Eco. 361–16-8-2021 (Online Discussion Quiz 2—Some Vital Questions on Development 1)

Name :Igbokwe Cynthia Esther
Reg no : 2016/234606
Dept: Economics

Question 1: What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

Answer:
1. For the last two decades or so, the developing countries have been under great pressure from the developed countries and the international institutions that they control – such as the International Monetary Fund, the World Bank, the World Trade Organization – to adopt a set of ‘good policies’, especially free trade, and ‘good institutions’, such as strong patent law, in order to foster their economic development.
a. The historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now recommend to, or even force upon, the developing countries.
b. Virtually all of today’s developed countries used tariff protection and subsidies to develop their industries, and in the earlier stages of their development, they did not even have such ‘basic’ institutions as democracy, central banks, patent law, or professional civil services.
c. Given that the adoption of ‘good policies’ and ‘good institutions’ has failed to generate the promised acceleration of economic development in the developing world, and has in some cases even led to economic and social collapses, a radical re-thinking of the development orthodoxy is required.
d. Above all, the conditions attached to bilateral and multilateral financial assistance to developing countries should be radically changed, on the recognition that the orthodox recipe is not working, and that there can be no single recipe of ‘best practice’ policies that everyone should use.
2. Second, the WTO rules should be re-written so that the developing countries can move actively using tariffs and subsidies for industrial development.
3. Third, improvements in institutions should be encouraged, but this should not be equated with imposing a fixed set of today’s – not even yesterday’s – Anglo-American institutions on all countries; nor should it be attempted in haste, as institutional development is a lengthy and costly process.

ii) The initial condition above are totally different from what the developed countries faced on the eve of their industrialization and this are what they did below:
Characteristics of industrialization include economic growth, the more efficient division of labor, and the use of technological innovation to solve problems as opposed to dependency on conditions outside of human control.

Question 2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development ?
Answer:
The term “Economic Institutions” refers to two things:
1. Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. The Internal Revenue Service (the IRS—the government tax-collection agency), the U.S. Federal Reserve (the government producer of money), the National Bureau of Economic Research (a private research agency) are all examples of economic institutions.
2. Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.
Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen’s instinct-oriented dichotomy between technology on the one side and the “ceremonial” sphere of society on the other.(Wikipedia)
ii) a. Institutions conducive to economic development reduce the costs of economic activity. The costs include transaction costs such as search and information costs, bargaining and decision costs, policing and enforcement costs. They lower transaction costs by providing common legal frameworks (e.g. contracts and contract enforcement, commercial norms and rules), and they encourage trust by providing policing and justice systems for the adherence to common laws and regulations.
b. institutions which are conducive to development ensure greater self-expression, allow the free flow of information and encourage the formation of associations and clubs. These form prosperous social relationships, which are conducive to greater economic interaction by increasing levels of trust and wider availability of information (Putnam, 1993). They allow greater sharing of resources through democratic institutions and the use of the state to reduce the risk attached to economic activity.
c. There is wide-ranging evidence that institutions matter a great deal in determining the level of economic development of a country. Cross-country analyses use indicators such as degree of protection of property rights, the rule of law, and civic liberties and find that they are strongly correlated to economic performance.

Question 3. How can the extremes between rich and poor be so very great?
Answer:
1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.
2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments under tax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
3. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.
4. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.
5. Inequality is sexist. With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity.
Question 4. What are the sources of national and international economic growth?
Answer:
a) Sources of national and international economic growth:
1. Human Resources: Labor inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labor inputs—the skills, knowledge, and discipline of the labor force—is the single most important element in economic growth. A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labor.
2.Natural Resources: The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry. Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries. Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labor and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.
3.Capital Formation: Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation. IN this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.
4.Technological Change and Innovation: In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other. Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.
Technological change denotes changes in the processes of production or introduction of new products or services. Process inventions that have greatly increased productivity were the steam engine, the generation of electricity, the internal-combustion engine, the wide-body jet, the photocopier machine, and the fax machine. Fundamental product inventions include the telephone, the radio, the airplane, the phonograph, the television, and the VCR.
The most dramatic technological developments of the modern era are occurring in electronics and computers, where today’s tiny notebook computers can outperform the fastest computer of the 1960s. These inventions provide the most spectacular examples of technological change, but technological change is in fact a continuous process of small and large improvements, as witnessed by the fact that the United States issues over 100,000 new patents annually and that there are millions of other small refinements that are part of the routine progress of an economy. For the most part, technology advances in a quiet, unnoticed fashion as small improvements increase the quality of products or the quantity of output.

Question 4i. Why do some countries make rapid progress toward development while many others remain poor?
When considering nations, economists often use gross domestic product (GDP) per capita as an indicator of average economic well-being within a country. GDP is the total market value, expressed in dollars, of all final goods and services produced in an economy in a given year. In a sense, a country’s GDP is like its yearly income. So, dividing a particular country’s GDP by its population is an estimate of how much income, on average, the economy produces per person (per capita) per year. In other words, GDP per capita is a measure of a nation’s standard of living. For example, in 2016, GDP per capita was $57,467 in the United States, $42,158 in Canada, $27,539 in South Korea, $8,123 in China, $1,513 in Ghana, and $455 in Liberia

NAME: NWOKE EBERECHI ANGEL
REG NO: 2018/251570
DEPT: ECONOMICS

1.) Governments can advance development even with low levels of government spending.
* Today’s developing economies need to focus on building fiscal and market institutions before rising spending needs—and not after they materialize.
* Government spending by today’s developing economies is likely to increase, but there is a choice to make to the extent of redistribution and government services.
* Government spending has been countercyclical since World War II in almost all advanced economies, even with the sustained trend of spending increases
2.) The term “Economic Institutions” refers to two things:
Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country and Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions. Institutions determine the costs of economic transactions: they spur development in the form of contracts and contract enforcement, common commercial codes, and increased availability of information, all of which reduce the costs of transactions, risk, and uncertainty.

3.) It’s simple. The rich get richer because money makes money. When you have money to invest, you can multiply it. The poor don’t necessarily get poorer unless they overspend or face a crisis, but they stay poor because they don’t have money surplus to their needs that they can put into an investment. Having no reserves or surplus income, though, they may become poorer if they face heavy medical bills, if accident or illness disrupts their income-earning capacity, or if they face a crisis of some kind. The rich, conversely, have both money to invest and money to pay for expensive legal and insurance protections, expert investment advice, help with tax reduction and avoidance, etc. Even the money to access better health care, to eat better and access exercise programs and mental health counselling gives people a huge advantage in overcoming the obstacles to improving wealth. The rich mix with people who are inventing or creating income-generating enterprises and give them first right of refusal to invest in promising ventures and inside knowledge of opportunities.
The poor are risk averse, because they understand that a financial loss might mean losing their bread and butter, while for the rich man it just means a slightly lower sum on his bank statement. The poor are generally financially illiterate, and therefore don’t know how to make money, nor, in many cases, do they understand the real costs of borrowing or how to make quality and value comparisons. Advertising drives spending that is in the interests of the rich and middle class, but adverse to the interests of the poor, and emotional needs drive foolish spending that delivers short-term relief or pleasure but in the long term reduces the chances of improving the circumstances of a poor person.
The poor are also typically taxed much more heavily in proportion to their wealth and assets because indirect taxes impact most heavily on those who have to spend all of their income, and the poor have no access to tax reduction or avoidance schemes used by the upper middle class and upper class.
Another factor, in many developed countries, is welfare systems designed, either deliberately or otherwise, to suppress. Earning a little can make people worse off than sitting back on welfare, so they don’t strive.
Ultimately, the answer is education, but that’s also a catch because the poor often can’t access education due to cost or are not psychologically equipped to respond positively. Then again, the upper class resists making financial education available to the poor, because the financially illiterate are much easier to exploit.
The poor may be poor because their income-earning capacity is restricted by illness or disability. Disability is a broad term, and often disabilities are not visible. A person may have an intellectual disability or a psychological disability that society generally would not recognize as a disability, but it never-the-less may heavily restrict their income-earning capacity and also their money-management skills. Even being heavily risk averse as a result of past hardship is a psychological disability that can keep people poor. Lack of trust in the system and those in power is a psychological disability that restricts capacity to improve wealth. Such lack of trust can be a result of suffering social or economic injustice, deprivation in childhood – particularly deprivation of affection – or strong influence from, for example, parents who suffered serious injustice or persecution.
Another factor that makes the poor poorer and the rich richer is corruption and abuse of commercial power. We have laws to theoretically restrict monopolistic business practice because they are harmful to the economy, but we don’t have sufficient restrictions to curb abuse of commercial or legal power that may prevent a small business succeeding or require a poor person to hold permits or qualification certificates that are costly to obtain before he can ply his trade. A person can be very capable of performing a task, yet locked out by legal or commercial requirements. The misuse of legal process and the high cost of access to legal protection and insurance is also a factor keeping the poor down, although these obstacles present more often to those who have had some degree of success in escaping poverty and are striving for greater success.
Generally speaking, in developed nations the majority of the poor have the opportunity to improve their situation substantially, but not the knowledge or the will. And that suits the agenda of the middle and upper class very nicely, because they can exploit the poor in various ways: paying them unfairly for their labour; selling them things that they don’t need and shouldn’t be buying but are induced or pressured to believe will make their life better; and lending them money on harsh or unfair terms. All of these actions make the rich richer and may make the poor poorer. They also, however, contribute to making the nation as a whole more affluent, which ultimately improves living conditions for the poor even if it makes them poorer in relativity to the rich. If there were suddenly no poor to exploit, economic growth would recede and the entire nation would suffer. Equally, if there were no middle class, there would be much less enterprise and innovation, and if there were no wealthy, there would be a capital deficiency restricting growth.
Ultimately, the capitalist economy requires a strong economic class system. Part of the cause of the economic malaise currently presenting problems for developed nations is the attack on the middle class. But it won’t be resolved by attacking the rich, as many of the working and middle class believe. Nor will it be resolved by handing out more to the poor. The most efficient economic system is one underpinned by a strong progressive income tax system, modest indirect taxes targeted mostly at luxury items, monetary transactions, and high asset ownership (particularly property), a robust welfare system, and plenty of powerful incentives to strive. Sadly, many governments are going in the opposite direction: flattening income tax at the high end (but not sufficiently at the lower to middle end); punishing battlers harshly for saving and investing; and structuring welfare systems that reward people for manipulating to access welfare and punish endeavour to rise above welfare dependency.
In less developed countries, the problem may be different, because in many third-world nations the primary reason for the rich getting richer and the poor getting poorer is corruption. The poor man wants to take work in a neighbouring community because there is a better opportunity there, but he has to pay a king’s ransom for a permit. He wants to access water for cooking and cleaning, but the water source is controlled by a rich man and he has to pay a huge tax for access. To some degree, corruption exists everywhere, but more so in third world nations.

