FANA HAGOS BERHANE (LL. B) (LL.M)
Sponsored by the Justice and Legal System Research Institute
DIMENSIONS OF DEVELOPMENT OF DEVELOPING COUNTRIES
We have already seen the concept of development and its measurements. We will use these concepts and their measurements as guideline in understanding the depth and width of the problems of countries of the third world. This chapter gives a short account of the dimensions of the development problems of poor nations.
These countries have both similarities and difference in economic, geographical, historical, social, cultural and institutional factors. Here, it is attempted to shortly familiarize the student with the diversities and common features of developing countries. The chapter is divided into two parts. The discussion starts with the differences among developing countries and proceeds to their common characteristic features.
At the end of this chapter you will be able to
2.1. An Overview of the Diverse Structures of Developing Countries
This section portrays the structural diversity of developing nations. With this intention, we will do an examination of eight critical components. These are
1. The size of the country(geographic area, size of population, and income levels)
2. Its historical and economical background;
3. Its endowments of physical and human resources;
4. Its ethnic and religious composition;
5. The relative importance of its public and private sector
6. The nature of its industrial structure;
7. Its degree of dependence on external economic and political forces and
8. The distribution of power and the institutional and political structure within the nation.
Dear students, each of the above components are discussed in detail below. In doing this, we will focus on regional comparisons of the developing countries of Africa, Asia, and Latin America and their sub regions.
2.1.1. Size and Income Level
Evidently, economic potential of a country is significantly determined by its physique and population size, and its level of national per capita income. These are also major factors differentiating one developing country from another. In the world of developing countries, larger and populated nations such as Brazil, India, Nigeria and Ethiopia exist side-by side with small countries like Paraguay, Nepal and Djibouti respectively.
This size provides both advantages and disadvantages. Large size usually presents advantages of diverse resources endowment, large potential markets, and lesser dependence on foreign sources of materials and products. But it also creates problems of administrative control, national cohesion, and regional imbalances.
However, it is to be noted that there is no necessary relationship among a country’s size, its level of per capita income, and the degree of equality or inequality in the distribution of that income. For example, as compared to Ethiopia, the neighboring country, Kenya is smaller in geographic and population size. But Kenya has about 3 times the per capita income of Ethiopia at official exchange rate. But Kenya has also lesser per capita income than Brazil and some other lager developing countries.
2.1.2. Historical Background
The other source of diversity among the developing countries is their traditional and colonial heritages; apparently, countries have their own different cultural background accumulated in their history making them to have different social and economic institutions. Moreover, developing nations were at one time or other colonies of western European countries. The European colonial powers had a dramatic and long-lasting impact on the economic, political and institutional structures of their African and Asian colonies. The economic structures of these nations, as well as their educational and social institutions have typically been modeled on those of their former economic rulers.
Hence, the diversity in colonial heritage together with the indigenous cultural differences have resulted different structural problems in these countries. Depending on their colonial heritage, there fore, the countries are required to take different measures. Countries like those in Africa that only recently gained their independence are likely to be more concerned with consolidating and evolving their own national, economic and polity’s structures than with simply promoting rapid economic development. Their policies may, consequently, reflect a greater interest in these immediate issues.
Latin American countries have a longer history of political independence plus a more shared colonial heritage. Therefore, in spite of geographic and demographic diversity, the countries possess relatively similar economic, social, and cultural institutions and face similar problems, In Asia, on the other hand, different colonial heritages and the diverse cultural traditions of the indigenous peoples have combined to create different institutional and social patterns.
2.1.3 Physical and Human Resources
Endowments of physical and human recourses are other sources of disparities in economic growth potential of the countries. If we deal with the physical resource endowments, on the one hand, there are countries which are extremely and favorably endowed in resources such as minerals, raw materials, and fertile land. On the other hand, there are also poorly endowed nations where endowments of raw materials and minerals and even fertile land are relatively minimal.
Moreover, geography and climate can also play an important role in the success or failure of development efforts. Other things being equal, it is said that, island economies seem to do better than landlocked economies. With respect to climate also temperate zone countries do better than tropical zone nations.
