Economists Change of Approach - Essay Example

?Economic Development Economists’ change of approach Yesterdays were the period of economists who were focused on industrialization and urban development. They were of the view that urban development is the sole driving force of an economy. They proposed for subsidies and tax concessions for companies for setting up business in a particular area or region. In some cases even farm lands were sold to big companies for expanding their presence in the country. All these were done by completely ignoring the rural areas of the country. Development of cities and high rise buildings were considered to be the picture of development. Therefore, in most developing countries, a wide gap can be seen between the rich and the poor unlike that in the developed nations. This gap widens more as long as rural development is ignored by economists and politicians. But there is a sudden change being experienced in the approach of economists and intellectuals. Those who have merely ignored the rural development in the past are now propagating for its development. Next sections of the essay will analyze the reasons behind ignoring rural development and the sudden change of approach. Reasons for Change of Approach Rural development mainly refers to the role of agriculture for the development of the nation. “Agriculture constitutes the main source of employment of the majority of the world’s poor. In total, the share of agriculture in total employment in developing countries constitutes 53% of the total workforce in 2004. In Sub-Saharan Africa 60% of the economically active population works in the agricultural sector.” (Meijerink & Roza, 2007). This shows that agriculture or rural sector is the back bone of many developing economies. But the increased importance given to the industrialization opened up many industries and reduced the share of agriculture to the overall economic growth. Agriculture gradually became less attractive for the economies. This made the economists and intellectuals to reduce the focus on rural areas. But now economists and governments are seemed to be increasing their focus on rural development especially in developing countries. Some of the disadvantage of urbanization and industrialization helped them for this late realization. The main factors that lead to the change of approach are as follows: 1. Poverty 2. Unbalanced growth 3. Food Security 4. Lack of Infrastructure 5. Rural Marketing Poverty: Increased poverty in the rural area is the main reasons for this change of approach. Poverty is seen as a drawback for the development of a nation. Overall development of an economy is not possible if there is a considerable percentage of poor among the population. Eradicating poverty became the major agenda of many countries. While looking back to the 19th century, economists realized that irrespective of the size of the nation, the sole factor that drove the economy was agriculture. But somewhere with the advent of technologies, countries reduced the focus on agriculture. This is one of the reasons that helped the economists to change their mind. Unbalanced Growth: In most developing countries, there is a wide gap between rich and the poor. Though such countries are recording tremendous economic progress, it could not be categorized as a developed nation when there is an unbalanced growth in the economy. Majority of the population should experience more or less similar growth and living conditions for a balanced growth in the economy. Food Security: Another major reason for the change of approach of the economists is food security. “At its June 2003 summit, the G8 group of countries recognized the need to increase investment in rural and agricultural development to achieve lasting food security. It pledged to reverse the decline in ODA for agriculture and to increase trade opportunities for developing countries.” (Bage, 2004) Food security is now a cause of concern for many countries. As a result of this, countries are increasing their respective funding to the agriculture sector in order to boost the productivity. Increased agricultural production and rural development is a necessity to avoid any possible scarcity of food. Lack of infrastructure: Inaccessibility of the farmers to better markets is another reason that drove the change. Sometimes, rural population produces required goods but is not able to get better price for their produce due to lack of infrastructure to access the markets. Therefore, economists have realized that rural population should be given better platform and infrastructure that will enable them to gain maximum benefits for their produce. This is a solution for poverty elevation as well as for food security. Rural Marketing: There is also a marketing reason for the new focus began on the rural development. Companies at large have found that rural market is a completely untapped market for centuries. It is a potential market that can help the companies to make profits. This awareness of companies is passed on to the governments and economists. This is true especially in the case of financial products. Rural population has very limited accessibility to banks, financial institutions, insurance and investment companies and the like. Therefore, the economists have now come up with the plan of financial inclusion. Financial inclusion helps the rural population to have better access to the capital required for their agricultural needs. This will help to improve the standard of living of the rural people as well. Therefore, rural development has become a cause of concern for the very existence of the economy itself. The section which was being ignored for a very long period is now getting boosted. If the policies of the economists and efforts of the government are channeled properly, it can result in the gradual improvement of the rural area of a country. It has been proved that any growth without