Macro and Micro Factors of Economic Development in Developing Countries - Essay Example

No: Part 1. Development is an increase in GDP per capita. True. Economic efficiencyor Economic growth is relating to increase in productivity. Economic growth derives from producing more goods and services by applying the similar inputs i.e. investment, energy, materials and labor. The best example of labor and land production in agriculture can be seen in the Green Revolution. The Green Revolution that spreads 40s to 70s has seen the new grain techniques that lead to significant production across the world. To achieve the desire to maintain standard of living, the country should focus on a) level of goods and services b) individuals purchase. The growth in population along with increase in economic growth, increase in GDP is not necessarily an indicator of improving standard of living based on per capita. The other factor, which may be taken into consideration, is the population growth, which has no match with the economic growth. The growth of population should match with the economic growth otherwise, it definitely defeats the very purpose of improvement of standard of living of the masses. A controversy prevails on the green revolution for sustainable improvement in the standard of living on the face of accelerated population growth. The Revolutionary period of industrialization in England, plays a vital role in increasing the per capita income by virtue of replacement of work force with the machines. If we look at the increased population of England during the era of 1700 to 1860 AD, we may find a lot about the major factors in increasing the production. The major factor of multiple production attributed to more production per worker combined with many more workers. 2. In developing countries, there may be both market failure and the government failure. True. The market failure depends on the failure of government in respect of manning the affairs of market. Unnecessary intervention by the concerned department of the government, will complex the issues. However, the government should take note of inefficient management in respect of allocation of goods and resources. Let the market forces manage the goods and resource in an efficient manner. Hence, the incumbent(s) of government should keep him/themselves away from intervening unnecessarily to ensure smooth function. 3. Transactions and information costs can prevent effective markets in developing countries especially in agriculture. True. The transaction cost provides a base in the design and impact of ICT, which has a far-reaching effect in the field of agriculture. The information system relied upon transaction costs approach. ICT can be used to cater the requirement of sustainable information thus empowers the information management. In taking the economic exchanges, ICT is an efficient tool for the transactional efficiency. There cannot be two opinions about the impact of ICT in managing the economic exchanges on a positive note. 4. Famine is more a problem of distribution than supply. False. At the time of famine, Government of Bengal’s strategy in line with Sen.’s philosophy was laudable. Well known Indian economist Sen., a noble laureate in Economic Science was keen in resolving the problems of down trodden. He was famous for his work on the causes of famine that provides practical solutions to prevent and limit the worst impact of shortages of food. Inability is to purchase food by the poor caused starvation. The starvation has nothing to do merely with distribution and supply system only. Price control committee can control price to make it accessible to the general consumers and to prevent other market players to skim off more than their fare share. Further, public welfare scheme and supply of food through public distribution channel can play an effective role to lessen the gravity of famine. In addition, some degree of rationing under the mentioned scenario was desirable. Speculation and hoarding were two main factors of the famine. To provide population, the purchasing power necessary to get food, the government took public relief measures. The government to control the situation intervened to streamline the system of goods supply and resources. The matter under discussion indicates that if the strategy was right in terms of supply of food, three million people had not lost their life. 5. Growth depends on accumulation of assets and making assets more productive. True. In modern terminology, economic growth relates to amassing of valuable assets and wealth. The money invested aims at making more money. Quality Human capital must have personal abilities i.e. education and expertise in their respective fields. To contribute, the capitalism is concentrated more, more and more money is invested. No doubt coming generation will be far advanced in the area of research, education, health and technology as compared to the current generation. As far as the formation of human capital is concerned, future generation will have an edge over the present generation. The formation of human capital will provide superior quality of manpower to the succeeding generations. 6. Population growth has a negative effect in Solow model but can also have positive effect on economic growth. True. It has nothing to do with the population growth in Solow model since economic growth increases productivity resultantly lower the inputs for output. By lowering the input costs, demand for goods and services increases. New products and services are the indicators of economic growth. The ups and downs in the economy of a country mainly attribute to excess production of not readily saleable goods, over borrowings and lack of good governance. As per the definition of economist there is a distinction between short term changes in production and long term economic growth. Short term is considered as business cycle. The upward and downward trends in business cycle, creates fluctuations in economic growth. 