Can Underdeveloped Countries Achieve Economic Development - Essay Example

For economic development to occur the individual economy must be able to have institutions that promote and sustain modern economic growth through;

1. Strong Property Rights
2. Patents and copyrights
3. Efficient financial institutions
4. Literacy and widespread education
5. Free trade
6. The competitive market system

A natural resource is another major contributor to economic development. A natural resource is anything found by a man in his natural environment that he may use in some form for his benefit. On the other hand, lack of adequate natural resources is not a limitation to economic growth because; In the process of economic growth, economic activities depend much more on the use of physical and human capital. Countries like Japan and other South East Asia countries have made themselves economic growth with limited natural resources endowments, and have used more physical and human capital.
Human resource is the physical labor and the stock of labor in the form of skills. A large labor force implies more productive manpower to offer services to various industries. A strong education-based economy can produce a skilled labor force. This in return will improve the living standards of its employees through the salaries the workers receive from the services they lend.

Conclusion
Accumulation of capital occurs when some of the present GDP is saved and later invested for future benefits. The capital accumulation helps in economic growth by:
(i) Permitting capital –deepening i.e. giving each worker more capital to work with.
(ii) The availability of capital tends to promote specialization and division of labor – hence improvements in labor productivity.
(iii) Capital contributes to growth by overcoming the bottlenecks in agriculture. The limited availability of fertile land for cultivation can be overcome by raising arable land production via intensive farming.

Does underdeveloped economics follow certain development stages?
Walter Rostow, describes economic development following a certain order to achieve the full development of the economy. He argues that within civilization chronological economic stages of modernization are followed. Walter identifies five stages; these stages include;
1. The traditional society: this is the initial stage of development; the economy is characterized by the use of manpower for cultivation. The productivity is, therefore, low and low mobility of persons.

2. The precondition of take-off: this is the second stage of development. During this stage of development, the rates of investment are getting high. This kind of development comes as a result of the industrial revolution. The produce from agriculture is, therefore, further processed in the developed industries. The workforce of the primary sector becomes redundant. This stage may last for about a century.
3. The take-off: in this stage, there is dynamic economic growth. The main feature of this platform is the capability of the economy to withstand its progression. This stage lasts for about two to three decades.

4. Drive to maturity: in this stage, the rate of investment goes a notch higher to about 40% to 60 %. Economic and technical progress dominates this stage. There is the emergence of new industries in the economy such as the neo-technical industries. As a result of the emergence of these new industries, economic prosperity has increased. This stage may last for about 60 years.

5. The stage of mass consumption: This is the final stage of development. The majority of the population lives in prosperity, individuals are employed and are offered both abidance and a multiplicity of choices. The majority of western countries are in this stage already.

Accounting for growth
Labor is a major contributor to economic growth; the labor force has been seen to grow by 1.6 million per worker in the past 56 years, and this accounts for about 1/3 of the economic growth.

The women's labor force has led to being a major factor in economic development. The number of women in formal and paid sectors has risen from about 40% since 1960 to 60% to date. In other words, modernization comes from the outside rather than from the inside. Thus, the development of local people gets initiated from the unseen area. It can be said that modernization happens rather than getting introduced.

Conclusion
The demographic transition is causing greying populations, shrinking labor forces, and overall population decreases across generations. This is problematic since Real GDP = hours of work x labor productivity. As the working-agee population declines around the world the 'hours of work' will most likely decline. Living standards are likely to fall as the percentage of the working-age population shrinks relative to the the non-working-age population. This problem will be exacerbated by social insurance programs around the developed world. Read More