4.) Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth. A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.
Natural Resources:
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries. Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.
Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.
Accumulating capital, as we have seen, requires a sacrifice of current consumption over many years. Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists believe that the low national savings rate in the United States—only 4 percent of output in 1996— poses a major economic problem for the country. When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples.
All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure Technological Change and Innovation:
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.
Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.

NAME: ANI CHARITY CHIEGE
DEPARTMENT: ECONOMICS EDUCATION
COURSE CODE: ECO 361
COURSE TITLE: DEVELOPMENT ECONOMICS
ANSWERS
NO. 1
Development is concerned with the economic, social, cultural and political requirement for effecting rapid structural and institutional transformation of entire society in a manner that will most effectively bring the fruit of the economic progress to the broadest segements of their population.
Therefore, development can be seen as a complex multi-dimensional process involving improvement in human well being and standard of living of people.
According to “Amartya Sen”, Development requires removal of all or major sources of unfreedom, poverty as well as training, poor economic opportunity as well as systematic social deprivation neglect of public facilities as well as intolerance or over activities of repressive states.

NO. 2
The historical record of an economical progress in the nown developed world.
What the developing countries need they argue is the good economic policies and institution that the developed countries themselves used in order to develop. Such as liberalization of trade and investment and strong patent law. Though they debate on whether such policies and institution should be imposed on other developing countries and if they will be suitable to the developing countries.
Widespread use of tariffs and subsidies, almost all of today rich countries used tariffs protection and subsidies to develop their industries in the earliest stages of their development. It is particularly important to note that Britain and the USA, the two countries that are supposed to have reach the summit of the world economy through free-market, free trade policy, are actually the ones that most aggressively used protection and subsides.
But this is not all about “getting the story history right” but one of allowing the developing countries to make more informed choices. However, this strategic choice should be made in the full knowledge that historically the majority of the successful countries did the opposite in the past when they faced the same challenges from more advanced countries, which the developing countries faced now.
NO. 3
Economic institutions are those financial institutions that control the money supply and general credit available in the economy. Here, the central bank have the focal point of the monetary and banking system of the country. In the Nigeria economy, CBN USSD some monetary policies to execute and help the economy (i.e.) (1) Open market operation (OMO). This include the major tool of monetary policy and control policy in nigeria where the market institution exist for its use.
The CBN sells securities to Nigeria and public which includes the commercial bank which who made payment with shares draw from the respective bank.
Discount rate: the discount rate is when the CBN raise the discount rate to increase the cost of borrowing which in turn causes the commercial bank to increase their interest rate and cut down their lending rate. Decrease in interest rate will reduce the demand for bank loan. It is used to discourage borrowers and lenders.
NO. 4
How can the extremes between the rich and the poor be so very great?
This is because the rich invest in liabilities while the rich invest in assets. Liabilities takes money away from you while assets grow your net worth.
Poor people think in the moment and look for easy fixes like playing the lottery. Example, had a conversation with someone who ended up with money from inheritance when a parents passed away. He feels like to go on a few vacations and purchase a pet both of which are liabilities.
It’s not that the rich don’t purchase liabilities they do but they typically use passive income from their investments for that.

NO. 5
Sources of National and international growth
1. Human resources: many economist believes that the quality of labour inputs – the skills, knowledge and discipline of the labour force is the single most important element in economic growth. This is because capital goods can be effectively used and maintained only by skilled and trained workers.
2. Natural Resources: The important resources here are land, oil and gas, forest, water and mineral resources
3. Capital formation: tangible capital includes structures like roads and power plants, equipments like tracks and computers and stock of inventories.
4. Technological change and innovation: Technological advance has been a vital ingredient in the rapid growth of living standards.
NO. 6
Is underdevelopment an internally or externally caused phenomenon
Underdevelopment means having low level of economic productivity and technological sophistication within contemporary range of possibility developing. It refers to a low level of development characterized by low real per capital income.
Underdevelopment is viewed as an externally induced process which is perpetuated by a small but powerful domestic elite who form an alliance with the international capitalist system. The development of underdevelopment” is therefore systematic and path dependant.

NO. 7
What constraints most hold back accelerated growth depending on local conditions?
1. Joint family system: in many countries, all the members of the family lives together. Few of them work hard while the others do nothing, except quarrelling with one another. Hence reduction in national products.
2. Literacy: the literacy rate is very low in the under developed countries. It reduces the rate of economic growth.

Gwom paul Jacob
2018/243820
Economics
An Assignment
6.Which are the most influential theories of development, and are they compatible? Is underdevelopment an internally (domestically) or externally (internationally) induced phenomenon?
The theory looks at which aspects of countries are beneficial and which constitute obstacles for economic development. The idea is that development assistance targeted at those particular aspects can lead to modernization of ‘traditional’ or ‘backward’ societies. Scientists from various research disciplines have contributed to modernization theory. Sociological and anthropological modernization theory The earliest principles of modernization theory can be derived from the idea of progress, which stated that people can develop and change their society themselves. Marquis de Condorcet was involved in the origins of this theory. This theory also states that technological advancements and economic changes can lead to changes in moral and cultural values. The French sociologist Émile Durkheim stressed the interdependence of institutions in a society and the way in which they interact with cultural and social unity. His work The Division of Labor in Society was very influential. It described how social order is maintained in society.

7.What constraints hold back accelerated growth, depending on local conditions?

The pace of development can be slowed down, or even reversed, by various factors affecting the economy. Some of these constraints can be dealt with through economic and social policy, while others may be difficult to resolve.
The constraints on development include:
Inefficiencies within the micro-economy.
Imbalances in the structure of the economy.
A rapidly growing or declining population.
Lack of financial capital.
Lack of human capital.
Poor governance and corruption.
Missing markets.
Over-exploitation of environmental capital.
Barriers to trade.
Inefficiency
Productive inefficiency
Producers in less developed countries may not be able to produce at the lowest possible average cost. This may be because of the failure to apply technology to production, using obsolete technology, or because of the inability to achieve economies of scale. Opening up the economy to free trade may help reduce this type of inefficiency, and encourage technology transfer.

Allocative inefficiency
When developing economies remain closed to competition, when they are dominated by local monopolies, or when production is in the hands of the state, prices might not reflect the marginal cost of production. Opening up the economy to free trade, and privatisation of industry may help promote a more competitive environment, and reduce allocatively inefficiency.

‘X’ Inefficiency

X inefficiency can arise when there is a lack of competition in a market. It is primarily associated with inefficient management, where average cost is above its minimum. Competition is limited in many developing economies, and resources are often allocated by government. This means that inefficient management is common.

Social inefficiency

Social inefficiency exists when social costs do not equate with social benefits. This can arise when externalities are not taken into account. For example, under-spending on education creates social inefficiency. Some of these inefficiencies are the result of the economy not allowing market forces to operate, while others are the result of market failures. Negative externalities like pollution are often largely uncontrolled in less developed parts of the world, and this imposes a constraint on the sustainability of development.

