Economic development is a complex process. There are many indicators to be considered and many conventional means that must not be considered. The following is a discussion of the indicators that can be used to define economic development and their plausibility as credible benchmarks of the achievement of economic development.
Changes in Gross Domestic Product
Change in GDP is a way to measure economic development. Positive change in the GDP means the same in the case of income. GDP per person, therefore, is a measure to calculate the average standard of living. However, this idea may prove deceptive because almost none of the people of a country receive the average income. Some receive more, and most receive less.
In many cases, most of the increased GDP goes to the wealthiest of the country, and the poorest receive so little. A nasty case worldwide is that the gap between the rich and the poor only increases in most countries. Therefore an increase in GDP rarely means an increase in the people’s standard of living. A case study on this is the Indira Gandhi Canal Project in India, where the project stemmed an increase in the overall GDP but failed to ameliorate the conditions of the marginally poor and centralized land and capital in the hands of a newly prosperous landowning class who were successful to buy off or control the peasantry by other methods which were initially endowed with the land by the government. Therefore, while the change in GDP can be an indicator of economic development, it is only partial and not the most reliable one.
Sustainability is an essential indicator of natural economic development. Increasing numbers of people are calling for sustainable development: development that protects its environmental base so that it can be continued into the indefinite future. According to this way of looking at the issue, economic growth that fails to protect the environment is not actual development because it cannot be sustained. At the same time, Isbister is only concerned about the environmental effects as a measure of sustainability, increase in average GDP per person and standard of living is undoubtedly another.
Because if the economy fails to produce enough buyers for its product, it will fail to sustain the development it achieves in the short run. We find the truth of this case in studying Brazil, where the poor grew in number and not in the standard of living, the economy being unable to buy the products that the economy produced.
Income distribution is an important benchmark that provides sustainability to economic growth. Although this was ignored by many economists in the past, this idea is growing more prominent by the day. The trend for the new century is bridging the gap between the rich and the poor and creating a middle class that can consume the products that the economy produces.
Human development and the achievement of basic needs
The establishment of the World Bank as an international lending organization changed the definition of economic development to a great extent. In the 1970s, Bank President Robert S.McNamara and his associates directed attention to the absolute poor’s needs and economic development towards basic needs. The basic needs are sufficient food, adequate shelter from the elements, decent clothing, protection from disease, and elementary education. The United Nations Development Program advanced the basic needs approach a step. Further, by constructing a human development. It acts as an alternative to the GDP expansion approach to economic development because part of the HDI is also the expansion of the GDP per person and includes the achievement of basic needs. It gives us a newer outlook on viewing economic development. Under the HDI approach, China does better than it does under the GDP approach because it has been mainly successful in providing the basic needs of its people. Some countries like Brazil show results that are just the opposite, and these performances directly relate to the standard of living of the people residing in these countries.
Therefore, keeping all the conditions above in mind, an acceptable definition of economic development is the expansion of the economy measured by the expansion in the GDP that is sustainable and provides proper income distribution among the people of the economy, resulting in a better standard of living as measured by the achievement of basic needs and a better ranking.
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The idea of economic underdevelopment is a significant one. A strict definition of this is absolutely in a dispensary before starting a discussion on this topic. Because underdevelopment is not simply the opposite of development, it is a condition that has arisen in the post-colonial third world that hinders the development path, keeping the nations from achieving their developmental goal. The effect of colonialism and neo-colonialism gave birth to these extraordinary phenomena.
The definition of underdevelopment by Smith(2013) will be used in this article which is the following: Underdevelopment refers to a continuing relationship of exploitation where, at any one level in the chain, the total economic surplus is not available for reinvestment. Another explanation of this definition can be that economic underdevelopment is a condition where for a set of reasons, an economy cannot reach its full potential of growth, and existing relations hinder change toward a state of economic development.
The Third World
The working definition of the third world for the purposes of this article will be a direct excerpt from Smith(2013) which is as follows: The third world will be defined as a group of countries that have colonial histories and which are in the process of developing economically and socially from a status characterized by low incomes, dependence on agriculture, weakness in trading relations, social deprivation for large segments of society, and restricted political and civil liberties. (p.11, Chapter one)
Causes of Underdevelopment and Development
Three leading scholars discuss the reasons for underdevelopment in the third world. They also try and provide specific frameworks for overcoming those problems and heading towards a developed state—the primary schools of theorists are the dependency and modernization theorists. For this paper, dependency theorists and Marxist theorists will be viewed as a single entity as much of the revolutionary ideas from the socialist faction of the dependency school and Marxists overlap almost indistinguishable. There proposed reasons for underdevelopment and direction for development are summed in the following discussion.
