Thus this international demonstration effect reduces the savings potential of the underdeveloped countries and thereby creates severe constraints on the path of their growth process. Rapidly growing population slows down the rate and process of capital formation. Savings and investment patterns are considerably influenced by cultural and social considerations. Finally, people’s participation and public co-operation in all developmental projects are considered as an important pre-requisite and a principal force behind all planned developmental schemes of the under-developed countries. Another pre-requisite for economic development is to raise the capital absorption capacity of underdeveloped countries as they mostly suffer from lack of such capacity due to non-availability of co-operant factors. Due to lack of adoption of modern technique in agriculture, industry and trade, these underdeveloped countries fail to stand in the competition with developed countries. Such changes have resulted corresponding shifts in the sectoral allocation of labour force of the country. The country should arrange cheap and larger volume of credit facilities readily available for its industrialists, cultivators, businessmen, small traders and new entrepreneurs. Thus to attain a high rate of economic development, inter-sectoral transfer of work force is very much necessary. Under such a situation, the rate of investment in these countries is very low leading to low level of capital formation and low level of income. Underdeveloped countries are facing peculiar problem in respect of adopting modern and latest technology. The rate of economic development and the level of per capita income increase as more and more work force shift from primary sector to secondary and tertiary sector. Capital Formation and Capital Accumulation: Capital formation and capital accumulation are playing an important role in the process of economic development of the country. Firstly, the productive opportunities available within the existing resouirce and necessary known-how have to be utilised to the maximum extent through optimum allocation of the resources of the country. Conclusion We have examined a diverse set of mechanisms through which population growth affects economic development. The following are some of the important obstacles or constraints on the path of economic development of underdeveloped countries: In the initial part of their development process, most of the underdeveloped countries were under foreign domination which had led to the huge colonial exploitation by the foreign rulers. Experimental outlook, necessary for economic development must grow with the spread of education. Underdevelopment countries are facing various socio-political hurdles in the path of economic development. Peoples’ desire for the attainment of economic progress is the most important requirement of economic development. Before people didn’t really realize that they could run out of resources at some point, they thought it would be here indefinitely, and we have r… This vicious circle operates not only on demand side but also on supply side. These resources allow the nation to present itself as a competitor among others. Fig. Privacy Policy3. There were certain disequalising forces operating in the world economy which made the gains from trade go mainly to developed countries. Thus Prof. Ragnar Nurkse has rightly observed, “The meaning of capital formation is that society does not apply the whole of its current activity to the needs and desires of immediate consumption, but directs a part of it to the making of capital goods—tools and instruments, machines and transport facilities, plant and equipment.”. In recent years, economic planning has been playing an important role in accelerating the pace of economic development in different countries. Disclaimer Copyright, Share Your Knowledge Attainment of economic development in a country is very much related to social attitudes, political conditions, human resources, and also very much depending on psychological, social culture and political requirements of the country itself. Growing population also results food problem, unemployment problem which forced the country to divert its scarce resources to meet such crisis. Another important obstacles or constraints to the path of development of underdeveloped countries are its inefficient agricultural structure. A proper balance between the private and public sector initiatives is considered very important for evolving such an effective economic organisation. Determinants of Economic Development 3. 7 Conclusion. and also increased volume of concessional aid from international institutions like I.M.F., I.B.R.D. Such problems of low capital absorption capacity arise due to lack of technology, shortage of skilled personnel and poor geographical mobility of labour. The economic organisation of the country should be of that type which can respond well to the requirements of planning for economic development. All these have led to diversion of resources and initiatives from developmental to non-developmental ends. The suitable investment criteria should maximise the social marginal productivity and also make a balance between labour intensive and capital intensive techniques. Prof. Lewis, in this connection, rightly observed, “The proximate causes of economic growth are: the effort to economise, the increase of knowledge or its application in production and increasing the amount of capital or other resources per head. The theory developed here is called the neoclassical theory of distribution. Without the aforementioned cookies the website cannot function properly. LEI code 529900F7Y171QF1RSU09. Because this will generate adequate enthusiasm among, the general masses toward economic development of the country as well as for the successful working of the economic plan. Moreover, Easterlin argued that population pressure may favourably affect individual motivation and this may again lead to changes in production techniques. conclusion In competitive markets, workers earn a wage equal to the value of their marginal contribution to the production of goods and services. (b) ability to realise the possibilities of using scientific inventions and innovations for commercial purposes and expansion and diversification of the market for its product. Problems within the sector therefore need to be addressed in an integrated and all-encompassing way, by taking into account socio-economic considerations as well as legal, institutional and financial framework conditions. In India, as per 1991 census, about 66.0 per cent of the total working population was absorbed in agriculture. Determinants of Economic Development: Essay # 3. CONCLUSION. This type of political instability creates uncertainty about its future steps and adversely affects the economic decisions of these underdeveloped countries relating to its investment. Naturally, in the initial period, it is not