Imbalances

Not all sectors of an economy are capable of growth. For some developing economies, too many scarce resources may be allocated to sectors with little growth potential. This is especially the case with the production of agriculture and commodities.
In these sectors, there is little opportunity for economic growth because the impact of real and human capital development is small, and marginal factor productivity is very low. Failure to allocate scarce resources to where they are most productive can impose a limit on development.

Population

Population is a considerable constraint on economic growth, either, and most commonly, because there is too a high rate of population growth for the country’s current resources, or because the population is growing too slowly or declining as a result of war, famine, or disease. Many economists see population growth as the single biggest issue facing developing countries. The line of argument runs as follows:
At first, the take-off phase of development and economic growth creates positive externalities from the application of science and technology to healthcare and education and this leads to a decline in the death rate, but no decline, or even an increase, in the birth rate. Over time life expectancy rises, but the age distribution remains skewed, with an increasing number of dependents in the lower age range. As a result, the number of consumers relative to producers increases.
The short-term gains from growth are quickly eroded as GDP per capita actually falls, hence, only when the birth rate falls will GDP per capita rise. In this case, there is a positive role for government in terms of encouraging a lower birth rate.

Lack of real capital

Many developing economies do not have sufficient financial capital to engage in public or private investment. There are several reasons for this, including the following:

Low growth

Growth is not sufficient to allow scarce financial resources to be freed up for non-current expenditure.

Lack of savings

A general lack of savings is often seen as the key reason why financial capital is in short supply.  High interest rates to encourage saving will, of course, deter investment.

Debts

In the case of public sector funding, spare public funds are often used to repay previous debts, so there are fewer available funds for capital investment by government. This is often called the problem of debt overhang. The recent sovereign debt crisis has highlighted the problems faced by countries with large public debts, and how such debts limit the ability of government to inject spending into a developing economy.

Crowding out

In addition, because many developing economies have large public sectors, private investment may be crowded out by public sector borrowing. This means that a government may borrow from local capital markets, if indeed they exist, which causes a relative shortage of capital and raises interest rates.

Absence of credit markets

Finally, there is an absence of credit markets in many developing economies, and this discourages both lenders and borrowers. Credit markets often fail to form because of the extremely high risks associated with lending in developing countries. This is one reason for the importance of micro-finance initiatives commonly found across India, Pakistan and some parts of Africa.

Corruption

Some developing economies suffer from corruption in many different sectors of their economies. Corruption comes in many forms, including the theft of public funds by politicians and government employees, and the theft and misuse of overseas aid. Bribery is also alleged to be a persistent threat, and tends to involve the issuing of government contracts. In some developing economies, bribery is the norm, and this seriously weakens the operation of the price mechanism.

Inadequate financial markets
Missing markets usually arise because of information failure. Because of asymmetric information lenders in credit markets may not be aware of the full creditworthiness of borrowers. This pushes up interest rates for all borrowers, even those with a good credit prospect.
Low risk individuals and firms are deterred from borrowing, and a lemons problem arises, with only high risk individuals and firms choosing to borrow. Thus, the credit market in developing economies is under-developed or completely missing, with few wishing to borrow, and with those who wish to lend expecting high loan defaults and hence charging very high interest rates.

Insurance markets
In a similar way to credit markets, insurance markets may be under-developed, with few insurers willing to accept ‘bad’ risks. Insurance charges (premiums) will be driven up, and potential entrepreneurs may be deterred from taking out insurance, or will be unwilling to take uninsured risks. The result is that new businesses may fail to develop.

The principal – agent (landlord – tenant) problem
In agriculture in particular, the principal-agent problem existing between landlord (principal) and worker (agent) creates asymmetric information and moral hazard. Workers may not bother to work hard. With low pay rates, the risks of being caught ‘shirking’ are small – the loss of pay is not a significant enough incentive to work hard and efficiently.

Absence of property rights
In many developing economies it is not always clear who owns property, especially land. Given this there is no incentive to develop the land because of the free-rider problem.

Absence of a developed legal system
In many developing economies there is an absence of a developed or appropriate legal system in the following areas:

Property rights are not protected
The right to start a business is limited to a small section or a favoured elite

Consumer rights are not protected

Employment rights do not exist

Competition law is limited or absent

Under-investment in human capital

Human capital development requires investment in education. Education is a merit good, and the long term benefit to society is often considerably under-perceived, and therefore, under-consumed.
For many in developing economies, the return on human capital development is uncertain compared to the immediate return from employment on the land. Therefore, there is little incentive to continue in full-time education.
The solution is to reduce information failure by promoting the benefits of education and using the market system to send out effective signals to encourage people to alter their behaviour. For example, loans, grants and aid can be made conditional upon funds being allocated to provide ‘free’ education and books, or to fund teacher training, or to raise the wages of teachers so that more will train in the future.

Over exploitation of environment and non-renewable resources

The long term negative effect of the excessive use of resources may be less clear than the short term benefit. This means that there is a tendency for countries not to conserve resources. However, this can have an adverse effect on growth rates in the future.

Too many resources

Evidence suggests that some countries with the greatest scarce resources do not necessarily exploit them effectively, and may fail to develop fully. This might be because over-abundance creates a kind of Dutch disease – a complacency which can exist when a country has high quantities of valuable resources. This means that there is a tendency to squander any comparative advantage, and the potential benefits of the resources are lost.
Over-abundance creates a disincentive to be efficient – the reverse of what has happened to Japan, which has very limited oil reserves, and needs to be efficient in the production of manufactures to enable it to import the oil it needs.
One issue is that the allocation of property rights may be difficult when resources are so vast. Furthermore, there are likely to be inefficiencies associated with government failure as government attempts to dominate the economy and the exploitation of resources.

Protectionism

One significant constraint on the economic prosperity of less developed countries is the protectionism adopted by some developed one. Developed counties can impose tariffs, quotas, and other protectionist measures individually, or more commonly as a member of a trading bloc. 8.How can improvements in the role and status of women have an especially beneficial impact on development prospects?Improvement in the role and status of women has been beneficial for the development prospects as per the following reasons:

Women as caretakers: Women are the primary caretakers of the children and elders in every country. International studies demonstrate that when the economy and political organization of a society change, women take the lead in helping the family adjust to new realities and challenges.

Women as Educators: The contribution of women to a society’s transition from pre-literate to literate likewise is undeniable. Basic education is key to a nation’s ability to develop and achieve sustainability targets. Research has shown that education can improve agricultural productivity, enhance the status of girls and women, reduce population growth rates, enhance environmental protection, and widely raise the standard of living.

Improvement in the role and status of women has been beneficial for the development prospects as per the following reasons:

Women as caretakers: Women are the primary caretakers of the children and elders in every country. International studies demonstrate that when the economy and political organization of a society change, women take the lead in helping the family adjust to new realities and challenges.

Women as Educators: The contribution of women to a society’s transition from pre-literate to literate likewise is undeniable. Basic education is key to a nation’s ability to develop and achieve sustainability targets. Research has shown that education can improve agricultural productivity, enhance the status of girls and women, reduce population growth rates, enhance environmental protection, and widely raise the standard of living.

Traditionally, women were considered to be full-time homemakers. Their responsibilities were to take care of their children and family. They didn’t have any role in the household earning. Over the years, the roles of women have changed. Here we are going to discuss it.
Child-bearing role
Women now bear less number of children than they used to before. Most families now have one or two children. They even give birth to a child at a more matured age. Women now have children even without marriage.
Education
More women are now getting literate and they are also pursuing higher education. This is creating an opportunity for them to work. They are also playing role in family decision making.
Outside activities
Women are no longer staying home full-time. They are going to the market for doing grocery shopping, paying bills and doing all the works that only men used to do before. They are getting more involved in the outside works.
Workplace
Women have entered the workplace. They also earn for their family just like men. However, the percentage of women in the workplace is still less than that of men as women have to take the major household responsibilities. The percentage of the part-time job is more in case of women. Women are still often seen in the caring or teaching sector. But now more women are entering the male-dominated sectors like politics, the legal system, etc. as well. More women are occupying senior management positions.
Fighting for rights
Women now have a voice, unlike before. Families are no more male-dominated. Like men, women also make major life decisions. Women have stood against dowry and domestic violence. Even in the workplace, they fight against sexual abuse and equality. Child marriage is being stopped in many communities.
Men now play a role in child raising and household activities just like women. Both men and women now share their responsibilities both home and outside. Women now stand against any discrimination and torture. There have been lots of gender-issue related movements and many social organizations now fight for women’s rights. Women are now getting power even in rural areas. In many countries now women are the head of the state. Education has made women independent and they are no longer dependent on men to lead their lives.
Business laws have changed to allow more women in the workplace and giving them a comfortable environment to work in. Women can now stand tall like men and get equal opportunities in everything.