The modernizations think of today’s third-world societies as being largely traditional. They believe life under the traditional system is not linear but cyclic, with little space for innovation and change. Nothing is innovative, and there is no attempt to make someone’s condition than the current state. The modernization theorists are not dismissive of the traditional lifestyle of the third world and do not commonly view it as unfavorable. Nevertheless, from the economic perspective, it is a poor, subsistence life, a life that has no hope of accumulation, income, or wealth. Historians in the modernization school argue that about five hundred years ago, most people in the world were poor, living under traditional social arrangements. Sparks of scientific discovery and higher crop yields gave birth to the ripples of societal change that could evolve into something new. The modernizations argue that the failure of development in the third world is simply the failure of societies to kindle similar sparks of creativity. Their diagnosis of the causes of the underdevelopment of the third world is the failure to dismantle the traditional society and create a capitalist society where upward mobility is possible. The direction for development provided by the modernization theorists is described by Isbister(2006) as follows: The transformation to modernity requires a breaking of these ways of thought the creation, for example, of a ‘need for achievement,’ to use psychologist David McClelland phrase a celebration of individual success as opposed to group affiliation. […] What is needed is a class of entrepreneurs who will mobilize the country’s wealth for productive investment to create the technology and capital needed for growth. However, this change might seem unnecessary since it is too risky for the people of the third world from their perspective. Therefore the transformation requires low-risk opportunities and incentives to be provided to people so they can opt for higher productivity and incomes (Isbister, 2006, p. 39, Chapter Three). The impetus for this change can come from within the society or from outside of it. For proper sustainable development, the change must come from inside of the society from people who can help sustain their achievement. It can come from a few people outside the power structure or from people who were formerly disposed of their power in an older power structure.
The modernization school, however, does not exempt the developed world from the burden of promoting growth in the underdeveloped world. They argue that it is mutually beneficial for the two worlds to help each other develop. The third world can benefit from acquiring the knowledge and technology of the first world. The first world can create a new consumer base for their products in the third world by helping them develop economically. (Isbister, 2006, p. 40, Chapter Three)
The modernizations, however, believe that the growth of the first world is indispensable for the growth of the third world. They argue that creating capital to be employed in developing the third world will be impossible without it.
One of the prevailing theories coming mainly from the voices of the third-world leaders themselves is the dependency theory. Dependency theorists believe that the growth of today’s rich countries has impoverished the third world and that the forces of international capitalism still block its progress. John Isbister describes it in the following excerpt: To those in the dependency school, however, underdevelopment is a process. Underdevelopment is not just the failure to develop; it is an active process of impoverishment. Aidan FosterCarter put it nicely when he described Andre Gunder Frank’s use of underdeveloped. B.C. Smith provides the following definition for underdevelopment from the perspective of dependency theorists: Underdevelopment refers to a continuing relationship of exploitation where the entire economic surplus is not available for reinvestment at any level of the chain. According to dependency theorists, the underdevelopment of the third world is a process started by the colonialists. An economic explanation of imperialism is the voracious demand of the industrialized countries for raw materials and food imports from the world’s tropical areas. Imperialism shaped the economy of the third world, which even today leaves the vast majority in desperately poor conditions. The imperialists destroyed the traditional economic systems of the third world and replaced them with a production system that produced well for their consumption. The colonies were turned into a vast production system for sugar, cacao, tobacco, wheat, cotton, meat, fish, jute, coffee, coconuts, rubber, wool, palm oil, rice, bananas, groundnuts, indigo, tin, gold, silver, bauxite, copper and many more products.
The dependency theorists see a fundamental difference between their views and the views of Modernization. They say: The modernization school sees the rich countries as being the main obstacle to the wellbeing of the poor. […] Modernization theorists are prominent liberal and pro-capitalist, whereas dependency theorists are socialist and frequently revolutionary.
Although there is a significant difference between the dependency theorists and the modernization theorists in diagnosing the problem, some of the dependency theorists choose the path prescribed by modernization. They propose to fight fire with fire, the fire being capitalism. They can use today’s capitalism to break out of their dependent state. The scholars of this school find examples in Japan, Singapore, Hong Kong, Taiwan, South Korea, and Malaysia. However, most in the dependency school argue against this notion and say that capitalism is not a strategy that can work for the great majority of the world’s poor. They argue that it reproduces class tensions and inequalities in economically advanced countries. Most dependency adherents negate the notions of liberalism and call for a full-fledged socialist revolution in the third world with an idea very close to Marxism. The only distinguishable difference between the Marxist analysis and the dependency theory analysis is that Marxists consider the class struggle that is the cause of underdevelopment as being internal.
