Obstacles to Development of Poorer Nations - Essay Example

Obstacles to Development of Poorer Nations Obstacles to Development of Poorer Nations The poorer nations are also referred to as thethird world nations. They are poor but are in the process of developing and include: Asia, Latin America and Sub Saharan Africa regions. However, countries in Asia region include Bangladesh, South Asia, Central Asia and Pakistan. Those in the Latin America region include Panama, Bahamas, Peru, Paraguay, Venezuela, Uruguay, Argentina and Brazil. On the other hand the Sub Saharan Africa countries include Sierra Leone, Burundi, Botswana, Zimbabwe, South Sudan among others.1 According to Wei the constraints to development in these countries can be divided into four categories: Natural Resources, Human Capital, Poor Infrastructure, and institutional factors.2 However, the difference between the developing and the developed world lies in the human, physical and the socioeconomic environments of the nations in question. This paper has used different theories of development to explain the obstacle to development experienced by poor countries. a) Inadequate natural resources Most of the poorer countries have inadequate resources including the fertile land. Availability of the resources can bring an increase in the productivity of the economy. In most developing nations, there is shortage of land due to the high population. Lesser land leads to significant fall in cultivation which is the main source of income in the poor nation. This in turn leads to the fall on the nations’ productivity known as the Gross Domestic Products.3 The situation is even worse since these countries have not tapped the technological practices in their productivity. According to the Exogenous Growth theory lack of technology makes it hard for a country to develop. Technology acquisition enables high production per unit of a natural resource like land when it comes to agriculture.4 The land in most of the developing nations is also so much fragmented due to socioeconomic issues such as passing the land to the next generation and the attempt by government to ensure equitable distribution of resources in these areas. It is good to understand that most of these nations over- depends on land which is the backbone of the developing world economy. There is therefore much tension when it comes to land issues.5 b) Untapped resources Most of the Sub Saharan African countries have vast natural resources that include oil and gold. This line of argument is in agreement with the Exogenous Growth Theory that the problem comes in the identification and affordability of technology that would help in the discovery of mineral deposits.6 This has led corrupting during mineral extraction leaving the countries with little to gain from the discoveries. This is another mode of neocolonialism.7 Some of the rich countries with expertise also fear the idea of setting a firm in a country whose political system has collapsed and the governments in place are corrupt. c) Inefficiently managed resources The developing nations’ resources are poorly managed due to ignorance or corruption and nepotism. This has made many of the poor countries not to achieve productive and allocative efficiency. Productive inefficiency is caused due to lack of competitions in contracts and projects. In the developing world, most of these products and projects are awarded to the family members or political ‘friends’. Allocative efficiency is where so much labor is used to produce so much of something instead of something else that has more gains.8 A good example is the Indian government that encouraged the production of oilseeds and sugar where it had no comparative advantage instead of concentrating on rice, wheat and cotton. Neo- liberalism Theory suggests that to ensure that the resources are managed efficiently there is need for privatization.9 d) Lack of human capital Jeffrey argues that poorer countries located insignificant budget to human capital development. This is due to the debts that they owe majorly like the IMF and World Bank, the agriculture produce losing market, and the financial institutions posing tough conditions for rescheduling of loans. This has made these nations to have low technical know- how thus loss of work force that directly impacts on the country’s economy.10 e) Rapid population growth The Chenery’s Patterns of Development as argued by Todaro and Smith, shows that high population growth has a direct connect with mass consumption.11 There is, therefore, need for decline in size of the family and population growth for development requirements to be met. According to Wei, the climate change has made countries like Africa to experience difficulty in carrying out agriculture and yet there has been a rapid population growth in these areas.12 From the argument of Thomas Malthus that food grow in arithmetic progression while population is in geometric progression, the population growth is therefore seen as a ticking time bomb whose effects are already experienced in these developing nations. f) High dependency ratio The high population growth has led to a large pool of children in most of the developing world economy. With the declining number of working adults, the number of children being taken care of by each adult has