9.What are the causes of extreme poverty, and what policies have been most effective for improving the lives of the poorest of the poor?

1. Increase rate of rising population:
In the last 45 years, the population has increased at the whopping rate of 2.2% per annum. An average of approx. 17 million people are added every year to the population which raises the demand for consumption goods considerably.
2. Less productivity in agriculture:
In agriculture, the productivity level is very low due to subdivided and fragmented holdings, lack of capital, use of traditional methods of cultivation, illiteracy etc. The very reason for poverty in the country is this factor only.
3. Less utilization of resources:
Underemployment and veiled unemployment of human resources and less utilization of resources have resulted in low production in the agricultural sector. This brought a downfall in their standard of living.
4. A short rate of economic development:
In India, the rate of economic development is very low what is required for a good level. Therefore, there persists a gap between the level of availability and requirements of goods and services. The net result is poverty.
5. Increasing price rise:
Poor is becoming poorer because of continuous and steep price rise. It has benefited a few people in the society and the persons in lower income group find it difficult to get their minimum needs.
6. Unemployment:
One of the main causes of poverty is the continuous expanding army of unemployed in our country. The job seeker is increasing in number at a higher rate than the expansion in employment opportunities.
7. Shortage of capital and able entrepreneurship:
The much-required capital and sustainable entrepreneurship play a very important role in accelerating the growth. But these are in short supply making it difficult to increase production significantly.
8. Social factors:
Our country’s social set up is very much backward with the rest of the world and not at all beneficial for faster development. The caste system, inheritance law, rigid traditions and customs are putting hindrances in the way of faster development and have aggravated the problem of poverty.
9. Political factors:
We all know that the East India Company started lopsided development in India and had reduced our economy to a colonial state. They exploited the natural resources to suit their interests and weaken the industrial base of Indian economy. Hence, the planning was of immense failure to handle the problems of poverty and unemployment.
10. Unequal distribution of income:
If you simply increase the production or do a checking on population cannot help poverty in our country. We need to understand that inequality in the distribution of income and concentration of wealth should be checked. The government can reduce inequality of income and check the concentration of wealth by pursuing suitable monetary and price policies.
11. The problem of distribution:
The distribution channel should be robust in order to remove poverty. Mass consumption of goods and food grains etc. should be distributed first among the poor population. Present public distribution system must be re-organised and extended to rural and semi-urban areas of the country.
12. Regional poverty:
India is divided by the inappropriate proportion of poor in some states, like Nagaland, Orissa, Bihar, Nagaland, etc. is greater than the other states. The administration should offer special amenities and discounts to attract private capital investment to backward regions. 
13. Provision for minimum requirements of the poor:
The government should take care of the minimum requirements, like drinking water, primary medical care, and primary education etc. of the poor. 
Means-tested welfare benefits to the poorest in society; for example, unemployment benefit, food stamps, income support and housing benefit.
Free market policies to promote economic growth – hoping that rising living standards will filter down to the poorest in society.

10.Rapid population growth threatening the economic progress of developing nations? Do large families make economic sense in an environment of widespread poverty and financial insecurity?

11. Why is there so much unemployment and underemployment in the developing world, especially in the cities, and why do people continue to migrate to the cities from rural areas even when their chances of finding a conventional job are very slim? The reason why there is so much unemployment and underemployment is because of the following: 1.Lack of the Stock of Physical Capital:2. Use of Capital Intensive Techniques:3. Inequitable Distribution of Land:4. Rigid Protective Labour Legislation. 5. Neglect of the Role of Agriculture in Employment Generation.6. Lack of Infrastructure: In the world, three out of four people living in poverty and suffering from hunger live in rural areas. This data, released by FAO, emphasizes the extent of rural poverty, caused by factors such as lack of employment and opportunities, limited access to services and infrastructure, and conflicts over natural resources and land. Added to these circumstances are the adverse effects of climate change, which aggravate alarming phenomena such as the exhaustion of natural resources, deforestation, soil erosion, a decline in crop yields, or the loss of agrobiodiversity.
This set of unfavorable conditions causes significant migratory flows to cities, especially of young people seeking new income and employment opportunities. Rural-urban migration in Central America has contributed to the population growth of cities, and the region is today the second in the world to register the highest and fastest urbanization rates, with an average growth rate of 3.8 during the last two decades. Likewise, according to World Bank forecasts, by 2050 the region will have doubled its urban population, mainly due to rural migrants who come to the cities in search of economic opportunities and access to basic services.
 
Challenges
The migratory movement towards urban areas implies a transformation process that causes a decrease of income generation and employment in agriculture. This leads to less labor participation in the primary sector, which can cause a reduction in agricultural production and threaten food security in some territories.
Thus, for example, the countryside may lack a young and dynamic workforce, also registering an ageing population, which can compromise a sufficient and varied food production. In rural areas of Mexico, for example, the migration of young people, and the consequent decrease in the fertility rate, has caused a variation among the population groups: while in 2005 there were 21 adults over 60 years  for every 100 children, predictions indicate that by 2051 there will be 167 older adults for every 100 children.
Likewise, the increase in urban poverty responds to the abundant migratory flows to cities: migrants may not find work in urban areas (although the search for employment opportunities was the reason for mobilizing),and this generates a vicious circle of scarcity and needs.
The high percentages of informal work in the region also indicate a lack of social protection, which aggravates the situations of poverty and precariousness of internal migrants. Another factor that highlights the difficult living conditions of rural migrants in cities is that, due to limited economic resources, this population often lives in informal settlements, which are home to around 29% of the urban population in Central America. These settlements are usually located in areas that are vulnerable to natural disasters, such as floods, landslides and earthquakes. This shows how rural migration, also fostered by the effects of climate change, needs special attention to avoid a reproduction of existing vulnerabilities.
Furthermore, while conflicts over natural resources can provoke rural migration, migrants find new forms of violence in cities. In the Northern Triangle of Central America, violence is a mainly urban phenomenon, aggravated by causes such as poverty, segregation, inequality and lack of opportunities. Farmers in poverty conditions and unemployed people can be new victims of criminal groups in cities. This situation can cause new migratory flows of people who migrated to the cities and, as they do not find an adequate situation, they decide to migrate abroad.
Hence, rural-urban migration has crucial implications not only for rural, but also urban development and sustainability. For example, current challenges such as urban overpopulation or the loss of traditional crops and agrobiodiversity depend directly on rural migratory flows. To resolve these issues, it is necessary to draw attention to their roots: the countryside and migration.
 
Opportunities
The FAO report also highlights the positive aspects of rural migration, which can reduce pressure on local labor markets and natural resources or improve wages in the agricultural sector. Remittances from international migrants can also facilitate investments in productive economic activities, generate employment, and increase private consumption.
Along the same lines, rural migration (historically with a greater male presence), the decline in the fertility rate and a growing number of households headed by women have produced a feminization of agriculture, especially in Mexico and largely in Central America . This phenomenon has encouraged the economic and social empowerment of rural women and in some cases the reduction of gender stereotypes that limited their functions. For example, women have started to take over agricultural tasks previously only performed by men, such as preparing the field and growing food for trade.
However, on the other hand, these results can also be detrimental for women, since they lead to an overload of work in the field or in local commerce and at home.
 
How can governments and other national and international organizations encourage rural migration that benefits all actors?
The FAO Framework for Migration proposes four main actions to effectively address the phenomenon of rural migration. These recommendations are:
1. Minimise the causes of migration and offer alternatives in rural areas, creating decent employment opportunities and mitigating the impacts of climate change;
2. Facilitate rural mobility, developing agricultural migration plans and information campaigns for migrants and promoting opportunities for cooperation between rural and urban areas.
3. Accentuate the benefits of migration, promoting the investment of remittances and highlighting the usefulness of migration as an adaptation strategy to climate change;
4. Promote the well-being of migrants, providing support for their incorporation into host communities.
With the deterioration of climatic and environmental conditions, the mechanization of work in the field and the high rates of rural poverty, rural migration to cities will continue to be an important issue to address, because of its determining effects on the achievement of food security and rural and urban sustainability.

To most of those who govern the global economy today – the developed country policy-makers, international business leaders, and the international economic organisations (the International Monetary Fund, the World Bank, and the World Trade Organisation) – the solution to this problem is clear. What the developing countries need, they argue, is the ‘good’ economic policies and institutions that the developed countries themselves used in order to develop – such as liberalisation of trade and investment and strong patent law. Their belief in their own recommendations is so absolute that in their view it has to be imposed on the developing countries at all costs through strong bilateral and multilateral external pressures.

As is well known, there have been heated debates on whether these policies and institutions are suitable to the developing countries. The curious thing is that even those who are sceptical of their suitability rarely question whether these are the policies and the institutions that the developed countries actually used in order to become rich. However, the historical fact is that the rich countries did not develop on the basis of the policies and the institutions that they now recommend to, and often force upon, the developing countries.