Developing countries are also distinguished one from the other in their human resource endowments. The human resource endowments includes not only the number of people and their skill levels but so also their cultural outlooks, attitudes toward work, access to information, willingness to innovate, and desire for self-improvement.
Furthermore, the level of administrative skill will often determine the ability of the public sector to alter the structure of production and the time it takes for such structural alteration to occur. This has to do with the whole complex of interrelationships between culture, tradition, religion, and ethnic and tribal fragmentation or cohesion. Thus the nature and character of a country’s human resources are important determinants of its economic structure and these clearly differ from one region to the other.
2.1.4. Ethnic and Religious Composition
Ethnicity and religion often play a major role in the success or failure of development efforts. Evidently, the greater the ethnic and religious diversity of a country the more likely it is that there will be internal strife and political instability. There is also distinction in ethnic and religious composition among nations. Presently more than 40% of the world’s nations have more than five significant ethnic populations.
In most cases, one or more of these groups face serious problem of discrimination. Over half of the worlds less developed countries have recently experienced some form of interethnic conflict. Just in the first half of the 1999s, ethnic and religious conflicts leading to wide spread death and distinction took place in many African countries and some countries of other regions.
But neither overt physical conflict nor widespread violence is necessary to disrupt an economy or cause political instability. If development is about improving human lives and providing a widening range of choice to all peoples, racial, ethnic, or religious discriminations can be equally destructive. For example through out Latin America, indigenous populations have significantly lagged behind other groups on almost every measure of economic and social progress. In these countries, being indigenous makes it such more likely that an individual will be less educated, in poorer health, and in a lower socio economic structure than other citizens. This is particularly true for indigenous women,
Ethnic and religious diversity need not, however, necessarily lead to inequality, turmoil, or instability. There have been numerous instances of successful economic and social integration of minority or indigenous ethnic population in countries as diverse as Malaysia and Mauritius. The point is that the ethnic and religious composition of a developing nation and whether or not that diversity leads to conflict or cooperation can be important determinants of the success or failure of development efforts. Too often, economists neglect to recognize this fundamental fact.
2.1.5. Relative Importance of the Public and private Sectors
Most developing countries have mixed economic system, featuring both public and private ownership and use of resources. The division between the two and their relative importance are mostly determined by the historical and political circumstances of the countries. Thus, in general, Latin American and South East Asian nations have larger private sectors than South Asian and African nations.
The degree of foreign ownership on the private sector is another important variable to consider when differentiating among less developed countries. A large foreign owned private sector usually creates economic and political opportunities as well as problems not found in countries where foreign investors are less prevalent.
Economic policies, such as those designed to promote more employment, will naturally be different for countries with large public sectors and ones with sizeable private sectors. Direct government investment projects and large rural work programs may take precedence in economies dominated by the public sectors. In the private oriented economies, however, special tax allowances designed to induce private businesses that can employ more workers might be more common, Although the problem to be solved may be similar, the solution can differ in countries with significant differences in the relative importance of the public and private sectors.
2.1.6 Economic Structure
Developing countries are predominantly agrarian in economic, social, and cultural out look. Labour force in most of these countries is overwhelmingly engaged in agriculture, The agricultural Sector contributes significantly also to the GDP of many of the poor nations. Farming is not merely an occupation but a way of life for most people in Asia, Africa, and Latin America.
Nevertheless, there are great differences between the structure of agrarian systems and patterns of land ownership in Latin America. Asian agrarian systems are some what closer to those of Latin America in terms of patterns of land ownership. But even the similarities are lessened by substantial cultural differences.
It is in the relative importance of both the manufacturing and service sectors that we find the widest variation among developing nations. Most Latin American countries possess more advanced industrial sectors. But in the 1970s and 1980s countries like Taiwan, South Korea, and Singapore are rapidly becoming industrialized states.
In spite of common problems, therefore, development strategies may vary from one country to the next depending on the nature, structure, and degree of interdependence among its primary, secondary, and tertiary industrial sectors.