increased. This is an automatic burden to an already poor family thus a vicious cycle of poverty. However, as per the Structural Change Theory high population growth has a direct connect with mass consumption. There is therefore need for decline in size of the family and population growth.13 g) Lack of savings For a country to achieve higher growth it must invest more in capital goods. This can be done only by sacrificing the current consumption of the nation thus saving. This is not the case with most of the developing world. Neo- classical theories reveals that; economies grow by adding capital thus making saving rates key for a developing country to develop.14 h) Lack of infrastructure The burden of debt and the austerity measures that are imposed onto many poorer nations has made the infrastructure development to lag far behind. Telecommunication and transport sectors are still under developed. These two are the key services that attract foreign investments. As per the neoclassical theory if roads, railways, harbors and bridges are in bad conditions they may affect the economy. This is because they lead to delay in the delivery of goods and services causing more loss for market especially those of perishable goods.15 However, in most of the Sub Saharan countries, safe and clean water supply is not yet resolved. This has led to outbreak of diseases like cholera and typhoid thus costing the country more monetary resources in terms of treatment that ought to have been used in infrastructure development. Technical innovation has a direct link to productivity of a country. Way Forward In reference to the development theory, dependent states should attempt to come up with policies that promote self reliance. International Monetary Fund and World Bank neoclassical models should be thrown to the dogs. These models have made the developing nations to be in great debts thus making much effort to pay the debts as opposed to investing in development. Integration to the global economy is necessarily not a good choice to the developing world (Ferraro 2008, 64). These policies will ensure that the developing world make good use of their resources in development of the human capital and developing the savings culture which will automatically lead to fall in the population growth thus reducing the dependency ratio. Some may oppose the policy in comparing it with the policy of autarky. Example of the autarky policies includes China’s Great Leap Forward or the Tanzanian Ujamaa policy, and there is much importance to know the difference. The failures of the autarky policies are clear thus stating clearly that they are not appropriate. The solution therefore remains to be pegged in the self- reliance policy which can be interpreted as a policy that enables a controlled interaction with the world economy. Poorer countries should only engage I interactions that promise to improve the state of their citizen’s social and economic welfare. Notes 1. Lawrence Wei, “What are the Major Obstacles in Development?” Your Portal to the World, Last modified January 14, 2009, http://econsguide.blogspot.com/2009/01/economics-of-aid-debt-from-perspective_14.html 2. Ibid 3. Michael Todaro, Economic Development in the Third World, 7th Edition (New York: Addison Wesley Longman, 2000), 28. 4. Robert M. Solow, "A Contribution to the Theory of Economic Growth,"Quarterly Journal of Economics 70, no.1 (1956):70 5. Michael Todaro, Economic Development, 37 6. Robert M. Solow, A Contribution, 66 7. Patrick M. Muthee, Dependency Theory: The Reality of the International System (New York: createspace independent publishing platform, 2013) 98. 8. Lawrence Wei, “Obstacles in Development,” 9. Rick, Rowden, The deadly ideas of neoliberalism: how the IMF has undermined public health and the fight against AIDS (London: Zed Books, 2009) 54 10. Jeffrey, Sachs, The End of Poverty: Economic Possibilities for Our Time ( Johannesburg: Penguin Press, 2005) 82 11. Michael P. Todaro and Smith, Stephen C., Economic Development, 11th Edition (New York: Addison-Wesley, 2012) 100 12. Lawrence Wei, “Obstacles in Development,” 13. Michael P. Todaro and Smith, Stephen C., Economic Development, 106 14. Robert M. Solow, A Contribution, 68 15. Ibid,. 79 Bibliography Wei, Lawrence. “What are the Major Obstacles in Development?” Your Portal to the World. Last modified January 14, 2009. http://econsguide.blogspot.com/2009/01/economics-of- aid-debt-from-perspective_14.html. Solow, Robert M. "A Contribution to the Theory of Economic Growth". Quarterly Journal of Economics 70, no.1 (1956): 65–94 Todaro, Michael. Economic Development in the Third World, 7th Edition. New York: Addison Wesley Longman, 2000. Muthee, Patrick M. Dependency Theory: The Reality of the International System. New York: createspace independent publishing platform, 2013. Rowden, Rick. The deadly ideas of neoliberalism: how the IMF has undermined public health and the fight against AIDS. London: Zed Books, 2009. Sachs, Jeffrey. The End of Poverty: Economic Possibilities for Our Time. Johannesburg: Penguin Press, 2005 Hubbard Glenn R. and Duggan William. The Aid Trap: Hard Truths About Ending Poverty. Colombia: Columbian Business School, 2009. Todaro, Michael P. and Stephen C. Smith. Economic Development, 11th Edition. New York: Addison-Wesley, 2012. Read More