If the policies and institutions that the rich countries are recommending to the poor countries are not the ones that they themselves used when they were developing, what is going on? We can only conclude that, whether intentionally or not, the rich countries are effectively kicking away the ladder that allowed them to climb to where they are now. It is no coincidence that economic development has become more difficult during the last two decades when the developed countries started turning up the pressure on the developing countries to adopt the so-called ‘good’ policies and institutions. What can be done to change this? First, the facts about the historical experiences of the developed countries should be more widely publicised. This is not just a matter of ‘getting history right’, but also one of allowing the developing countries to make more informed choices. This is not to say that every developing country should adopt an interventionist development strategy. Some of them may indeed benefit from following the Swiss or Hong Kong models. However, this strategic choice should be made in the full knowledge that historically the majority of the successful countries did the opposite in the past when they faced the same international competitive challenge from more advanced countries, which the developing countries face now.

Second, the conditions attached to bilateral and multilateral financial assistance offered to developing countries should be radically changed. It should be accepted that the orthodox recipe is not working, and also that there can be no single ‘best practice’ policies that everyone should use. More specifically, in terms of policies, the ‘bad policies’ that most of today’s developed countries used with so much effectiveness when they were developing countries themselves should be at least allowed, if not actively encouraged, by the developed countries and the international development policy establishment that they control. While it is true that activist trade and industrial policies can sometimes degenerate into a web of red tape and corruption, this should not mean that these policies should never be used under any circumstances.

Third, the WTO rules should be re-written so that the developing countries can more actively use tariffs and subsidies for industrial development. They should also be allowed to have less stringent patent laws and other intellectual property rights laws.

Fourth, improvements in institutions should be encouraged, but this should not be equated with imposing a fixed set of today’s – not even yesterday’s – Anglo-American institutions on all countries. There need to be more serious attempts, both at the academic and the practical levels, to explore exactly which institutions are necessary, or at least beneficial, and for what types of countries, given their stages of development and their economic, political, social, and even cultural conditions. Special care has to be taken in order not to demand excessively rapid upgrading of institutions by the developing countries, especially given that they already have quite sophisticated institutions when compared to today’s developed countries at comparable stages of development, and given that establishing and running new institutions is costly.

By having the freedom to choose policies and institutions that are more suitable to their conditions, the developing countries will be able to develop faster. This will also benefit the developed countries in the long run, as it will increase their trade and investment opportunities. That the developed countries, and the international institutions which they influence, cannot see this is the tragedy.

2. The term “Economic Institutions” refers to two things: … Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.
Among other things, economic institutions have decisive influence on investments in physical and human capital, technology, and industrial production. It is also well-understood that in addition to having a critical role in economic growth, economic institutions are also important for resource distribution.
Institutions conducive to economic development reduce the costs of economic activity. The costs include transaction costs such as search and information costs, bargaining and decision costs, policing and enforcement costs (Coase, 1992, p 197; Dahlman, 1979, p. 149). They lower transaction costs by providing common legal frameworks (e.g. contracts and contract enforcement, commercial norms and rules), and they encourage trust by providing policing and justice systems for the adherence to common laws and regulations. Communities in LDCs typically rely on kinship or ethnic and religious ties for trade. Norms and networks of common language and religion may be enough to ensure compliance with agreements on economic exchange; collective punishment and social reputation may be enough to ensure the enforcement of (often informal) contracts even in the absence of a third party. Greif (1993) describes the trade networks of Maghribi traders which permitted the sharing of information on dishonest traders and their collective punishment. To take advantage of opportunities for trade with different groups and increase the size of economic transactions, however, cultural ties are not enough. There is need for greater information about trading partners, and for institutions which ensure agreements on the details of exchange and compliance to the agreed conditions. These take the form of contracts, codes of conduct, standardized weights and measures, disclosure agreements, and enforcement through courts and policing. Where transaction costs are small, the private enforcement of contracts may still be preferred. But as economic relations develop and become increasingly impersonal, the role of a third party to enforce compliance to rules is increasingly necessary (Shirley, 2003, p. 2).

3. Extreme inequality is out of control. Hundreds of millions of people are living in extreme poverty while huge rewards go to those at the very top. There are more billionaires than ever before, and their fortunes have grown to record levels. Meanwhile, the world’s poorest got even poorer.

Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education.

These policies hit the poor hardest. The human costs are devastating, with women and girls suffering the most. Despite their huge contribution to our societies through unpaid care work, they are among those who benefit the least from today’s economic system.

Extreme poverty vs extreme wealth: how big is the inequality gap?

1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.

2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.

3. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.

4. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.

The growing gap between rich and poor is undermining the fight against poverty, damaging our economies and tearing our societies apart.

Yet inequality is not inevitable – it is a political choice.

Governments around the world must act now to build a new, human economy that values what truly matters to society, rather than fueling an endless pursuit of profit. An economy that values the care work of women and girls instead of billionaires’ wealth. An economy that works for everyone, not just a fortunate few.

Join us to urge our political leaders to invest in vital public services and tax the rich fairly, and to ensure everyone has secure jobs paying decent wages. It’s time to fight inequality, and beat poverty for good.

4. The sources are: 1. Human Resources 2. Natural Resources 3. Capital Formation 4. Technology and entrepreneur

Why do some countries make rapid progress toward development while many others remain poor?
Because GDP per capita is simply GDP divided by the population, it is a measure of income as if it were divided equally among the population. In reality, there can be large differences in the incomes of people within a country. So, even in a country with relatively low GDP, some people will be better off than others. And, there are poor people in very wealthy countries. In 2013 (the most recent year comprehensive data on global poverty are available), 767 million people, or 10.7 percent of the world population, were estimated to be living below the international poverty line of $1.90 per person per day.3 Whether for people or nations, the key to escaping poverty lies in rising levels of income. For nations specifically, which measure wealth in terms of GDP, escaping poverty requires increasing the amount of output (per person) that their economy produces. In short, economic growth enables countries to escape poverty.

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

Neoclassical economic theory on international trade holds that liberal trade policies maximize economic welfare. Mainstream development economists add that this is also true in a dynamic sense: such policies would help poor countries to acquire the skills and technology that they need to catch up with rich ones (World Bank 1993). Extending this to farm policy, many economists see agricultural trade liberalization as a pre-condition for pro-poor growth in least developed countries (Aksoy and Beghin 2004; Anderson and Martin 2005; Hertel and Winters 2005; Nash and Mitchell 2005).
This position is underscored by model studies that couple strong convictions with methodological weaknesses. For example, Anderson and Martin (2005) envisage large effects from poor countries reducing their agricultural tariffs. However, whether these are the ‘welfare gains’ they claim cannot be decided since the distribution among households is unknown1. Moreover, their comparative-static model cannot assess the impact on development. This latter is also true for Hertel and Winters (2005), even though these authors include the distribution issue. The few dynamic models that are being made tend to stress endogenous growth effects but ignore poverty traps that can make poor economies dual equilibrium systems.
Furthermore, there are hardly any studies that point to the impact that tariff reduction in developed countries would have on the least developed countries specifically – a remarkable fact, for even standard models show that these countries
would lose rather than gain since their preferential access to developed country markets would be eroded (Panagariya 2005; Yu, this volume).

Meanwhile, economists who believe that agricultural trade liberalization would generally benefit least developed countries are faced with some realities that seem to belie this notion: Many developed countries did not liberalize their agricultural trade during the early stages of their industrialization but protected their farmers, and newcomers like Korea and Taiwan have followed their example. Neoclassical economists assert that agricultural protection harmed poor consumers and retarded growth (E.G. Diao et al. 2002b; Tracy 1989), but I will argue that this is not always clear. Most Asian developing countries with successful green revolutions stabilized or supported their agricultural prices at the time these revolutions occurred (Dorward et al. 2002). These cases include countries with rapid growth like Indonesia and Malaysia (Dawe 2001; Jenkins and Lai 1991; Timmer 2002). In Vietnam and Chile, where rapid growth was coupled with the liberalization of agricultural trade, this involved the removal of negative protection rather than reduction in positive protection (Benjamin and Brandt 2002; Valdés et al. 1991)2.
Most least developed countries that are caught in stagnation have not protected their agriculture. Development economists blame their situation on ‘urban bias’ leading to over-taxation of farmers (Bates 1981; Ng and Yeats 1998; World Bank 1981). Yet a country like Kenya, which was praised for being relatively free from these bogeys (Bates 1989), also slipped into the morass, raising doubts about whether domestic factors offer a full explanation. These anomalies do not refute the urgent need for reforming the multilateral system of agricultural trade, nor do they mean that all liberal reform is bad.
However, they do suggest that the real world is more complex than the standard economic model. Rather than bombarding the public with model studies in a bid to confirm preconceived ideas, economists would do better to pay more attention to the empirical lessons told by actual history – the real laboratory of the social sciences. As a first step in this direction, in the next session, I will survey the historical experiences of developed countries with agricultural free trade or protection. I do not present a sophisticated quantitative analysis, but simply point out some major facts and conjunctures. Even if this does not allow me to make absolute statements on causality, it reveals a number of cases that cannot readily be explained by the standard model. In Section “Experiences with agricultural free trade and protection”, therefore, I reconsider the issue of market failure in agriculture. In Section “What does it mean for poor countries?”, I discuss policy implications for the least developed countries, focusing particularly on the situation in many countries in Sub-Saharan Africa.

