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The Meaning of Economic Development

The Orthodox Perception or the Mainstream School of Thought; (Diffusion Model)
The orthodox perceptions of the concept of economic development can be summarised as follows:

(i) To develop, the country must institute capitalism, as the market mechanism (market forces) constitute the best resource allocative device. This implies that government’s intervention in the economy is rejected.
(ii) Economic development is synonymous with economic growth and therefore, is the achievement of yearly increases in the per-capita output of goods and services. This implies that increases in GNP (Gross National Product), is the indicator of economic growth and development.
(iii) Increase in the per capita income to a certain level, for example, 5% to achieve a self-sustaining growth.
(iv) To achieve this, there must be a massive rise in the investment rate and the growth of national income. Consequently the development process breeds the process of capital formation and accumulation. It is also related to the spread to modernise backward and traditional areas as well as the transformation of cultural and traditional values into modern cultural and behavioural values.
(v) Industrialisation is the engine that propels the process of economic growth and development.
(vi) In a situation where there is shortage of domestic capital, a primary catalyst of development is the diffusion of advanced technology and capital inflows from the more advanced countries.
(vii) To achieve this economic development requires political stability and limited government intervention to attract foreign capital and technology.

When economic development has not occurred, it must be that something interfered with the process that is, something is hindering the automatic process of the ‘market’. In this way, this paradigm views the lack of economic development in a country to consist of an analysis of the obstacles to development. Two broad categories of obstacles were distinguished:

1. Non-rational behaviour – i.e. non maximising behaviour. This usually results from cultural factors, lack of drive and spirit of enterprise and from social and psychological constraints. Because of these constraints, people behave in ways that perpetuate traditional forms of an economy and thus retard development.
2. Obstacle to the free working of the market-created by government regulation and its participation in the economy. These obstacles hamper the automatic process of development which could have taken place. For a country to attain economic development these obstacles must be removed.

Suggested Strategies

(i) Planning, particularly indicative planning.
(ii) Growth with Equity – This strategy shows concern for some of the problems that are not taken care of by the growth process. For example, unemployment and socio-economic inequalities proponents of this strategy believe that the less developed countries can improve living standards of their people, without social revolutions. They often cite the examples of Taiwan, Hong-Kong, Japan, Israel, Singapore and Sri-Lanka.

In terms of specific strategies, those who argue for growth with equity suggest the following:-

a. Employment generation.
b. Meeting basic needs (shelter, food, cloths).
c. Human resource development.
d. Agricultural development.
e. Integrated rural development.
f. Anew international economic development.

The Radical Paradigm
It regards economic development as a means, not an end, for the end is the enhancement of what people value. Their views can be summarised as follows:

(i) Economic development is liberation from oppression and exploitative relationships, both internally and externally.
(ii) The control and use of the economic surplus of the society. These are the keys to power and control of development.

Thus for the purpose of this level, we shall accept Akpakpan’s (1987) stance which sees economic development as a process of improvements in the general welfare of the entire society usually manifested in desirable changes in the various aspects of life of the society as follows:

1. A reduction in the level of unemployment.
2. A reduction in the extent of personal and regional inequalities.
3. A reduction in the level of absolute poverty.
4. A rise in real output of goods and services and improvement in the techniques of production.
5. Improvements in literacy, health services, housing conditions and government services.
6. Improvements in the level of social and political consciousness of the people.
7. Greater ability to draw on local resources to meet local need – becoming self-reliant.