2.1.7. External Dependence: Economic, Political and Cultural
The degree to which a country is dependent on foreign economic, social, and political force is related to its size, resources endowment, and political history. For most developing countries, this dependence is substantial. In some cases, it touches almost every facet of life. Most small nations are highly dependent on foreign trade with the developed world Almost all small nations are dependent on the importance of foreign and often inappropriate technologies of production. This fact alone exerts an extraordinary influence on the character istics of the growth process in these dependent nations.
But even beyond the strictly economic manifestations of dependence in the form of the international transfer of goods and technologies is the international transmission of institution and values. Most notably are systems of education and governance, and attitudes toward life, work, and self. The transmission phenomenon brings mixed blessing to most less developed countries especially to those with the greatest potential for self reliance. A country’s ability to chart its own economic and social destiny is significantly affected by its degree of dependence on these and other external forces.
2.1.8 Political Structure, Power and Interest Groups
In the final analysis, it is often not the correctness of economic policies alone that determines the outcome of national approaches to critical development problems. The political structure and the vested interests of ruling elites (e.g., large landowners, urban industrialists, bankers, foreign manufacturers, the military, and trade unionists) will typically determine what strategies are possible and where the main barriers to effective economic and social change may lie.
The concentration of interests and power among different segments of the populations of most developing countries itself is the result of their economic, social, and political histories ,and is likely to differ from one country to the other. Nevertheless, whatever the specific distribution of power among the military, the industrialists, and the large landowners of Latin America, the politicians and high level civil servants in Africa, the oil sheiks and financial of the middle east, or the land lords, money lenders, and wealthy industrialists of Asia-most developing countries are ruled directly or indirectly by small and powerful elites to a greater extent than the developed nations are.
Effective social and economic changes thus require either that the support of elite groups be enlisted or that the power of the elite be offset by more powerful democratic forces. Either way, economic and social development will often be impossible without corresponding changes in the social, political, and economic institutions of a nation. Such institutional changes may include: land tenure systems, forms of governance, educational structures, labor market relationships, property rights, the distribution and controls of physical financial asset, laws of taxation and inheritance and provision of credit.
2.2 Common Characteristics of Developing Countries
Dearr students, the foregoing discussions have demonstrated why it is sometimes risky to generalize too much about such a diverse set of nations. Nevertheless, common economic features of developing countries permit us to view them in a broadly similar framework.
This section portrays various dimensions of the development gap between rich and poor countries and similarities of poor nations. These include level and the growth rate of income, unemployment and underemployment, population growth rate, economic structure, political and institutional factors, and degree of dependence. We will attempt to identify these similarities and provide illustrative data to demonstrate their importance. For convenience, we can classify these common characteristics into seven broad categories.
I. Low levels of living which is characterized by income inequality, poor health, and inadequate education
II. Low levels of productivity
III. High rates of population growth and dependency burden
IV. High and rising levels of unemployment and underemployment
V. Substantial dependence on agricultural production and primary product exports
VI. Prevalence of imperfect markets and limited information
VII. Dominance, dependence and vulnerability in international relations.
2.2.1. Low Levels of Living
In developing nations, general level of living tends to be very low for the vast majority of people. This is true not only in relation to their counterparts in rich nations but often also in relation to small elite groups within their own societies. These low levels of living are manifested quantitatively and qualitatively in the form of low income (poverty), inadequate housing, poor health, limited or no education, high infant mortality, low life and work expectancies, and in many case a general sense of malaise and hopelessness. Let us look at some recent statistic as comprising certain aspects of life in the underdeveloped countries and in the more economically advanced nations.
A. Per capita national income: As we all know from the previous knowledge of economics, the GNP per capita is often used as summary index of the relative economic well-being of people in different nations. One common distinguishing feature of developing countries as compared to developed nations is the extremely low level of income. In 1997, the total national product of all the nations of the world was valid at more than $29 trillion, of which more than $22 trillion originated in the economically developed regions and less than $7 trillions was generated in the less developed nations.
The difference in income between rich and poor nations will be apparent when one takes in to account of the distribution of world population. In this term, this means that almost 80% of the world’s income is produced in the economically developed groups by 20% of the world’s people. Thus the remaining four-fifths of the world’s population is producing only one-fifth of total world output. In the year of 1997, the collective per capita incomes of the under developed countries averaged less than one- twentieth of the per capita income of rich nations.