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development?

Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Its original focus lay in Thorstein Veblen’s instinct-oriented dichotomy between technology on the one side and the “ceremonial” sphere of society on the other. Its name and core elements trace back to a 1919 American Economic Review article by Walton H. Hamilton. Institutional economics emphasizes a broader study of institutions and views markets as a result of the complex interaction of these various institutions (e.g. individuals, firms, states, social norms).

Poverty and economic disparities in underdeveloped countries
In its “Poverty and Shared Prosperity Report 2016” the World Bank reported that “poverty remains unacceptably high” with an estimated population of 766 million people living on less than $1.90 a day in 2013 (p.36). Countries located in Sub-Saharan Africa (388.7 million) or South-East Asian (256.2 million) are classified as underdeveloped countries. So far, researchers have concluded that development is limited by high levels of corruption (Olken, 2006), weak institutions and a lack of human rights enforcement (Webb, Kistruck, Ireland and Ketchen, 2010). Additionally, limited access to financial services (T. Beck and Demirguc-Kunt, 2006; Honohan, 2008), high inflation rates (Aisen and Veiga, 2006) and dependencies on foreign capital (Gur, 2015) lead to economic instability. Furthermore, development is inhibited by low levels of social trust (Barham, Boadway, Marchand and Pestieau, 1995; Bjørnskov, 2006), power concentration and imbalances (Acemoglu, Reed and Robinson, 2014) and civil wars and ethnic conflicts (Collier, Hoeffler and Söderbom, 2008).

As a solution, innovation has been identified as a means to support development in developed and developing countries (Chudnovsky, Lopez and Pupato, 2006; Kaplinsky, 2011). In general, new technologies can bring significant changes to the world’s poor and improve their living conditions. In particular, the blockchain has been suggested as a new technological solution to many problems in underdeveloped countries (e.g. Swan, 2015; D. Tapscott and A. Tapscott, 2016). However, the proposed solutions were held to be somewhat nebulous with few specifications regarding concrete applications. Moreover, researchers have focussed on theoretical approaches, neglecting practical examples and outcomes. An overview of possible and existing solutions which specifies relevant mechanisms and implementation hurdles has in consequence remained unconducted.

II. Development theories and approaches to poverty reduction
Several theories and approaches have been developed to reduce poverty and improve the living conditions of people in underdeveloped countries. Moreover, researchers have tested solution concepts and their practical impacts. The following section divides the relevant literature concerning poverty reduction into three categories. First, I examine the problem of institutional weaknesses and development challenges. Second, I analyse the role of financial inclusion in economic change. Third, I emphasize important instruments, campaigns and channels to address poverty.
a. Institutional weaknesses and development challenges
One major problem of underdeveloped countries, and one reason why development programs often do not deliver the desired outcomes, is weak institutions which fail to shape and control development. Corruption, for instance, is more likely to occur in poor regions where a lack of law enforcement is observed (LaPorta, Lopez-de-Silanes, Shleifer and Vishny, 1999; Mauro, 1995). Not only does corruption hinder economic development it limits the government’s power to establish redistribution programs. Olken (2006) found that the welfare loss caused by corruption can outweigh the benefits of the redistribution programs. He further observed that corruption is centralised, with a small group of people causing a considerable share. Rural areas, where people lack transparency and the possibility of monitoring their agents, are particularly prone to corruption.
Another problem in underdeveloped regions is the low level of social trust. Key determinants of social trust are defined as the reliability of legal institutions and social heterogeneity (Knack and Keefer, 1997). Social trust supports economic growth and thereby improves living conditions for poor people. It can generate growth through two major channels. First, social trust increases education efforts, causing higher education levels. A resultant impact is that investment rates which support economic growth increase (Bjørnskov, 2006; Levine and Renelt, 1992). Second, social trust improves governance as people are more likely to follow social norms, to accept regulation and are less likely to be corrupt (Bjørnskov, 2006; Uslaner, 2002).
b. The role of financial inclusion in economic change
The role of financial intermediaries for economic development has also been the object of several studies. Honohan (2008), for example, linked the access to financial intermediaries to poverty. He observed that the main problem for people in underdeveloped countries is not only a shortage in capital resources but also limited access to financial services, specifically bank and savings accounts. Furthermore, he found that countries with higher mobile phone penetration rates and more developed institutions have higher bank account penetration rates. Since access to financial intermediaries as an action against poverty is not yet proven, more research in this area is required. However, the connection between financial services and the effectiveness of redistribution programs has been partially analysed. Ravallion and Chen (2005) inspected the impact of household savings in response to development projects. They recognised that the benefits of development aid are deferred as people save half of the additional income. The primary reasons for the saving behaviour are the inability to assess the long-term success of the projects and limited access to financial services. People save money in order to hedge against future income losses and to overcome future borrowing constraints, both of which could be eliminated by developed financial services.

3. How can the extremes between rich and poor be so very great?

1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.
2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
3. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.
4. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.
5. Inequality is sexist. With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity.

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?

Sources of Economic Growth

Natural Factors.
More land and raw materials should lead to an outward shift of PPF and thus an increase in potential growth. Jeffrey Sachs in The End of Poverty calls this factor “Resource Boom” and gives an example on how government ability to control the breeding of black flies that spread African River Blindness can open up new farmland thus increasing the quantity of arable land in a country. However, quantity of natural factors such as land and raw materials like metals and oil could be small and even absent in some countries and the quantity cannot be easily increased. Fortunately, a country can still enjoy economic growth with modest natural resources provided it could obtain them efficiently from abroad; i.e. through trade. Singapore, Hong Kong and Japan have relatively little natural resources yet they have grown into developed economies. Land for example can be increased at a modest quantity by reclaiming it from the sea as in Singapore and Hong Kong. Oil reserves can be increased by active exploration and novel method of extraction. Instead of concentrating on the quantity, increase quality of the natural factors also help to shift the PPF outwards. A piece of land, for instance, can be rendered more productive (increased quality) by irrigation, improved farming technology and better planning of land usage.

Human Factor.
The quantity of labour is a factor that contribute to growth. Bigger the population, larger is the labour force and further out is the PPF. Larger population can also means more entrepreneurs and a larger market that can sustain more industries. A country can increase in labour force by increasing its population but in reality all except Singapore is interested in this approach. Labour force can also be increased through a immigration policy that attracts skilled workers. This policy is pursued in Australia and Canada. Singapore and Malaysia also host a large population of migrant workers from neighbouring countries using a foreign worker scheme. However, the quantity of labour alone is not enough to guarantee economic growth. Pakistan, Bangladesh and Nigeria have very big population but this “labour resource” alone does not necessary confer growth. What is more important is that quality of the labour force, the human capital. Human capital is the attributes of an individual that contribute productively to economic activities. Human capital could refer to educational attainments, training and skills, entrepreneurship, and creativity. Human capital can be improved through formal education for children, vocational training, retraining, life-long adult education programme, better nutrition that improve mental concentration, better sanitation that reduces illness and thus absenteeism from school and improved basic healthcare that reduces preventable diseases.

Technological Factor
(a) Appropriate technology. One organization that aims to promote appropriate technology to improve rural welfare is Practical Action previously known as The Intermediate Technology Development Group (ITDG)
(b) New production methods.
New production methods could improve the quality of goods and/or reduce the cost of production. For instance, a new production technology can produce stronger concrete at a faster rate and at lower cost of production. Thanks to this technology, better buildings can be constructed with lower costs. Technology also allows the country to combine resources to produce new goods or more value-added products.
(c) Informational Technology.
A cell phone, access to internet, and fax can improve the ability to gather live information that can improve productivity. Ability to access accurate weather forecasts can help farmers to make important decisions about sowing seeds, transplanting, harvesting, and storage of harvest. Thus, informational technology can be used to increase agricultural produce. Internet access, a reliable and cheap transportation system, and a reliable and cheap method of collection of payment over the internet allows enterprising businesses to expand their markets abroad and effectively increase output. Access to satellite communication is partly responsible for the success of Bangalore, India being transformed into the back office of large companies based in developed nations.

Institutional Factor.
According to the Economist Survey of 20th century: the recipe to growth is the rule of law (especially property), capitalism (facilitate resource allocation), and a fairly open economy with low tariffs.