7. Technological is change is essential for growth and development. True. Technological changes are important because it reduces the cost of supplying goods and services. By virtue of technology, machines replace the men thus reducing the cost of input. In the present day world, technological progress through process innovation played pivotal role to initiate, accelerate and sustainable economic growth. The Principals of Roomer Model are: a) economic growth b) technological advancement c) amassing of capital d) market incentives. 8. Getting price right is necessary but not sufficient condition for an effective growth. False. The structural adjustment is to get your prices right necessary and sufficient condition for growth. This ensures that skills, technological advancement and knowledge, all are in line with the requirements. The free market economy has the capacity to decide price mechanism for the goods and services to be offered. Price in fact is the reflection of information concerning ample resources and the desirability. Nevertheless, in socialist countries, government own and control the means of production hence, unable to determine the rational price of capital goods. 9. Agriculture is the source as any other industry in developing country. True. Majority of poor workforce around the world is placed in Agriculture Sector. In the developing countries, it comes to 53% and in the African Region, it is 60% of the total work force. The poverty reduction mainly attributes to agricultural growth. The exports of agricultural products by the developing countries to developed countries has upgraded and expanded based on industry. Majority of African countries depends on their agriculture products. Overall, agricultural exports from African countries inclusive of raw foods and proc­essed foods comprised total exports exceeding 80 percent in some cases. Part 2 Question 1 Sen., is an Indian economist, noble laureate, famous for his contributions to welfare economics. He is keen in resolving the problems of downtrodden segment of the society. He is best known for his work on the causes of famine, which led to the development of practical solutions for preventing the effects of shortages of food. Time magazine rated him as 100 most influential persons in the world. The mentioned economist believes in freedom of a person, non-interference and abilities to do something, are the focal point in his economics theories. During the Bengal famine, rural workforce’s freedom to buy food was not impacted. The workforce of above famine-hit province was facing starvation since they have not exercised their rights to chose in accordance with their likings. The mal function of nourishment was the major contributor of said famine. Economic efficiency or Economic growth is related to increase in productivity. Economic growth derives from producing more goods and services by applying the similar inputs i.e. investment, energy, materials and labor. The best example of labor and land production in agriculture can be seen in the Green Revolution. Human development is a process of enlarging people’s choices. The most critical of these wide-ranging choices are to live a long and healthy life, to be educated and to have access to resources needed for a decent standard of living. Additional choices include political freedom, guaranteed human rights and personal self-respect. It can be transpired from the above that contribution of human work force in this respect cannot be ignored. The scope of economic development comprises the process and policies on the basis of which a nation can improve its economic, political, and social welfare of its people. The over borrowing of the federal and provincial governments beyond their means of earning generated through direct or indirect taxes further widens the gap between revenue and expenses. To overcome mentioned problem, governments at their level best should control non-productive expenses or at least develop the habit to live within their means. To increase income, governments have to focus on increasing and improving their taxation system to plug the loopholes in it. Further, they should strive hard to boost exports oriented products for the export to the developed countries by the developing countries to generate more income. Poor people of the poor countries fall prey to debt trap because of their burning desire to live over and above their earnings. Take the example of consumer finance in the developing and the developed countries where people have an easy access to banks and financial institutions for consumer products like credit cards, personal loans, auto loans and mortgage loans. Sometimes, loaners found it difficult to pay off debts out of their shoestring budget because of domestic exigencies (economic recession, unemployment, price hike of daily consumable items etc.). This situation eventually leads the debtors to fall a prey to debt trap. Question 3 The World Bank is seriously working on the agenda of agriculture development. As per WDR, through the development of this sector poor and poorest people can reap the benefit of improved GDP. In other words, GDP growth derives from agriculture will be effective in reducing the poverty many times. The active pursuance of the World Bank agenda, the poor people of developing countries, most of which are engaged in agriculture related activities and their numbers comes to 900million, their earning capacity is less than a dollar a day around the world. The president of World Bank is rightly pointed out that the governments of developing countries should value agriculture across the board. However, at the global perspective, countries must have vital reforms in terms of subsidies and opening markets. The civil society especially farmer groups must have their due role to play in setting the agriculture agenda. The World Bank is of the view that improved agriculture can