Reasons for Economic Development
There are a number of reasons suggested for why some economies have remained less developed than others.
• An over-dependence on agriculture to provide jobs and incomes.
More people in less developed economies work in farming than in industry and services compared to developed nations. They practice self subsistence farming, and only produce enough for their own consumption. There is very little to live on, and no surplus to sell or trade. In some areas, the land becomes unsuitable for farming and barren over time, as there has been over farming. Lack of rain due to global climate change also limits the growing and production of crops.
• Domination of international trade by developed nations.
It has been widely argued that rich countries exploit poor nations by buying up their natural resources and crops at extremely low prices, and then, using the same resources to produce goods and services which they then export back at high prices to these underdeveloped nations. In addition to that, developed nations practice protection of their own industries through the supply of subsidies into their agriculture and mining industries. This increases the global supply, and forces down world prices. Poor nations are unable to compete, and as a result, lose sales, incomes, and jobs.
• Lack of capital
When incomes remain low in poor countries, they do not have enough capital to invest in factories and to purchase machinery and equipment to develop an industrial base. They then, cannot produce more goods and services, which they could export.
However, it is not possible for rich nations to stop giving aid as poor nations will be unable to survive on its own. Rich nations should stop giving aid to poorer nations as this can create over-reliance. Due to the constant help given by rich nations, government of poorer nations may end up not doing anything to help its country and allow richer nations to help them. This will result in them ...
• Insufficient investment.
Many people in poor nations do not have access to basic education, training and healthcare. There is also low levels of investment in infrastructure, eg; roads, rail and communication networks. This makes travel and access to rural areas, and the sharing of information very difficult.
• Lack of efficient production
Many less developed countries lack industries and services. Low levels of income provide little incentive for business to set up companies. Workers are not trained or skillful, which makes industry difficult to employ them.
• High population growth
Many underdeveloped countries have rapidly growing population as their birth rates remain high. There is poor family planning and lack of education when it comes to childbirth. This means available goods and services have to be shared among more and more people over time.
• Other factors
An unstable and corrupt government, or civil wars within a nation or between several nations, dips into the nation’s capital fund, disallowing the nation to invest in economic development.
• GDP per capita
Gross Domestic Product (GDP), or average income per person, is the common method of comparative measure of development. Developed nations tend to have a high GDP per capita. However, measuring a nation’s development based on their GDP has its drawbacks. It is a narrow measure of development or welfare in a country, as it has no indication of what is bought with the income, or how the income is distributed throughout the population.
• Poverty Indicators
A better measure on level of poverty in a country is the proportion of people living on low incomes. Other indicators include malnutrition levels, number of underweight children, levels of unemployment, as well as number of people living in slums.
• Life Expectancy at Birth.
People in developed countries tend to live longer than people in underdeveloped countries. Life expectancy measures the average lifespan from birth to adulthood of a person. Other Health related Indicators include baby and mother mortality rates, and number of inoculations against diseases. Healthcare in developed nations is relatively better and at a higher standard.
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• Adult Literacy Rate
This measures the proportion of adults who can read and write in the nation. A more developed nation will have better education systems and provision. Other education related indicators include school & college enrollment rates, as well as school completion rates.
• Access to Safe Water.
Clean and safe water is practically what every nation needs. It is the ease of access to clean and safe water that measures development. It is a means to be free of water-borne disease, and improved sanitation.
• Ownership of consumer goods.
You need high income to buy goods, such as cars, computers, washing machines, and so on. This indicates an improved quality of life, as the people have enough access and money to buy these goods and services.
• Employment Sectors.
There are both high income employment sectors as well as low income employment sectors. High income employment sectors primarily consist of manufacturing and service, while low income sectors consist of agricultural sectors. As a result, most people in developed countries work in manufacturing and services, while most people in underdeveloped countries work in agricultural sectors.