consideration of the rural area is not sustainable. It may seem to sustain for certain period. But for the long term development of the world economy, rural development is a must. Be it a developed nation or developing nations, the need for developing the rural area seem to be of equal importance to both. Constructive strategies should be adopted for helping the rural areas to develop and contribute for the overall economy. Next section will deal with the strategies to be adopted for developing the rural areas. Rural Development Strategies There are various strategies that can be adopted for the rural development. This section can be discussed by referring to India, which is one of the fastest developing nations with majority of the population living in rural areas. India is emerging to be one of the world’s super powers by 2020. There is sustainable growth in the economy and compared to many other countries India faced fewer problems in the recent financial crisis. But the most notable characteristic with India is that more than 70% of the population resides in the rural areas of the country. Also, there is a very wide gap between the rich and the poor in India. Therefore, the issue of rural development is very serious in India’s context. Some of the strategies that India can adopt to develop the rural area is discussed further. 1. Agricultural Development 2. Employment Generation 3. Infrastructure Development 4. Financial Inclusion 5. Social Security Programs 6. Rural Housing Agricultural Development: Agricultural development is the first step to be taken for the development of the rural areas. As more than half of the India’s population resides in the rural areas among which most of them depend on agriculture for their living, agricultural development becomes the primary strategy for rural development. It is sad to know that the share of agriculture among the GDP of the nation is reducing considerably year on year. Compared to two decades earlier, the crop production has decelerated to a great extent. Due to the high yields and profits from non-food crops like cotton, rubber and the like, the cultivation of food crops reduced. The government should frame subsidies and more support for farming food crops. This will enable food security for the nation in the long run also by ensuring the development of the rural areas. Employment Generation: Not all rural population is employed in agriculture. Also, those who are employed in agriculture are not assured of steady returns for the whole year. This necessitates the generation of sufficient job opportunities in the rural areas. The rural population should be assured of a steady income for the whole year. But at present, India has a very innovative and very successful program called NREGA that aims at developing jobs in the rural areas. But NREGA is not very effective in certain corrupt states of India. Measures should be taken to tackle this situation and to ensure that the fund reaches the right people. A steady return will help to increase the purchasing power of the people. Increased purchasing power will foster development in the rural areas. Employment here refers to non-farm employment. Infrastructure Development: No development story is complete without the term called infrastructure. Often the government is reluctant to make huge investment in the rural infrastructure due to the minimal returns in the initial years. Infrastructure development facilitates economic activities at the rural areas. Infrastructure development in the rural areas not only refers to better roads and irrigation facilities but also the information technology infrastructure that will help the farmers to have better access to the markets for their goods. They can have a good idea about the market price and can be at a better bargaining position. As important as this is the necessity for electrification. Electrification, irrigation, roads and communication systems are the rural infrastructure that should not be compromised. Focusing on these areas will definitely ensure long term sustainability for the economy as a whole. Financial Inclusion: Financial inclusion has emerged as a hot topic of discussion in the present day India. It simply refers to making available all the financial products and assistance to the rural population as it is being made available to the urban India. Micro Finance is one of the first organized efforts by the government and financial institutions for financial inclusion. Government should exercise tight control over the policies of micro finance and other products in the rural areas as many companies are trying to take this as an opportunity for exploiting the poor. Riskier and complicated financial products should not be supplied to the poor as it runs the risk of loss of money. But definitely, companies should look for designing good investment products for the rural population. Social Security Programs: Unlike the urban population, one of the major issues being faced by the rural population is the lack of social security schemes. A large rural population in India is not enrolled under any social security schemes. The government has launched NSAP and some other state level welfare schemes in the past. But the pace of reach of these schemes is seemed to be very slow. The scheme framework should also be altered in order to include more people in the program. This will enable protection for more people. The protection should be meaningful and profitable for both the people as well as for the government. The plan should take into consideration the aging population in the rural areas. Again here, necessary steps have to be taken to ensure that the benefits reach the right hands. Rural Housing: Rural housing program is another strategy that will help to ensure a better standard of living of the poor. There are many rural populations in India who does not have proper shelter and sanitation facilities. The