Why are some places wealthier than others?
As you have already discovered, the world is an incredibly diverse place. In this topic, the focus is on the different levels of development around the world. This will involve an investigation into both human geography (the economic, social, cultural and political characteristics of places) and physical geography (the natural resources, locations, and environments of places).
1. The creation of the Palm Islands in Dubai started in 2001.
2. In Brazil, the rainforest is being cleared to make way for palm oil, soya beans, and cattle.
3. Makoko is a vast floating informal settlement on the edge of Lagos, Nigeria.
4. The City of London is one of the world’s most important centres of finance and banking.

Geographers think critically about the idea of development. As you will learn in this chapter, development has had many positive consequences for people and places around the world. However, some geographers argue that development is not always sustainable, with a number of different environments being threatened as a result. 

MICHAEL DORATHY UZOAMAKA
2018/241586
LIBRARY AND INFORMATION SCIENCE/ECONOMIC
dorathyuzoamaka2018@gmail.com
ECO 361
Q1a.what can be learned from the historical record of economic progress in the now developed world?
Q1b.are the initial condition similar or different for contemporary developing countries from what the developed countries faced on the eve of there industrilazation.
Answer
1a.The historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now recommend to, or even force upon, the developing countries.
Virtually all of today’s developed countries used tariff protection and subsidies to develop their industries, and in the earlier stages of their development, they did not even have such ‘basic’ institutions as democracy, central banks, patent law, or professional civil services. What can be learned inclues:
First, the facts about the historical experiences of the developed countries should be more widely publicised. This is not just a matter of ‘getting history right’, but also one of allowing the developing countries to make more informed choices. This is not to say that every developing country should adopt an interventionist development strategy. Some of them may indeed benefit from following the Swiss or Hong Kong models.
Above all, the conditions attached to bilateral and multilateral financial assistance to developing countries should be radically changed, on the recognition that the orthodox recipe is not working, and that there can be no single recipe of ‘best practice’ policies that everyone should use.
Secondly, the WTO rules should be re-written so that the developing countries can more actively use tariffs and subsidies for industrial development.
Thirdly, improvements in institutions should be encouraged, but this should not be equated with imposing a fixed set of today’s – not even yesterday’s – Anglo-American institutions on all countries; nor should it be attempted in haste, as institutional development is a lengthy and costly process.
1b. Their are similar in the following ways:
i. Terms of intellectual property rights institutions, which have become a key issue following the recent controversy surrounding the TRIPS (trade-related intellectual property rights) agreement in the WTO.
ii. In relation to institutional development.
iii. Public finance: The fiscal capacity of the state remained highly inadequate in most now-developed countries until the mid-20th century, when most of them did not have income tax.
Q2.what are economic institutions and how do they shape problems of underdevelopment and prospects for successful development
Answers
2.Generally, there are two ways to define economic institutions, depending on the context in which the term is used. First, it is thought of as an organization, whether public or private, that engages in the collection and research of economic data or that provides a service or product deemed economically central to a nation’s economy. These institutions are also considered foundational structures or organizations in society that are inherent to the economic system or culture, such as the banking systems, investment markets or even a custom, such as providing children with a weekly allowance
Micro-Finance Institutions: these are economic institutions that lend money to low income groups, who lack access to banking and other related services. They provide financial services to the poor. MFIs can shape the problem of underdevelopment and prospects of successful development by performing functions like encouraging entrepreneurship and self sufficiency through providing access to funds for the poor through loans. They help to reduce poverty because the loans given to the poor can help them start up a business and earn income and thus alleviate poverty. They also encourage gender equality by providing women with financial backing needed to start up their own business and actively contribute to the economy and thus put the economy on a sound development path.
Q3. How can the extremes between rich and poor be so very great
Answers
The world’s poorest got even poorer.Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education.
A. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.
B. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.
C. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
D. Inequality is sexist. With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity.
F. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford.
Q4a. what are the sources of national and international economic growth
Q4b.why do some countries make rapid progress towards development while many others remain poor.
Answers
4.1. Human Resources:Labour inputs consist of quantities of workers and of the skills of the work force.Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
2. Natural Resources:The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources.
3. Capital Formation:Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples
4. Technological Change and Innovation:In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other
5.Institutional Factor :Financial sector & efficiency.A developed and efficienct financial system instills confidence in consumers to save with this financial institutions. In this case, savings can be fed back into the economy through the financial system as borrowing to firms.The financial system’s role is to intermediate between savings and investments and cycle funds. “The ratio of domestic credit provided by the banking sector to GDP is used to measure the growth of the banking system because it reflects the extent to which savings are financial.
4b.In common language, the terms “rich” and “poor” are often used in a relative sense: A “poor” person has less income, wealth, goods, or services than a “rich” person. Mostly it is just that they have a very pure market economy. Lots of corruption, not many rules being enforced, everything can be bought, everyone poor, no government to invest in infrastructure (since the government officials are acting like capitalists and trying to keep as much for themselves as possible), etc.And any time that they try to organize differently, they get bombed back to freedom, or a coup is set up so a violent US backed dictator can take power and protect corporate interests.So they have a hard time moving forward, and get pulled back every time they do.poor countries remain poor for endemic cultural reasons no amount of money can fix ,and when rich countries try to help fix these primary economic issues (lack of education , corruption or locking up potential workforce) they are often rebuked and reminded to stop interfering with the local culture.Physical factors – some areas have a hostile or difficult landscape. This can make development more difficult. Examples of this are very hot climates or arid (a lack of water) climates which make it difficult to grow sufficient food.
Economic factors – some countries have very high levels of debt. This means that they have to pay a lot of money in interest and repayments and there is very little left over for development projects.
Environmental factors – some places experience environmental issues, which can prevent them from developing. Examples might be extreme flooding or desertification.
factors – some parts of the world have issues that are caused by people. These include low levels of education, poor water quality or a lack of doctors.
Political factors – some countries are at war or the government may be corrupt. Therefore money does not reach the people who need it most and spending on areas such as education and infrastructure may be insufficient.
Natural resources – some countries have an abundance of raw materials such as oil or precious minerals. These can be sold and the money invested into developing the country.

NAME: NGADI GOD’SPROMISE CHICHOROBIM
REG. NO.: 2018/242405
DEPARTMENT: ECONOMICS
ECO. 361: DEVELOPMENT ECONOMICS I

Online Discussion Quiz-Some Vital Questions on Development Economics I
Critically discuss and analyze these questions as a potential Special Adviser to Mr. President on Poverty Alleviation and Economic Development

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
Some of the lessons to be learnt from the historical record of economic progress of developed countries are:
i. While working on strengthening domestic taxation and raising more revenues to finance public goods, the priority needs to be on improving the business environment to attract private capital-mobilizing private finance for development.
ii. Today’s developing economies need to focus on building fiscal and market institutions before rising spending needs- and not after they materialize.
iii. Improvements in institutions should be encouraged, but should not be attempted in haste, because institutional development is a lengthy and costly process.
In addition to the above three lessons, developing countries should recognize that developed countries were able to progress because they did not focus on just improving economic output but also focused on increasing the life chances, welfare and living standards of their people.

The initial conditions are similar for every country at the onset of Industrialization, what is different is the strategies the countries employ in their quest for development. The most common strategies employed by developed countries is that of structuring their development to include all the people in the society irrespective of status; only through this can economic growth and development be fully actualized.
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development
Economic Institutions are specific agencies or foundations, both government and private, studying economic data and commissioned with the job of facilitating the flow of economic activities in a country. They include: the central banks, microfinance institutions, commercial banks, development finance institutions etc.
Microfinance institutions shape problems of underdevelopment and prospects for successful development by providing loans to low income groups in the society. These loans can be used by these people to open their own businesses, to earn income. In this way, poverty can be alleviated and the poor can be able to contribute to the economy.
Development finance institutions like the Bank of Agriculture can shape problems of underdevelopment and prospects for successful development by providing credit to farmers. These farmers can now use these loans to acquire more land and purchase mechanized farming implements. This action can have the effect of increasing agricultural output, which will pave the way for rapid economic growth and development.
3. How can the extremes between rich and poor be so very great?
The income disparity between the rich and the poor is ever increasing. As millions of people become poorer, there is an increase in the number of millionaires in the country. This disparity is mainly due to negative government policies which tend to favour the rich and against the poor. In developing countries, governments tend to align themselves with the rich and make policies based on their alignment with the rich. They don’t care about the poor, since they see the poor as not being able to contribute anything tangible to their government. To tackle this problem of extreme inequality, governments should make inclusive policies, by inclusive I mean they should include everyone-both the rich and the poor-in any policy making. Also, private corporations and the wealthy should be sufficiently taxed and adequate funding should be made available for the underfunded vital public services like education and healthcare. If governments continue with these negative policies, there is bound to be a further increase in income disparity between the rich and the poor.