provide a way out to reduce or eliminate the poverty provided efforts are to be made to increase productivity of staple foods, expansion of high value horticulture, poultry farming, fish farming and dairy farming thus creating more outlets for agric. products. This will create more jobs for the workforce of the agriculture business. Take the example of East Asian countries where agriculture growth has played an important role in reducing the poverty to the desired level over a period of fifteen years. The Chief Economist of the World Bank opines that sustainable economy provides great help in reducing poverty in the African and South Asian Countries where the numbers of urban poor people is on the rise and this trend will continue for another three decades. Since most of the agriculture countries are small in size hence, found it difficult to manage research and training to achieve and maintain the required level of economies until and unless regional markets are better equipped to cope with the situation. The forty percent population of Africa lives in a landlocked country, hence to face the expensive transport cost to be incurred which is 50 per cent up to the cost of coastal country. In many countries of low population and vast density in Africa make trade, its infrastructure, and services expensive and make it difficult to compete with other market players. The other way round, areas having low population density possess good potential for agriculture expansion to be tapped. Everyone knows that majority of world stuck in the conflict of 1999 appeared in the sub Saharan parts of Africa. Now these numbers are declined recently. Despite negative impact on growth and poverty can be seen. Conflict that reduced provides ample ground for rapid agricultural growth as demonstrated in Mozambique. The workforce concerning agriculture, employing the old age methods of cultivation and food preservation due to lack of training over the past 20 years. The major accomplishment in this area is the education that ensures the bright future of new generation. Question 5 Every day increase in population, shrinkage of farm size, infertility due to soil, missed opportunities for diversified income. Migration is another factor that creates distress for agriculture development. Taxing on agriculture income is the main hurdle in the growth of this sector. In political economy there is an upper hand of the influential urbanites as far as the interest of urban areas are concerned. Comparatively developing countries are far below in terms of spending on agriculture despite a high share of agriculture GDP. Look at the figure of 4 percent in the agro based countries in the year 2004 as compared to 10 percent of transforming countries in the year 1980. The food inflation attract the invitation of many a countries to achieve food security through rising income. There is no doubt that the Agriculture sector is successfully meeting the requirement of food of the world at large, even than around 800 million people remain food insecure. The future of this segment would be uncertain if not addressed properly. Food prices in the days to come may create stir in the global market in terms of reversing downward trend for food security. The problems are so complex in terms of change of climate, environmental deterioration, increasing demand for land and water, unbearable energy prices; doubts about determination of food prices, higher cost for adoption of new technologies definitely have an adverse impact. Therefore, challenges and risks make predictions is more difficult. To comply with the ever-increasing demand of agro based products with the increase in population make it a tougher job for the peasants and the feudal lords. The demand for biofuels already pushed up the world food prices beyond the reach of many of us. To cope with this situation we have to have pragmatic approach, good policies and sustainable investment to meet the demand of food security. However, potential investment can be seen in Africa where food imports are expected to be doubled by 2030. To reduce poverty and achieve sustainable growth, agriculture must be used scot free in furtherance of development. It should be treated as complete process. The complete process should required consultations with all stakeholders locally and internationally to make concerted policies and procedures to implement effective strategies. Serious work should be done on capacity building. Without the support of government, public and private sectors one cannot dream of achieving desired targets. Now the consensus has developed at the level of government and donors that the agriculture sector must play its prominent role in reducing the poverty and ensure food security for all living beings. This has encouraged associated people with this industry that if due role is played by the government, donors, public and private sectors, the future of this important sector will be further strengthen in the developed world as well as in the semi developed world. Therefore, the countries should not miss this opportunity to achieve its targets in the years ahead. Works Cited "Amartya Sen - Prize Lecture". Nobelprize.org. Retrieved on October 14, 2011 from http://nobelprize.org/nobel_prizes/economics/laureates/1998/sen-lecture.html Gillis, Justin. A Warming Planet Struggles to Feed Itself. New York Times, June 2011. Retrieved on October 14, 2011 from http://www.nytimes.com/2011/06/05/science/earth/05harvest.html?hp What are the links between agricultural production and food security? Retrieved on October 14, 2011 from http://siteresources.worldbank.org/INTWDR2008/Resources/2795087-1192112387976/WDR08_07_Focus_C.pdf World Development Report 2008: Agriculture for Development. October 2007. Retrieved on October 14, 2011 from http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTWDRS/EXTWDR2008/0,,menuPK:2795178~pagePK:64167702~piPK:64167676~theSitePK:2795143,00.html Read More