Economic development Essay

Economic knowledge and scotch exploitation ar both indicators of the sparing position of the boorish. Economic maturation is the harvest-time in gross home(prenominal) product and economic schooling is link up to ontogenesis in the standard of living and impoverishment. As you end rule economic growth and economic using argon not the analogous thing, economic education is utter some more than just growth in GDP as it involves indicators that argon not purely economic solelyy related. as yet economic growth is an indicator of economic breeding neverthe slight at that status ar excessively several other meanss that represent economic phylogeny. These indicators are life expectancy at birth, infant death rate rate, daily nutritionists calorie supply per capita, adult literacy rate, get of doctors per 1000 battalion, sightly age of schooling, availability of clean pissing, freedom of commove, immunisation rates and levels of discrimination. As you can chatter these are frequently not economic indicators but when they are combine they form the economic development figure.There are fifteen obstacles to economic development, the offshoot of these being a overlook of tangible capital. Lack physical capital is a substantive hindrance to the development of a country for several precedents. There is already a shortage of capital that move on trains to slight capital being produced this craps significant hassles for ontogenesis countries. In these countries the income levels are low star(p) to low savings and wherefore little capital for enthronization in capital. This wishing of capital furthers the low productivity beca riding habit the employment remains low.This in addition leads to a omit of necessity for goods and operate the low collect means that slight(prenominal) pick outs to be produced thusly little capital needs to be produced. This then forces the country into a cycle of underdevelopmen t. This consequently hits a parapet for the country to develop. An sheath of this is in virtu aloney little unquestionable countries where they are in constant generation of war and civil unrest. Their capital is washed-up with with(predicate) war fashioning it difficult for the country to produce more capital. Also, Sierra Leone, the worlds least essential country, as sh feature by the human development index, has a GDP per capita of US$159 this creates significant businesss for the sparing and its development.A lack of human capital is the neighboring breastwork to development. This barrier is created through and through a lack of education and grooming of the community. It too relates to the general heath and salubriousbeing of the existence. If the sweat-force are getting blue then they are unavailing to tempt and at that rear endfore decreasing the force capital. A contemporary example of this situation is in reciprocal ohm Africa. In South Africa the micro-economic impact of AIDS is precise serious and is getting worse.Among mean workers HIV prevalence is expected to peak between a fifth part and a quarter share by the year 2000, which is consequently depleting the number of skilled workers creating the lack of capital development barrier. These problems are as well leading to a rise in insurance bills and the be of health benefits rise. This thitherfore diverts regime savings to pay for health care and as a result the availability of bills for investment will fall. AIDS is predicted to roast 0.3 to 0.4 percent off the annual growth rate. As you can propose this is a severe barrier to development in these less unquestionable countries. A dodge to this barrier is human resource development.The coterminous barrier to development is a lack of savings. This in like manner ca drug abuses low levels of investment callable to the low income leading to low savings. This low level of savings is in like manner caused by several other reasons much(prenominal) as bruskly create financial marketplaces, holding of savings in traditional non-money forms, the purchase of spare luxury items, cheap family labour reducing the incentive to save for investment and the general indebtedness of the universe. The low incentive to reinvest profits by businesses alike reduces the savings.Budget deficits by the organisation to make up for the low task income revenue are excessively decreasing the amount being saved. When thither is a lack of savings caused by any of these causes it forces the need to repeat form overseas that consequently leads to problems with the balance of payments. An example of lack of savings exists in Nigeria. In Nigeria thither are severe problems with their currency. These begin with significant fraud problems also the majority of trading is make with cash in which until recently the currency did not exceed the equivalent of 50 cents.The bordering problem is that they dont co nceptualise in banks, the besides use of banks is to trade unconnected currencies for tourists, which leads to a lack of funds for investments. Also, Local traders save up all working capital stuffed in coca jars, as they believe business opportunities will disappear in the time it takes to make a withdrawal. sticks do not allow credit over due to the fear of not being rep fear. All of these factors contribute to a oversized barrier to development simply due to a lack of savings. This could be solved through up(p) the financial dodge.Another barrier to development is a lack of receipts revenue. A lack of taxation creates barriers as it means the regimen has little finances to use on economic development. The utmost unemployment, very low-income levels and difficulties in tax collection cause this lack of tax revenue. The government is then forced to collect tax mainly from customs duties, sales taxes and excises. These taxes can prove to be very pretensionary and are a lso regressive. Another 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 give taxes, as they believe that their money will be flinched by the stain government. This creates severe problems for the country, as there is no money for the government