may be forgiving employment possibilities, as most new technology is very labour intensive, this will consequently lead to a fall in employment. As these countries have an abundance of labour it is much easier, cost effective and better for the economy if they use intermediate technology that still requires high levels of labour. An example of this is Fred Hollows, Hollows uses local resources to create employment income and economic growth through the training of people to actualize the medical tasks and also employment in the factories where the lens are created.The final strategy to promote economic development is to improve the financial system. In these economies there is a lack of savings and an insufficient financial system, this creates major barriers to development. Thus policies need to be adopted to improve this situation that promote growth and employment without generating high levels of inflation. The humanity Banks executive director Board approved a $506 million loan to support financial sector adjustment and reform in Colombia. The loan is part of a revised World Bank strategy for Colombia that includes intensified lending to help the country promote peace, ease the impact of the recession on the poor, and reconstruct after their earthquake. It is also part of a $1.4 billion package to help bolster Colombias economy. This financial sector adjustment loan reflects the World Banks confidence in Colombias wide-ranging reform strategy, which is critical to its effort to overcome the recession, said Andres Solimano, director of the Banks program in Colombia.The financing of many of these strategies is usually funded through institutions such as the World Bank and the International Monetary Fund institutions. The World Bank is a major force behind the development of less developed countries as it gives issues discounted loans to most of these countries. Another way that these countries can fund their development is through overseas aid. The are large amounts of money flowing out of the developed countries from governments and other aid organizations as aid into the less developed countries hoping to achieve economic development. For all of these less developed countries to achieve economic development, an effort from all developed countries with aid and advice must be contributed, but until then the world will not have any chance of abolishing poverty.References IFC Building the private sector in Africa The Economist January fifteenth 2000 survey Nigeria World bank Rwanda developme nt project The Economist may 27th Aids impact in South Africa World Bank Cubas Cuentapropistas World Bank Indias development The Grameen Bank Economic Development in Bangladesh The Economist May 27th Growth is good The Economist Feb 22nd Televista World Bank press release, 11th June 1998