B. Growth Rates of Income: Many developing countries not only have much lower levels of per capita income but also have experience of slower GNP growth than the developed nations. For example, the average growth rate slowed considerably during the 1980s. The real per capita GDP even declined by 0.2% in 1990 and in 1991 between 1985 and 1995 economic growth in Latin America and the Caribbean averaged 0.3% and in Africa-1.1% while growth in the developed countries was averaging 1.9% per annum.
In fact, during the 1980s and early 1990s, the income gap between rich and poor nations widened at the fastest pace in more than the other three decades. The impact of this widening gap is striking. If, for example, we take the income levels of the richest 20% of the world’s population in comparison with the poorest 20% we find that whereas in 1960 the income ratio was 30 to 1 at the end of 1991 the rich were receiving 61 times the income of the poor. Table 1 gives the details of the ever-growing income disparity between the richest and poorest 20% of the world’s population.
C. Distribution of National Income: The growing gap in per capita incomes between rich and poor nations is not the only manifestation of the widening economic disparity between the world’s rich and poor. To appreciate the breadth and depth of third world poverty, it is also necessary to look at the growing gap between rich and poor within individual LDCs.
All nations of the world show some degree of income inequality. There are large disparities between the income of the rich and of the poor in both developed and underdeveloped countries. Nevertheless, the gap between rich and poor is generally greater in less developed nations than in developed nations.
Comparing the share of national income that accrues to the accuse to the poorest 40% of a country’s population with that of the richest 20% can be used as an arbitrary measure of the degree of inequality. In this case, we discover many African and Latin America countries to be with substantial income inequality. Nevertheless, most Asian countries have either moderate inequality or lesser inequalities in overall income distribution.
Moreover, there is no obvious relationship or correlation between levels of per capital income and degree of income inequality. Kenya, with the same low per capita income as India has a much wider income disparity between the top 20% and bottom 40% of the population. Similarly, Kuwait, with almost the same high per capita income as Belgium has a much lower percentage of its income distributed to the bottom 40% of its population.
D. Extent of Poverty: The magnitude and extent of poverty in any country depend on two factors: the average level of national income and the degree of inequality in its distribution. Clearly, for any given level of national per capita income, the more unequal the distribution the lower is the includence of poverty. Similarly, for any given distribution, the lower the average income level, the greater is the includence of poverty. But how is one to measure poverty in any meaningful quantitative sense?
During the 1970s, as interest in problems of poverty increased, development economists took the first step in measuring its magnitude within and across countries by attempting to establish a common poverty line. They went even further and devised the now widely used concept of absolute poverty. It is meant to represent a specific minimum level of income needed to satisfy the basic physical needs of food, clothing, and shelter In order to ensure continued survival, one common methodology has been used to establish an international poverty line at, say, a constant U.S &370 per year (based, for example, on the value of the 1985 dollar and then attempt to estimate the purchasing power equivalent to that sum of money in terms of a developing country’s own currency.
We see that in the last decade of the 20th century, some 1.3 billion people, or 32% of the developing world population, were living in absolute poverty. Looking at individual regions, we find the highest poverty rate (43%) in South Asia (Bangladesh, India, Pakistan, etc.) where the largest number of poor people lives (515 million). But sub-Saharan Africa with 219 million absolute poor has by far the fastest poverty growth rate. It is estimated that during the first decade of the 21st century, African poverty rates will approach 50 percent.
E. Health: In addition to struggling on low income, many people in developing nations fight a constant battle against malnutrition, disease, and ill health. Life expectancy in 1998 still averaged only 48 years compared to 63 years among other third world countries and 75 years in developed nations. Infant mortality rates (the number of children who die before their first birthday out of every 1.000 live births) average about 96 in the least developed countries and 8 in developed countries.
In the mid-1970s, more than 1 billion people, almost half the population of the developing world (excluding China), were living on diets deficient in essential calories. One-third of them were children under 2 years of age. These people were concentrated in the poorest countries. In the 1990s the situation consumption and widespread famine. In both Asia and Africa, over 60% of the population barely met minimum caloric requirements necessary to maintain adequate health.