to use in investment to promote economic development. Improving the financial system will also assist solve this barrier.The next barrier to introduction is a lack of infrastructure. Less create countries rarely take aim a sufficient supply of necessities such(prenominal) as roads, ports, sewerage, power schools or water- facilities etcetera The main reason that this infrastructure is not being made is that the government simply cannot raise the funds to finance them due to their lack of taxation revenue. Another reason maybe that the government has chosen to finance falsification spending or if they are in time of war, in which most liquid crystal displays are. A lack of infrastructure restricts the free break outside 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 under certain compared to the other less create regions. They have 6 phone lines for every(prenominal) 1000 people compared to the average of 54 for other developing regions. Also their power supply is far less than the average of 300kw per 1000 peoples with 80kw this importantly stops their development.In Nigeria there are serious problems with infrastructure causing business uncertainty. Telephones rarely work and the electric comes in periodic vengeful surges. Nigerian firms, particularly the state- possess ones due to the lack of taxation, devote little effort into maintaining their infrastructure and it therefore ends up breaking down. Reliable firms are so hard to come by that firm s barter contacts well let you share the electricity from our generator if you can jockstrap us find spare parts for it. Firms wanting to set up in Nigeria submit 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 some modal values such as encouraging enterprise, human resource development or improving the financial system.A lack of entrepreneurs is other barrier to economic development. endeavor is essential in order for development to occur, as it is one of the identify 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 luck 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 on tap(predicate) also distracts these entreprene urs.Another reason to the lack of entrepreneurs is that heathenish beliefs much place little minuteance 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 terminal 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 closely relates to the lack of the infrastructure. The lack of infrastructure adds at least 25 percent onto a firms direct 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 achieve economic development. A strategy that could be adopt to function this situation is encouraging enterprise.The next barrier to economic development is a lack of engine room. There are several reasons why these less developed countries are not more technologically advanced. The first reason bei ng that most forward-looking engineering science will involve round investment in capital that is lacking in these less developed countries. Also another problem is that the new-fashioned technology will need skilled labour to operate it but skilled labour is also of shortage in a liquid crystal display. The next reason is that companies dont really want to adopt labour saving technology when they already have cheap labour and there are high unemployment rates.The final reason that there is a lack of technology is that new technology is used to facilitate the achievement of economies of scale and the small markets in liquid crystal displays reduce the incentive to mass-produce. The governments however, have managed to encourage technology into these liquid crystal displays and most currently use modern technology that paying attention the labour so workers maintain their jobs. A lot of the modern technology used in these counties is generally used in the unconnected owned ind ustries where they mass-produce in order to exportation to advanced markets.Over population 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 high(prenominal) than in the more developed countries. The advances of medical specialty have also caused a fall in the deaths, which leads to a higher(prenominal) population growth. The growth of these countries is generally more or less 2 percent and their growth is usually downstairs 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 virtually 0.5 percent and their economic growth will usually be higher than that.This is where the widening gap occurs pushing less developed countries further away from more advanced countries. This high growth of the population also has the transaction of change magnitude the labour for ce, 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 diet, water, clothing and shelter. This creates a problem known as addiction burden making development even harder. Governments in these LDCs skirmish a tough battle with a rapid growing population and are always trying to slow this rate but they face several problems such as little education, communication, lack of contraception and cultural attitudes.Africa is currently the fastest 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. Afri cans also have a life expectancy of 52 years 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 tally strategy.The next barrier to development is swelling. Inflation in these countries is caused by the weary amounts of goods and services relative 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 unwanted effects such as decreased living standards and a reduction in real income, it also tends to redistribute the income from the pitiful to the wealthy therefore increasing the income inequality that already exists.A high inflation rate also causes the investment of non-productive assets suc h as antiques or gold, this money is therefore taken out of the economy reducing the funds available for investment. These high inflation rates also cause a reduction in the competitiveness of exporters and import competing firms that therefore leads to an increase in the countries current account deficit. Another effect that inflation will lead to is a falling 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 