Indian government is already launching a free rural housing program. But then merely building houses for the poor does not ensure a better standard of living. It should also be ensured that any of the family members earn so that they can maintain the house and look after the family. The government should ensure that every house will have a proper toilet and other sanitation facility. A proper sanitation facility is equally important in order to ensure a hygienic living condition for the poor. A proper focus on the above strategies will help India to gradually develop the rural areas of the country. For a country like India, it is very necessary that rural areas should be developed for a better economic outlook. While implementing the strategies, measures should be taken to ensure that they are sustainable over the long term. Developing Countries and Greenhouse Gases Greenhouse Gases (GHG) is one of the major issues that the world faces today. GHG is the major contributor to global warming. Developed nations are the major contributor of GHG being emitted every year. It is a fact that as a nation develops there is more industrialization and usage of vehicles therein. Therefore, the GHG being emitted by them also increases. This section will specifically deal with the GHG emissions of developing countries. Developing nations as a list consist of many countries. But for the ease of explanation we can refer to two of the fastest growing nations India, China and Brazil. The Kyoto Protocol has put a serious pressure on the developing countries for reducing their GHG emissions. A report by UN has shown that India, China and Brazil have managed to reduce their emissions by more than what was demanded by the rich nations. (Newscientist.com, 2007) It requires continuous efforts from nations in order to make substantial decrease of GHG emissions in the future. But experts say that if the emerging countries are following the same growth path as that of the developed countries, they cannot manage to reduce the emissions. “Already, the increasing consumption of energy is leading to concerns about their energy security. China, which was self-sufficient in oil production is now scouring every corner of the globe to gain access to hydrocarbon resources.” (Pachauri, 2008) This is the cause of concern for all the nations. Increased reliance on petroleum products for the energy needs will only worsen the situation. Before looking into the solution for reducing the emissions it is important to look at the major reasons that cause the GHG emission. Major Reasons for Greenhouse Gases There are several reasons that cause the green house gas emissions on earth. Among them, some of the most common reasons are: 1. Fossil fuels and natural gases 2. Urbanization 3. Industrialization 4. Population Fossils fuels and natural gases: Burning of fossil fuels and natural gas is the major producer of greenhouse gases in the atmosphere. With the increased demand for vehicles in the developing nation, there is a huge increase in the burning of fossil fuels and thereby GHG. Vehicles are one of the major contributors to the GHG emissions. Apart from vehicles the fossil fuels and natural gas burned in factories and plants also contribute to the GHG emissions. Urbanization: Developing countries are highly motivated to develop the urban areas of the country. More and more land is being converted to towns and cities. In the process of urbanization and infrastructure development, more and more trees are cut down by these countries. Deforestation will harm the natural process of balancing the level of oxygen and carbon di oxide in the atmosphere. Industrialization: Industrialization is the next contributor to the GHG emissions of developing nations. Factories and plants release considerable amount of gases and fumes to the atmosphere. They mostly burn fossil fuels for their production activity. Therefore, industrialization in the current situation is coupled with more GHG emissions. Population: Population growth is at a very large pace especially in countries like India and China. As the number of people increases the need for transportation, houses, farming etc. also increases. The increased need for transportation will mean that more fossil fuels have to be burned. Similarly, the need for more houses, other accommodation facilities and infrastructure development will lead to more deforestation. Therefore, the growth of population will indirectly affect the GHG emission. How to reduce Greenhouse Gases It is highly necessary that the developing nations should reduce their share of GHG emissions in the coming years. But it should not be done at the cost of economic development of the nations. A constructive strategy should be used that will address the GHG emission issues of the world as a whole. Some of the methods that the developing nations can adopt to reduce the greenhouse gases are as follows: 1. Electric and/fuel efficient cars 2. Plantation of trees 3. Investment in renewable energy 4. Energy efficient standards Electric and/or fuel efficient cars: Usage of fuel efficient and electric cars is one of the main solutions for reducing the GHG emissions. But unlike that of the developed countries, the usage of fuel efficient and electric cars is very minimal in developing nations. Taking the case of India itself, there is only one electric car model being sold in the country. The car Reva, now owned by the Indian auto major Mahindra & Mahindra is a two door small car. The main disadvantage of the car is its price. Despite the small size and electric function, it is costlier that many small cars available in the country. This makes the car not a viable option for the people to buy. Running the car after owning is also a problem in the case of developing nations. There are fewer recharging stations in these countries. Therefore, the customers mostly recharge it from their own house. This situation also