possible to step up the rate of capital formation at the required rate by domestic savings alone. Economic development of a country also demands existence of a strong, honest, efficient and competent administrative machinery for the successful implementation of government policies and programmes for development. The Procedure was prepared in implementation of Government of the Republic of Lithuania Resolution No 1460 of 5 December 2012 and the provisions of the Republic of Lithuania Law on the Budget Structure (paragraph 5 of Article 37). A SUMMARY OF THE ANALYSIS In these countries, the rate of savings is low due to low per capita income and higher marginal propensity to consume. Moreover, rapidly rising population necessitates a higher rate of investment to maintain old standard of living and per capita income. Jacob Viner stated in this connection, “Population growth in a backward country does not induce capital widening investment or innovation. It is spirit itself that builds the body.” Prof. Ragnar Nurkse has further observed, “Economic development has much to do with human endowments, social attitudes, political conditions and historical accidents.”. After reading this essay you will learn about: 1. (c) international economic co-operation in the form of increasing flow of foreign aid from advanced countries like U.S.A., Japan etc. Thus in order to achieve fast economic progress, an underdeveloped country must attempt to introduce a rational reorganisation of its entire economy. etc. Prof. Spengler has listed about nineteen determinants but Rostow mentioned six propensities having much bearing on economic growth. Technological advancement is considered as an important determinant of economic growth. Category C – Synthesizing Climate Change Mitigation with Development. They have also destroyed the cottage and small industries by adopting unfair competition which has put a huge pressure on agriculture, disguised unemployment and poverty. Foreign rulers converted these economies as primary producing countries engaged in the production of raw materials only to be supplied to the ruler country at cheaper prices and also a potent market for the sale of the manufacturing products produced by the ruler country. While analysing the determinants of economic growth, Prof. J.J. Spengler and W.W. Rostow have made sincere attempts in this regard. Todaro and Smith (2003) state that in strict economics terms economic development refers to the capacity of a national economy, whose initial condition has been more or less static for a long time, to generate and sustain an annual increase in its Gross National Product (GNP) at rates of 5%-7% or more. The process of growth is connected with both fuller use of existing resources and expanding resources. in driving the country’s development, in addition to providing quality public services to its citizens. By technological advancement we mean improved technical know-how and its broad- based applications. (1) Propensity to develop fundamental services. Prof. Meier has rightly said, “We shall define economic development as the process whereby per capita income of a country increases over a long period of time.” Here the word “process” indicates long period changes related to changes in demand side as well as changes in factor supply. Fisher writes, “We may say that in every progressive economy there has been a steady shift of employment and investment from the essential ‘Primary activities’,……………………..to secondary activities of all kinds and to a still greater extent into tertiary production.”. Demonstration effect on consumption level works as another major obstacles or constraints on the path of economic development of underdeveloped countries as it increases propensity to consume and thereby reduces the rate of savings and investment. Therefore, another requirement of economic development is to maintain stability by avoiding inflationary rise in the price level so as to check mis-allocation of resources along with its other evils. Agriculture dominates the economy of most of the underdeveloped countries like India as it is contributing the major share of their GDP. Agricultural sector in these countries are suffering from primitive agricultural practices, lack of adequate inputs like fertilisers, HYV seeds and irrigation facilities, uneconomic holdings, defective land tenure and excessive dependence on agriculture. Accordingly, Prof. Samuelson rightly observed that “High Invention Nation” normally attains growth at a quicker pace than “High Investment Nation”. Therefore, the transfer of population from agricultural sector to non-agricultural sector must be supported by an increase in agricultural production so as to provide necessary food and raw materials to the non-agricultural sector as well as to meet the requirement of increasing population in both of these sectors. Prof. W.A. Economic development of a country does not simply require removal of some of its basic obstacles like market imperfections, capital shortage, various circle of poverty etc. Attaining structural changes in the economy is considered as one of the pre-conditions for economic development.in most of the developed countries, economic growth is characterised by structural transformations of the economy. According to McConnel, Brue and Flynn (2009) economic growth is ‘an outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology’ or it’s ‘an increase in real GDP or … Kindleberger writes, Economic growth means more output and economic development implies both more output and changes in the technical and institutional arrangements by which it is produced. 3. Put another way, economic growth is determined by the amounts and types of capital and labor that are invested, and how they are utilized for production and innovation. As social marginal productivity of investment differs thus investment should be made in those directions where its social marginal productivity is the highest. Schultz has aptly observed, “in most poor countries there is not much economic growth to be had by merely taking up whatever slack may exist in the way of the available resources being utilised.” Therefore, in order to provide all outward push to the production frontier, the productive has to be expanded. The external factors which are playing important role in sustaining the economic development include: (a) Growing export earnings for financing increasing import bills required for development, (b) Increasing flow of foreign capital in the form of direct foreign investment and participation in equity capital and. Conclusions on the economic development scenario. Economic Development of Hawaii Hawaii, with an area of 28,313 sq. Social institutions, habits and attitudes are influencing the productive activities and expenditure patterns substantially, especially in the underdeveloped countries. The Conclusion chapter discusses the Sustainable Development Goals (SDGs) in relation to human capability and human security analyses. Therefore, they must take proper steps, viz., introduction of compulsory deposit schemes, curtailing the conspicuous consumption, putting curbs on imports of consumption goods, inflow of foreign capital etc. Lukiškių Str. (c) Utilisation of these savings for the purpose of investment in capital goods. Another determinant of economic development is the occupational structure of the working population of the country. Through a pooled, cross-sectional an alysis of 131 nation-states from 1972 to 1989, Thus to attain a high level of economic development, the under-developed countries should try to achieve technological progress at a quicker pace. Obstacles or Constraints 4. Finally, social system has much impact on the economic phenomenon of the country. Singer observed that, “The speed or rate of economic development may then be described by the rate of which 70 : 30 ratio in economic structure is approximated to the 20 : 80 ratio which represents ultimate equilibrium at a high level of development.”