In contrast, dependency theorists consider it to be external. However, I would argue that the internal class struggle is nothing but an epiphenomenon of the global class conflict portrayed by the dependency school. Moreover, some adherents of the dependency school also agree with the Marxist analysis of internal struggle. Therefore, I include Marxist analysis as a subsection under the dependency school, not an independent ideology.
The postcolonial overdeveloped state is a cause of underdevelopment and a prologue to the discussion regarding the possibility of human development. The state in the third world has rarely if ever, developed as a politically neutral institution. It has frequently fallen under the elites from dominant ethnic groups, as exemplified by Sudan, Kenya, and Malaysia. It has been exploited by the bourgeois, as exemplified by the Latin American capitalist states. Political democracy prevails across the continent, but it lacks civil democracy, where the rights of the citizens are scrupulously observed. The power of the government in the third world has never been equally distributed and exemplified by Burma, Iran, and Nigeria, where freedom of organization is suppressed. The civil society in these countries is also underdeveloped and, therefore, cannot equally influence the government. Third-world countries also show an overdeveloped bureaucracy. The colonialists overdeveloped these sections of the society to facilitate their rule but underdeveloped the civil society. Thus the bureaucracy sometimes became military and authoritarian in the postcolonial period. The private sector is weak and dominated by bureaucracy. Some other functions, like party bureaucracies, sometimes counter the power of bureaucracy, as exemplified by Tanzania. The bureaucracy can also become a center of political competition in Mali. The bureaucracy supports the rise of a meritocratic stable middle class. Sometimes the bureaucracy develops into an authoritarian state. The state eliminates competition and closely controls political participation. They see democracy as an obstacle to economic growth. It happened in Brazil, Argentina, and Chile.
The possibility of Human Development in the Third World
Original Analysis Defining human development as the achievement of the basic needs of the majority of the citizen of a given country, I think there is a significant possibility of human development in the third world. The achievement of human development is possible if a third-world society observes the following stages.
Education must be emphasized as the first step towards development among basic needs. Education can be the most potent tool against the traditional economic system and the circular lifestyle of the people of the third world as observed by modernizations. Education should be widespread, accessible, and careeroriented. Much emphasis must be put into making a) a trained labour force, b) a trained class of entrepreneurs, and c) a trained class of researchers. The trained labourers will be eligible for higher pay automatically granted by new businesses launched by a growing class of entrepreneurs. The researcher would invent new technologies and methods to improve the industry and help create new revenue-generating industries for the economy. The education must be restructured so that it is not purposefully structured to create a class of bureaucrats but a class of risk-taking innovators and entrepreneurs. All other education must be seen as redundant.
The second stage of human development should be cutting down the bureaucracy and reallocating the budget towards aspiring entrepreneurs. It could be done through public universities where the school authority may issue grants provided by the government to help students fund a startup business that can create jobs for society. The government should try to create publicly owned private enterprises where the management would be done through private sectors. The government should the initial financial help by buying shares of promising companies and generating revenues out of the businesses.
The third stage is increased investment opportunities for national and international investors: The governments of the third world should follow the model of newly developed East Asian countries like Singapore, South Korea, and Malaysia and open their markets to national and international investors for increasing economic growth. The government should undertake monetary and financial policies to keep the economic environment favourable for investment.
The fourth stage provides a legal and fiscal framework, promotes human development, and enforces law and order. The state should enforce strict labour laws and ensure the implementation of labour rights. It should also strictly enforce property rights and provide the legal framework for business contracts to ensure economic growth. The government should increase welfare measures while reallocating the financial resources from the redundant bureaus and reallocate the resources to welfare programs such as sanitation, electrification, education, social security, etc. the fifth stage is to support NGOs in humanitarian activism: The state should support local and international nongovernmental organization who genuinely help to improve the human condition in the state. The state may try to fund the organizations if possible. The state must provide full access to the NGOs and help them carry out the social projects which have been proven beneficial.
Sixth, to Increase control over international trade and colonialism: as a final stage, when the state has become somewhat developed and can afford to exert political power, the state must endeavor to exert control over the interests of the international capital and as a sovereign entity in controlling neocolonial agendas and promote its self-interests on a global stage.
Author Anupam Debashis Roy Student, Department of Political Science Howard University, USA [email protected]