The extent of human deprivation in terms of some key health indicators is also another indicator of the low standard of living of these nations. For example, 766 million people in poor countries are without access to health services, 1.2 billion do not have access to safe drinking water, 1.9 billion (almost half the population) live without sanitation facilities, and 158 million children under age 5 are malnourished. Another often-used measure of child malnutrition is the percentage of children who are underweight. In the early 1990s statistics revealed that 67% of the children in Bangladesh were underweight; 63% in India, 43% in South Africa, 42% in Vietnam, 38% in Ethiopia, and 36% in Ghana and Nigeria.The access to clean drinking water is one of the most important measures of sanitation. Waterborne diseases such as typhoid fever, cholera, and a wide array of serious or fatal diarrhea illnesses are responsible for more than 35% of the deaths of young children in developing countries. Most of these diseases and resulting deaths would be quickly eliminated with safe water supplies.
To make matters worse, medical care is an extremely scarce social service in many parts of the developing world. In 1995, the number of doctors per 100,000 people averaged only 4.4 in the least developed countries, compared with 217 in the developed countries. The ratio of hospital beds to population is similarly divergent between these two sets of nations.
Moreover, when one realizes that most of the medical facilities in developing nations are concentrated in urban areas where only 25% of the population resides, the woefully inadequate provision of health care to the masses of poor people becomes strikingly clear. For example, in India, 80% of the doctors practice in urban areas where only 20% of the population resides. In Bolivia only one –there. In Kenya, the population-to-physician ratio is 672 to 1 for the capital city of Nairobi and 20.000 to 1 in the rural countryside where 87% of the Kenyan population lives. In terms of health expenditures, more than 75% of LDCs government outlays are devoted to urban hospitals that provide expensive, western-style curative care to a minority of the population.
Finally, no discussion of health problems would be complete without mentioning the terrible human toll that AIDS is inflicting on millions of people in developing countries. After tuberculosis, AIDS is now the second leading infectious cause of deaths among adult men and women. To date, an estimated 6 million people worldwide have died of AIDS and more than 30 million have contracted the human immunodeficiency virus (HIV) that causes it. 90% of all these people live in LDCs. At the beginning of 1998, out of the total number of these victims 66% them were residing in Africa while Asia and Latin America had 21% and 43% respectively.
F. Education: The spread of educational opportunities is the final indicator of the very low levels of living that is pervasive in developing nations. The attempt to provide primary school educational opportunities has probably been the most significant of all LDC development efforts. In most countries, education takes significant share of the government’s budget.
Yet in spite of some impressive quantitative advances in school enrollments, literacy levels remain strikingly low compared with the developed nations. For example, among the least developed countries, literacy rates average only 45% of the population, the corresponding rates for other third world nations and the developed countries are approximately 64% and 99%, respectively. There is high level of children dropouts of primary and secondary school, and out of the estimated illiterate adults, more than 60% are women. Moreover, the education of children who do attend school regularly is often irrelevant to the development needs of the nation, in which they live,
We can summarize the major illustrations of the low standard of living of the poor nations by listing the following points, Firstly, there is low relative levels and, in many countries, slow growth rates. Of national income, moreover, the real per capita income is either growing at a low level or in many countries stagnating The pattern of income distribution of the poor countries is highly skewed with the top 20% of the population receiving 5 to 10 as much income as the bottom 40%. Consequently, great masses of third world populations are suffering from absolute poverty, with up to 1.3 billion people living on subsistent income of less than $370 per year.
The low standard of living is also manifested in the social aspects. Large segments of the populations are suffering from ill health, malnutrition, and debilitating diseases, with infant mortality rates running as high as 10 times those in developed nations. In education, these countries are characterized by low levels of literacy, significant school dropout rates, and inadequate and often irrelevant educational curricula and facilities. Most important is the interaction of all six characteristics, which tend to rein- force and perpetuate the pervasive problems of “poverty, ignorance, and disease” that restrict the lives of so many people in the developing world.