makes the electric cars not viable for long trips. Therefore, the government and companies should work hard to reduce the cost of cars. From the government’s side, they should provide more tax and duty concessions to electric cars. The companies should also reduce the cost of production of the car to make it viable for the common people to own and maintain. Also, the market of electric cars should be opened up for more foreign players. Once more players enter the market, the customers will have ample choice of products. Plantation of trees: Development of a country will necessitate cutting down of more trees for various purposes. A high rate of population increase will make the situation even more serious. But what can be done on this ground is plantation of more trees. Plantation of a tree for every tree that is cut down should be made mandatory. It should be made mandatory not only in the case of business organizations that cut down trees for their needs but also for every individual of the country who cut down trees for their personal use. Tree plantation programs should be introduced at the community level so that more people are involved in the programs. A best place to implement such programs is educational institutions. Plantation and maintaining of trees should be made part a student’s curriculum at educational institutions. Students will be motivated for interesting programs like this. This program can ensure that every year sufficient amount of trees are planted in the country. Entire students of the educational institutions of a country planting one tree per year will make a huge difference. This is the more practical solution for the problem of deforestation. Another force that can take action are the big corporate. Corporate houses are now becoming more aware of the need for going green. Every corporate should develop their own corporate social responsibility (CSR) initiative and should include plantation of trees as a main agenda. Unlike that of the educational institutions, corporate institutions have more potential to make better investments in this arena. Investment in renewable energy: Investment in renewable energy is an area that requires clear focus. Developing countries have still not developed a sustainable renewable energy system. In developing countries, both government and private companies should join hands to ensure that good investments are being made in the renewable energy sector. Efforts are being taken largely in developing countries for developing renewable energy. But a full-fledged renewable energy plant is just few in these countries. This is true in the case of most developing nations. The two main areas where the developing countries should focus are solar energy and wind energy. All the developing countries have good potential for tapping considerable amount of solar and wind energy. A detailed study of the potentiality should be done and areas for setting up the plant should be identified. Based on the report, the government should invite private companies to partner with the government in the program. Thus an organized effort can be brought in the field of renewable energy. Energy efficiency standards: Every electronic goods and vehicles has to comply with the energy efficiency standards laid out by the country. These standards should be improved and the companies should be asked to comply with those strictly. Especially in the case of automobiles, the energy efficiency standards are not as strict as that of developed countries like Europe and USA. Improving the standards will ensure that only efficient products are supplied in the market. The matter is serious especially in the case of automobiles which is one of the major contributors to the GHG emissions. Most Workable Policies Whatever the strategies be, everything depends on the way it is implemented by the government. Every policy listed above is practical and feasible for developed countries. What lacks is the commitment from the government. Sometimes political issues of the country make the situation worse. India is one of the fastest developing countries in the world. But then it is one of the most corrupted countries too. India has been in the limelight recent years for corruption ranging from common wealth games to 2G spectrum allocation. Similarly, China is also having issues like strong bureaucracy that often makes it difficult for policy implementation. All the above mentioned strategies should be given equal importance by the government. A committee should be formed to deal with these issues separately. More and more foreign investments in the areas should be enabled. More tax exemptions should be provided to industries that produce eco-friendly products. Areas with potential for generation of renewable energy should be declared as special economic zones and companies that make investments in such areas should be given tax breaks. This will help for the employment of better technologies especially on the renewable energy sector. References Meijerink, G., Roza, P. “The role of agriculture in economic development.” Wageningneur. 2007. Accessed 18 November 2011. Keller, J, K. “The importance of rural development in the 21st century – persistence, sustainability, and futures.” The Regional institute Ltd. nd. 2011. Accessed 18 November 2011. Bage, L. “Rural Development: key to reaching the millennium development goals.” IFAD. 2004. Accessed 18 November 2011. Planning Commission. “Poverty Alleviation in Rural India – Strategy and Programmes.” nd. 2011. Accessed 18 November 2011. Lakhanpal, S. “Rural Development: Strategy for incorporating it into India’s overall economic development agenda.” CRISIL.COM. 2005. Accessed 19 November 2011. Newscientist.com. “Developing nations have slowed greenhouse gas rise.” 2007. Accessed 19 November 2011. Pachauri, R, K. “Greenhouse Gases: The developed world’s role.” Time Specials. 2008. Accessed 19 November 2011. Read More