Significant Economic Growth without Urbanisation - Assignment Example

SECTION A No country in the industrial age has ever achieved significant economic growth without urbanisation (UNFPA 2007) Comment in detail, exploring the reasons for this strong association between urbanisation and economic growth urbanization is necessary for achieving high growth and high incomes. Significant growth requires a clear set path and macroeconomic policies thus urbanization and growth goes together. No industrialized country can ever achieve middle income status or economic growth without a significant population shift into its cities. Furthermore, urbanization and economic growth and urbanization are inextricably associated. Economic growth always implies the conversion of rural land to effective urban uses (commercial, residential and industrial) as local economies transition. This process occurs in urban area as the country industrializes. Urbanization is a key requirement to sustain (although not necessarily drive) growth in industrialized nations and it provides for other benefits likewise. One can also argue that managing urbanisation is an essential part of sustaining growth; neglecting cities—even in nations in where the level of urbanisation is relatively lowered—may impose heavy costs. Furthermore, as economic growth increases, the agricultural activities are substituted with increase in manufacturing. this automatically results in increased urbanisation as many densely populated regions provide skilled labour. 2. (a) Examine the benefits of industrialisation and the reasons why different countries have followed diverse paths towards industrialisation. Probably the huge benefits of industrialization in many nations have been the fact that it eases the everyday tasks and responsibilities of citizens placing many of tasks on technology and various resources. Likewise, it provides for many opportunities in employment, in turn, also widens business establishments to satisfy the needs of individuals employed by the expanded industry. More broadly, everyone in the economy is well compensated and equally satisfied with industrialization. Different countries have followed the diverse path towards Industrialization for they have realized that it is not only main engine for wealth, employment, and technical skill, but for the development of technology which necessitates and accelerates economic growth. In the long run there are a lot of examples of how industrialization in these nations has contributed to widespread to how individuals live. This includes medical advances, transportation development, modern conveniences, better education system, changes in lifestyle, popular living locations, machination and many more. The main reasons why some countries opt for diversity paths towards industrialization is the impacts of catching up or being a late developer in the process. Through critical analysis, the less industrialised nations has advantages than the more developed nations as the former can learn a lot from the developed nations particularly the mistakes they could have made while on the path to industrialization. For instance, It took China lesser time compared to Germany to industrialise. 2. (b)What are the sources of strong industrial growth in early stages of development? Why these sources may weaken in later stages? Early stages of development in many nation is characterised by fast and strong industrial growth that can be attributed to many factors including technology, type of products, factor endowment, raw materials among others. Type of products-The products that get to be subjects of industrialisation are normally basic and mass consumption, for example, hygiene products, paper and items, constructions, nourishment and beverages. As there is conceivably are markets for these products, their creation may encounter economies of scale and hence ease. Effortlessness of items additionally implies that they are anything but difficult to keep up or supplant. Factor endowment- The items doubtlessly produced in early stages of development are probably to be labour intensive. Numerous developing nations at an early phase of development will select technologies and products that are labour intensive. This is appropriate to the state of labour abundant a significant number of these nations. Actually numerous early developers have generally depended on their expansive reservoir of abundant labour in a condition of unemployment and under-employment Raw material- Often locally available raw materials and different resources are employed. Wool and cotton for textile and stones for construction are cases. in general, the nation does not have to import raw materials and different assets from foreign nations, which may be more expensive and lower foreign country reserve. Technology-Technology utilized is basic; always either locally developed or effectively got by importing machines and fundamental knowledge. Machinery can be kept in good condition by use of easily available resources. In reality, the low level of innovation or technology ensures industrialisation both economical and less muddled. SECTION TWO 3. (a) Evaluate arguments for import substitution (IS) strategy of development and the means to achieve it. Import substitution policies are policies that try to lower foreign dependency to a nation by local production of industrial and food products. Import substitution strategies advocate for replacing imports with local production. It is focused on the basis that a nation should attempt to reduce its foreign dependency through local production of goods, chiefly industrial products. Many countries pursue this to this to becoming less vulnerable to unfavourable terms of trade and more self-sufficient. One of the arguments for these strategies is that industries in their infancy stage should be protected up to a time that they grow to withstand competition. The other argument is that artificially high wages in manufacturing encourage substitution of capital for labour and this raise productivity. Thus, rise in domestic employment in the nation and resilience in the eye of global economic shocks like depressions and recessions. However, for the strategy to be effective, there are various systems that must be in place. To start with, the import volume and infrastructure should portray a sufficiently ample potential market. These ensures that there is enough pay off and compensation on the entire market. Secondly, the existing degree of diversification of market production in the economy is sufficient to allow satisfactory retort to possible shortages of supplies of inputs still coming from foreign countries. ISI firms must be assured of the quality of inputs originating from local producers. These firms likewise should never fear being too dependent on supply from single source. (b) Explain how the process of globalisation has affected the choice of trade strategy by LDCs  LDCs are said to be nations with extremely low income, high economic vulnerability and weak human capital and all these factors are important considerations when the strategy in globalization arena. Globalization involves integration among the nations and firms companies driven by foreign trade and investment or aided by advancement in information technology. These aspects of globalization have made less developed countries rethink their trade strategies due to negligible gain expected. Globalization more often than not fail to have some recognizable effects on many less developed countries, thus as these nations over-liberalized their markets, whilst the industrial nations erect trade protection or barriers and offer subsidies to their local firms. Most less developed nations that have liberalized their markets without favourable systems, enabling environment, in place to boost the emergence and growth of their entrepreneurs have all, For instance, These countries have witnessed the elimination of various indigenous firms from the domestic market as competition as a result of globalisation intensified, these have made these less developed countries rethink trade strategies. This is also attributed to the notion that in globalisation the growth of foreign trade is exacerbating to way income inequalities specifically in less developed countries that are not industrialised 4.(a) Is maximising economic growth (growth in national income (GDP) per head) a legitimate goal for developing countries? Discuss. GDP per head or Per capita Gross Domestic Product is today used by many developed nations in Europe as an approximation of overall national well-being of their citizens. They have also in recent days tried to maximise it as a goal. This is due to the fact that these nations a large proportion much economic activity measured financial transactions unlike the case in many developing counties or where funding is really available for accurate measurements to publicly be made available (including private or/and institutional fraud, in some less developed nations). GDP measures only the economic production in these nations and due to proper distribution of income it goes a long way in approximating the economic growth should it be maximised. Furthermore, base argument to the fact that per-capita GDP indicate average prosperity and this is workable for developed nations as he indicators are workable. 4. (b) Does better income distribution promote economic growth? Discuss. Inequality in income is negatively associated with consequent slowing of economic growth. Income inequality can be understood as the differences in economic pie distribution among groups within the population these may be (individuals and households). Inequalities in the economy have implications for subsequent economic growth. This is the case since there are huge variations in spending habits witnessed between low-income households and for individuals in high-income brackets. Through critical analysis, the former tend to have relatively higher spending on consumption compared to the latter. And huge consumption patterns are needed in any economy to increase gain, which in the long run encourage producers or the owners of factors of production to hire more employees to produce more products to meet the higher spending demand. The rise in income inequality, thus, may stymie economic growth. in an heart shell, Income inequality slows aggregate demand, resulting in increasingly huge segments of previously middle class consumers incapable of affording as many essential goods and services and few luxury goods. Finally, pushes overall employment and production down (clear symptoms of an economic that is not growing). Read More