2.2.2. Low Levels of Productivity
In addition to low levels of livings, developing countries are characterized by relatively low levels of labor productivity. The concept of a production function is often used to describe the way in which societies go about providing for their material needs. Production function is systematically relating outputs to different combinations of factor inputs for a given technology.
But in less developed countries the concept of technical engineering concept of a production function must be broadened by adding some important factors. Among its other inputs, this includes managerial competence, access to information, worker motivation, and institutional flexibility. Throughout the developing world, levels of labor productivity are extremely low compared with those in developed countries. This can be explained by a number of basic economic concepts. For example, the principle of diminishing marginal productivity states that if increasing amounts of a variable factor (labor) are applied to fixed amounts of other factors(e.g., capital, land, materials), the extra or marginal product of the variable factor declines beyond a certain number.
Low levels of labour productivity can therefore be explained by the absence or severe lack of “complementary” factor inputs such as physical capital or experienced management. To raise productivity, according to this argument, domestic savings and foreign finance must be mobilized. This is to generate new investment in physical capital goods and build up the stock of human capital (e.g., managerial skills) through investment in education and training.
Institutional changes are also necessary to maximize the potential of this new physical and human investment. These changes might include such diverse activities as:
The conditions of physical health most clearly reveal the close linkage that exists between low levels of income and low levels of productivity in developing nations. It is well known, for example, that poor nutrition in childhood can severely restrict the mental and the physical growth of individuals. Poor dietary habits, inadequate food, and low standards of personal hygiene in later years can cause further deterioration in a worker’s health and can therefore adversely influence attitudes toward the job and the other people at work.
The worker’s low productivity may be due in large part to physical lethargy and the inability, both physical and emotional, to withstand the daily pressures of competitive work. We may conclude, therefore, that low levels of living and low productivity are self-reinforcing social and economic phenomena in poor countries, in can also be said that they are the principal manifestations of and contributors to their underdevelopment.
2.2.3 Population Growth and Dependency Burdens
Statistics on demographic evolution by country show that the present rhythm of global population growth is largely the result of the acceleration of growth in the developing regions. Consequently, the population of the third world rose from 1.7 billion in 1950, to 3.313 billion in 1980 and 4.036 billion in 1990. During the same year, the population of the developed countries stood respectively at 832 million, 1.137 billion and 1.210 billion. The demographic load of the third world has been accentuated. It Share from the total population has been continuously increasing to be 66.9% in 1950, 74.4% in 1980, 76.9% in 1990 and around 80% at the end of the 20th century and beginning of the 21st century. The percentage of the population of the developed countries has fallen from 33.1% to 20% in the course of the same period.
This swift population growth in developing countries is due to their higher birth rate as compared to death rate, though death rate also in high, birthrates (the yearly number of live births per 1.000 populations) in less developed countries are 30 to 40, whereas those in the developed countries are less than half that figure. The crude birthrateis probably one of the most efficient ways of distinguishing the less developed from the developed countries. There are few less developed countries with a birthrate below 20 per 1.000 and no developed nations with a birthrate above it.
Death rates (the yearly number of deaths per 1.000 populations) in third world countries are also high relative to the developed nations. However, these poor nations have benefited from the progress of medicine for the masses and the campaigns against endemic disease. This was followed by fall in mortality, hence, the differences in death rate between developing and developed countries are substantially smaller than the corresponding differences in birthrates, as a result, the average rate of population growth is now about 2.0% per year in third world countries (2.3% excluding China), even there are certain African countries approaching and even exceeding 3% per annum. This is as compared to population growth of 0.5% per year in the industrialized world. According to UN projections, now a days four out of five inhabitants of the planet are coming from the developing countries.
These high birthrates have considerable socioeconomic implication. Children under the age of 15 make up almost 40% of the total population in these countries. This is as opposed to less than 21% of the total population in the developed countries. Thus in most developing countries, the active labour force has to support proportionally almost twice as many children as it does in richer countries. By contrast, the proportion of people over the age of 65 is much greater in the developed nations.