liquid crystal displays have problems with their external balance as the little income they do earn is used on imports and used to pay off gratify on their foreign debts. As these countries are in deficit they are continually forced to borrow from overseas to finance their payments worsening t heir current account deficit even more. Many of these countries are also crucifixion from worsening terms 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 badly boost export revenue and turn the consumers away from imports. The strategy to help the balance of payments is import replacement.The next barrier to development that LCDs face is a depletion of their raw(a) resources. Many of these countries are highly dependant 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 natural 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 oddment 19 years purely for e xport. This causes massive environmental effects and also is a serious concern, as when 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 facilitate 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 retire forcing them to reform their political structures.This withdrawal of overseas assistance causes depletions in general living standards of the country. Another problem with these governm ents is that they know little or zilch about economics. These leads to several problems including poor administration and efficiency these lead to a poor ability to promote development. An example of this is in Nigeria where it has been estimated that in the closing curtain twenty years over two meg dollars of oil revenue from the country has been embezzled. This is mainly due to their last dictator who ordered the Nigerian Central Bank to deposit 15 zillion dollars a daylight 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 left 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 compa red to that of advanced countries. Most LCDs are prone to these natural disasters, which is a significant factor to their underdevelopment. In India they have times of severe droughts and flooding where 80 trillion people were affected. This has severely decreased their culture 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 cope 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 full 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 change magnitude 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 play 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. T his is serious problem in these less developed countries and is usually the result of government 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 t ax 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 development must 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 correctd health care and skills can be attained through things such as teach and education. In Nigeria the World Bank is currently funding an $80 billion roll into their education as well as building a make 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 encourag ing enterprise. In most LDCs there is a lack of entrepreneurs, in order to increase the quantity there are several solutions such as improving management and lead training and tax incentives, subsidies and free contributewords. Cuba has introduced a group of people called the cuentapropistas, 170,000 entrepreneurs brand the arrival of a new business sector in the islands collectivist economy. They account for 8% of the labour force and manage to put food on the table for one in ten Cubans. These new small businesses have been a result of reduced subsidies to state enterprises, increased foreign investment, and introduction of incentives in the agricultural sector and the legalisation of transaction 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 scarcity and therefore more poverty. There are view of methods that can be put into place to slow population growth. many of these methods include maximum children policy such as Chinas one child policy and free supplies of contraception. The Grameen bank is another ratifier to helping population control in Bangladesh. The bank issue loans to muliebrity 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. Agriculture 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 effici ent ones and encouraging owner operators to increase the incentive to break productivity there also several other ways in which these countries can improve their agricultural productivity. With 75 percent of the population living in hobnailed areas, improving the efficiency of Indias agriculture is the key to attaining high growth and reducing poverty.Accelerating rural development and poverty reduction requires cutting 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 find is increasing access to much-needed irrigation and safe drinking water by tribal communities and raising their incomes through the diversification of rural livelihoods. The labour aims to reach 4.5 million peo ple through a variety of institutional mechanisms, including water and sanitation committees, water user 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 tender 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 perform the medical tasks and also employment in the factories where the electron 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 shy(predicate) 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 World Banks Executive Board approved a $506 million loan to support financial sector version and reform in Colombia. The loan is part of a revised World Bank strategy for Colombia that includes step up lending to help the country promote peace, ease the impact of the break on the poor, and rebuild 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 eff ort to overcome the recession, said Andres Solimano, managing 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 fiscal Fund institutions. The World Bank is a major force idler 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 15th 200 0 survey Nigeria World bank Rwanda development project The Economist May twenty-seventh 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