. While reading this document, it is understood that the social benefits to the minimum wage increase is valuable for families, and it will profit this province as a whole. Developing countries like Mexico, Brazil and India have been applying technologies developed by advanced countries as per their own conditions and requirements. Lewis, there are three principal causes of economic development. Share Your PDF File Economic development, being a dynamic concept refers to the continuous increase in production over the changing time path. Stability, peace, protection from external aggression and legal protection generally raises morality, initiative and entrepreneurship. Share Your Word File Economic development is increasingly based on science and technology at the local, regional, national, and multinational levels. 2, 01512 Vilnius, Lithuania. Under such a poor structure, the agricultural productivity in these countries is very poor. Thus to bring social and institutional change as per changing environment and to realise the modern values of life are very much important for accelerating the pace of economic development in a country. Moreover, capital-output ratio along with national savings ratio can determine the rate of growth of national income. In this connection, Prof. H.W. T.W. Economic Development is a bigger concept than economic growth. Certain adverse international forces are operating against the under­developed countries which are always going against the interest of the underdeveloped countries. Meaning of Economic Development: Essay # 2. This chapter explained how labor, land, and capital are compensated for the roles they play in the ‘Production process. Thus with the increase in capital accumulation in such countries, the supply of other co-operant factors should be increased so as to enhance the capital absorption capacity of such countries. Following are some of the important pre-requisites for economic development of underdeveloped countries. Thus education is working as an engine for economic development. Economic, environmental and social dimensions of sustainable development. Essay # 1. In this connection, Prof. Arthur Lewis has rightly stated, “No country has made progress without positive stimulus from intelligent government.” Thus to attain economic development at a quicker pace, proper maintenance of law and order and stability are very important. Moreover, in order to implement any developmental projects to the fullest extent and also to restrict the leakages involved in it, peoples’ participation and public co-operation are considered very important, especially in these under-developed countries. It consists mainly of the Hawaiian Islands, eight main islands and 124 islets, reefs, and shoals. This requires proper selection of industries as per investment priorities and choice of production techniques so as to realise a low capital-output ratio and also for achieving maximum productivity. Economic factors alone are not sufficient for determining the process of economic development in a country. Sustainability of the development, which is always bearing in mind that every action can cause a reaction, and efficient use of resources would be a beneficial for future generations. Inefficient and underdeveloped human resources are also considered another major obstacle towards economic development of underdeveloped countries. Thus by the term economic development we mean a process so as to raise the per capita output with a scope for equitable distribution. Due to these market imperfections, resources of these countries mostly remain either unutilised or under­utilised leading to factor disequilibrium. Most of the underdeveloped countries are facing the problem of political instability resulting from frequent change of government, threats of external aggression and disturbed internal law and order conditions. Favourable investment pattern is an important determinant of economic development in a country. Thus immediate steps be taken to raise the rate of capital formation of the country. Inflation in these countries is influenced by the factors like monetary expansion, deficit financing, misdirection of savings in unproductive speculative activities, market imperfection: etc. Reproduction and quotation are authorised provided the source is acknowledged. Being a technologically backward country, India has decided to permit foreign direct investment in order to imbibe advanced technology for attaining international competitiveness under the present world trade and industrial scenario. Accordingly, Kindleberger further observed, “Growth involves focussing on height or weight, while development draws attention to the change in functional capacity.”, Although some economists have observed slight differences between economic development and economic growth but all these differences are imaginary and unreal and thus have little practical value. (iii) Amount of capital or other resources for land. Thus in conclusion it can be observed that availability of natural resources and its proper utilization is still working as an important determinant of economic growth. Introduction Economic systems are organized way in which a state or nation allocates its resources and apportions goods and services in the national community. Again the investment should be made to attain a balanced growth of different sectors of the economy. These modes of living in most under-developed countries have had in the past little direct connection with economic development. Planning is also essential for mobilisation of resources, capital formation and also to raise the volume of investment required for accelerating the pace of development. Prof. Krause has observed that, “Education brings revolutions in ideas for economic progress.” Education provides stimulus to economic growth as it teaches honesty, patriotism and adventure. 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