Both older people and children are often referred to as an economic dependency burden, This means that they are nonproductive members of society and therefore must be supported financially by a country’s labor force (usually defined as citizens between the ages of 15 and 64). The overall dependency burden (i.e., both young and old) represents only about one-third of the populations of developed countries but almost 45% of the populations of the less developed nations. Moreover, in the latter countries, almost 90% of the dependents are children, whereas only 66% are children in the richer nations.
We may conclude, therefore, that not only are third world countries characterized by higher rates of population growth, but they must also contend with greater dependency burdens than rich nations. The circumstances and conditions under which population growth becomes a deterrent to economic development is a critical issue.
2.2.4 High Unemployment and Underemployment
One of the principal manifestations of the low levels of living in developing nations is their relatively inadequate or inefficient utilization of labour in comparison with the developed nations. In the 1980s the unemployment and underemployment problem became increasingly pronounced and emerged as one of the most serious development problems.
Unemployment increased as a result of which employment has been growing during the past at a rate which is much slower than the rate of growth of the labor force. Stagnating economic growth, the austerity programs implemented as a result of the structural adjustment programs (SAPs) and high levels of rural-urban migration combined to precipitate this situation. For example, the ILO estimates that in the 1990s productive employment in sub-Saharan Africa increased by only 2.4 per cent per annum at a time when African labor force grown by a much faster rate of 3.3 per cent a year.
Unemployment in the developing world averaged 8% to 15% of the labor force. The unemployment rates in the 1980s for selected African countries were: Botswana 3.2%, Cote D’lvoire 20%, Ethiopia 23%, Kenya 16.2%, Nigeria 9.7%,Senegal 17.3%, Somalia 22.3%, Tanzania 21.6% Zambia 19%, and Zimbabwe 18.3% (ILO,1991).
The unemployed exhibit two important characteristics, namely their youthfulness and their high level of education. Youth (the age group of 15 to 24) unemployment rates are on the average twice higher than adult unemployment rates. Unemployment is also creeping up the educational ladder. When the underemployed are added to the openly unemployed and when ‘discouraged workers’- those who have given up looking for a job are added in, almost 35% of the combined urban and rural labor forces in poor nations is unutilized.
Given recent and current birthrates in most LDCs, their labor supply will be expanding rapidly for some time to come. This means that jobs will have to be created at equivalent rates simply to keep pace. Moreover, in urban areas rural urban migration is causing the labor force to grow at explosive annual rates of 5%, to 7% in many countries (especially in Africa). The prospects for coping effectively with rising levels of unemployment and underemployment and for dealing with the frustrations and anxieties of an increasingly vocal and educated but unemployed youth are frighteningly poor. The dimensions and implications of the unemployment and migration problem will be discussed in detail in part two of development economics.
2.2.5. Substantial Dependence on Agricultural Production and Primary-Product Exports
The vast majority of people in LDCs lives and works in rural areas. Over 65% are rurally based, compared to less than 27% in economically developed countries. Similarly, 58% of the labor force is engaged in agriculture, compared to only 5% in developed nations. Agriculture contributes about 14% of the GNP of developing nations but only 3% of the GNP of developed nations.
There is striking difference between the proportionate size of the agricultural population in Africa, which constitutes (68%) and south Asia (64%) versus North America (3%) but the average productivity of agricultural labour is almost 35 times greater in North America than in Asia and Africa combined. Although international comparative figures are often of dubious quality regarding both precision and methods of measurements, they, nevertheless, give us rough orders of magnitude. Even after making necessary adjustments for third world non marketed agricultural output, the differences in agricultural labour productivity would still be very sizable.
Agricultural productivity is low not only because of the large numbers of people in relation to available land but also because LDC agriculture is often characterized by primitive technologies, poor organization, and limited physical and human capital inputs, Technological backwardness persists because third world agriculture is predominantly non commercial peasant farming. In many parts of the world, especially in Asia and Latin America, it is characterized further by land tenure arrangements in which peasants rent rather than own third small plots of land. Tenure arrangements take away much of the economic incentive for out put expansion and productivity improvement.
Even where land is a bund ant, primitive techniques and the use of hand plows, drag harrows, and animal (oxen, and donkey) or raw human power necessitate that typical family holdings be not more than 5 to 8 hectares. In fact, in many countries, average holdings can be as low as 1 to 3 hectares. The number of people that this land must support both directly and indirectly often runs as high as 10 to 15 people per hectare. It is no wonder that efforts to improve the efficiency of agricultural production and increase the average yields of rice, wheat, maize, soybeans, and millet are now and will continue to be top-priority development objectives.
Dependence on primary exports- most economies of less developed countries are oriented toward the production of primary products. These primary commodities form their main exports. For example, for all non-Asian developing countries, these primary products account for over 70% of except in countries blesses with abundant supplies of petroleum and other valuable mineral resources and a few leading Asian exporters of manufactured goods, most LDC exports consist of basic foodstuffs, nonfood cash crops, and raw materials. In sub-Saharan Africa, primary products account for over 80% of total export earning.
Most poor countries need to obtain foreign exchange in addition to domestic savings in order to finance priority development projects. Although private foreign investment and foreign aid are a significant but rapidly declining source of foreign exchange, exports of primary products typically account for 60% to 70% of the annual flow of foreign currency into the developing world.
Even though exports are so important to many developing nations, LDC export growth (excluding oil exports) has barely kept pace with that of developed countries. Consequently, even in their best years, most non-oil-exporting developing nations have been losing ground to the more developed countries in terms of their share of total world trade. In 1950, for example, the LDCs; share was nearly 33% it has fallen in almost every year since and currently stands at around 20%.
Countries with the poorest 20% of the world’s population did even worse. By 1991, their share of world trade had fallen to 1.4%, while countries with the richest 20% had captured 85% of world trade. Most of the success in export promotion since 1970 has been captured by a few OPEC countries in the 1970s and the four Asian tigers; along with a few other NICs in the 1980s and 1990s the majority of LDCs have experienced a continuing decline in their share of world trade.
2.2.6. Imperfect Markets and Incomplete Information
Starting from the 1980s almost every developing country is moving toward the establishment of a market economy for many reasons. Many countries did so at the behest of the World Bank, which kept advocating “market-friendly” economic policies as preconditions for loans. There seemed to be a growing consensus that there had been too much government intervention in the workings of third world economies. This government intervention is sighted by many as the major cause of the problems in the poor nations. Hence, free market and unfettered competition are considered as the key economic growth.
But the presumed benefits of market economies and market-friendly policies depend heavily on the existence of institutional, cultural, and legal prerequisites that are taken for granted in the industrial societies. In many LDCs, these legal and institutional foundations are either absent or extremely weak. They include:
2.2.7. Dominance, Dependence and Vulnerability in International Relations
For many less developed countries, a final significant factor contributing to the persistence of low levels of living, rising unemployment, and growing income inequality is the highly unequal distribution of economic and political power between rich and poor nations, These unequal strengths are manifested in economic and non economic aspects of the relationships. Economically, the dominant powers of rich nations control the pattern of international trade. They have also the ability to dictate the terms where by technology. foreign aid and private capital are transferred to developing countries.
Other equally important aspects of the international transfer process can serve to inhibit the development of poor nations. One subtle but no, nevertheless, significant factor has been the transfer of first world values, attitudes, institution, and standards of behavior to third world nations. Examples include the colonial transfer of often inappropriate educational structures, curricula, and school system, the formation of western-style trade unions, the organization of health services in accordance with the curative rather than preventive model, and the importation of inappropriate structures and procedures for public bureaucratic and administrative systems.
Of even greater potential significance may be the influence of rich-country social and economic standards on developing country salary scales, elite lifestyle, and general attitudes toward the private accumulation of wealth. Whether there are market-friendly policies or extensive government intervention, such attitudes can often lead to corruption and economic plunder by a privileged minority.
Finally, the penetration of rich-country’s attitudes, values, and standard also contributes to a problem widely recognized and referred to as the international brain drain. Brain drain is the migration of professional and skilled personnel, who were often educated in the developing country at great expense, to the various developed nations. Examples include doctors, nurses, scientists, engineers, computer programmers, and economists.
The net effect of all these factors is to create a situation of vulnerability among third world nations in which forces largely outside their control can have decisive and dominating influences on their economic and social well being .