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
Sources of national and economic growth include the following:
●Natural Resources
●Human Capital
●Social and Political Structure
●Innovation
●Technology
●Industrialization
●Trade
Some of the reasons some countries make rapid progress toward development while others remain poor are:
●Climate and Geography
●Government policies affecting access to credit and Technology
●Prudent taxing and spending action of the Government
●Effective and efficient utilization of Resources

Economic development in different societies is shaped by the kind of politics citizens embrace. Citing the Korean example, the South Koreans have high living standards akin to those in developed Countries like the U.S, France, Japan etc. But the North Korean living standard is similar to those Countries in sub-Saharan Africa, about one-tenth of average living standards in South Korea.
The striking difference between the two Countries is as a result of the policies adopted by the government in the South and North in organizing their economies and how the citizens of each government worked.

NAME: NGADI GOD’SPROMISE CHICHOROBIM
REG. NO.: 2018/242405
DEPARTMENT: ECONOMICS
ECO. 361: DEVELOPMENT ECONOMICS I

Online Discussion Quiz-Some Vital Questions on Development Economics I
Critically discuss and analyze these questions as a potential Special Adviser to Mr. President on Poverty Alleviation and Economic Development

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
Some of the lessons to be learnt from the historical record of economic progress of developed countries are:
i. While working on strengthening domestic taxation and raising more revenues to finance public goods, the priority needs to be on improving the business environment to attract private capital-mobilizing private finance for development.
ii. Today’s developing economies need to focus on building fiscal and market institutions before rising spending needs- and not after they materialize.
iii. Improvements in institutions should be encouraged, but should not be attempted in haste, because institutional development is a lengthy and costly process.
In addition to the above three lessons, developing countries should recognize that developed countries were able to progress because they did not focus on just improving economic output but also focused on increasing the life chances, welfare and living standards of their people.

The initial conditions are similar for every country at the onset of Industrialization, what is different is the strategies the countries employ in their quest for development. The most common strategies employed by developed countries is that of structuring their development to include all the people in the society irrespective of status; only through this can economic growth and development be fully actualized.
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development
Economic Institutions are specific agencies or foundations, both government and private, studying economic data and commissioned with the job of facilitating the flow of economic activities in a country. They include: the central banks, microfinance institutions, commercial banks, development finance institutions etc.
Microfinance institutions shape problems of underdevelopment and prospects for successful development by providing loans to low income groups in the society. These loans can be used by these people to open their own businesses, to earn income. In this way, poverty can be alleviated and the poor can contribute to the economy.
Development finance institutions like the Bank of Agriculture can shape problems of underdevelopment and prospects for successful development by providing credit to farmers. These farmers can now use these loans to acquire more land and purchase mechanized farming implements. This action can have the effect of increasing agricultural output, which will pave the way for rapid economic growth and development.
3. How can the extremes between rich and poor be so very great?
The income disparity between the rich and the poor is ever increasing. As millions of people become poorer, there is an increase in the number of millionaires in the country. This disparity is mainly due to negative government policies which tend to favour the rich and against the poor. In developing countries, governments tend to align themselves with the rich and make policies based on their alignment with the rich. They don’t care about the poor, since they see the poor as not being able to contribute anything tangible to their government. To tackle this problem of extreme inequality, governments should make inclusive policies, by inclusive I mean they should include everyone-both the rich and the poor-in any policy making. Also, private corporations and the wealthy should be sufficiently taxed and adequate funding should be made available for the underfunded vital public services like education and healthcare. If governments continue with these negative policies, there is bound to be a further increase in income disparity between the rich and the poor.

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
Sources of national and economic growth include the following:
●Natural Resources
●Human Capital
●Social and Political Structure
●Innovation
●Technology
●Industrialization
●Trade
Some of the reasons some countries make rapid progress toward development while others remain poor are:
●Climate and Geography
●Government policies affecting access to credit and Technology
●Prudent taxing and spending action of the Government
●Effective and efficient utilization of Resources

Economic development in different societies is shaped by the kind of politics citizens embrace. Citing the Korean example, the South Koreans have high living standards akin to those in developed Countries like the U.S, France, Japan etc. But the North Korean living standard is similar to those Countries in sub-Saharan Africa, about one-tenth of average living standards in South Korea.
The striking difference between the two Countries is as a result of the policies adopted by the government in the South and North in organizing their economies and how the citizens of each government worked.

Name: Ibenyenwa Justice Junior
Reg no: 2018/245647
Dept: Economics
Course: Eco 361
Course Title: Development Economics
Email: justicejunior2018@gmail.com

Assignment
1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
In answering the research question above, We’ll take about economic progress
Explanation:
Economic progress is the process by which emerging economies become advanced economies. In other words, the process by which countries with low living standards become nations with high living standards.
IT is possible to study the economic growth of the world through the economy of developing coun- tries. In modern times without considering the mutual interactions between these economies and those of the advanced countries. When Western European Capitalism began to expand its production and trade on a world-wide scale, it awakened the less-developed areas of the world to modern economic development.Economic growth in the Asian area was brought about by the eastward advance of Western European capitalism. In this intermingling of Western European and
Asian economies the following historical stages can be observed.
The first stage is the period when native Asian industry developed as a result of the exchange of native Asian products for Western European
industrial products.
The second stage is the period when the native handicraft industry
crumbled because manufactured consumer goods flowed into the Asian area after the Industrial Revolution in Western Europe.
The third stage is the period when Western European capital and techniques infiltrated the Asian area for the large-scale production of primary goods, such as raw materials and provisions necessary for the Western European economy, as well as for the construction of railroads and highways. During this period the exchange of Western European consumer goods for native primary produ.cts came to be established.
The fourth stage is the period when Western European capital. came into the developing countries to develop modern industries, including the industries processing raw materials produced ip those areas.
The fifth stage is the period when native capital began to run the industries processing native raw materials. In this period a conflicting relationship was generated between consumer goods imported from the advanced countries and those of the native processing industries. However, in this period, capital goods came to be imported from the advanced countries for the consumer-goods industries in the developing countries and, in consequence, there was a conspicuous change from consumer goods to capital goods in the import structure.
The sixth stage is the period when manufactured goods in general began to be produced by native industries, whether the raw materials were domestically available or not. The capital goods required by these industries were imported at the expense of the induction of foreign capital_. and of the export of primary products,
The seventh stage is the period when the industrialization of the developing countries became so advanced as to make possible the export of manufactured consumer goods, and when the domestic production of some capital goods gradually came to the fore.
These stages, however, overlap each other and cannot be clearly classified nor applied to every developing country in Asia. For instance, J~pan has attained the position of an advanced country in comparison
with other Asian countries. She has attained a stage higher than the seventh stage. India and China can be said to have partially reached the seventh stage. The other countries, however, have not yet developed to the stage of capital goods production.

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.
Definition of Economic institutions:
Economic institutions are those institutions set up to facilitate the management of Economic activities in a country, they include central banks, commercial banks, microfinance banks, development finance institutions etc.
In describing their roles in shaping underdevelopment and prospects for successful development, two of the above listed Economic institutions will be discussed.
CENTRAL BANKS: A Central bank is the apex bank in a country. It regulates the volume of currency and credit in the country. The goals of the central bank are stabililisation of currency, inflation management and reduction of unemployment in the economy. The central bank can shape the problem of underdevelopment and prospects for successful economic development in the country by using tools of economic stabililisation like monetary policy.
By enacting monetary policy measure, the central bank can utilise implementing tools like interest rate adjustment, bank reserve ratio and open market operations.
The central bank can stimulate economic activities in the country by lowering interest rate, this will entice investors to borrow more money for investment. The investors can use this money to set up private corporations which will need to hire workers for its operations; in this way employment will be generated. Also, these corporations will produce goods and render services, thus increasing aggregate demand in the economy and thus pave the way for successful economic development.
Micro-Finance Institutions: these are economic institutions that lend money to low income groups, who lack access to banking and other related services. They provide financial services to the poor. MFIs can shape the problem of underdevelopment and prospects of successful development by performing functions like encouraging entrepreneurship and self sufficiency through providing access to funds for the poor through loans. They help to reduce poverty because the loans given to the poor can help them start up a business and earn income and thus alleviate poverty. They also encourage gender equality by providing women with financial backing needed to start up their own business and actively contribute to the economy and thus put the economy on a sound development path.
3. How can the extremes between rich and poor be so very great?
Extremes between rich and poor has been in existing in human society from the word “Go”. The world’s richest 1% have more than twice as much wealth as 6.9 billion people. Almost half of humanity is living on less than $5.50 a day.
1. Lining the pockets of the world’s billionaires: trillions of dollars of wealth are in the hands of a small group and the fortune and power of these people continue to grow. Billionaires have more wealth than 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile around 735 million people are still living in extreme poverty
2. Wealth undertaxed:while the richest continue to enjoy booming fortunes,they are also enjoying some of the lowest levels of tax are falling disproportionately on working people.when government undertax the rich, there’s less money for vital services like healthcare and education and increasing the amount of care work that falls on the shoulder of women and girls
3. Underfunded public services:at the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people
4. Denied a longer life: in most countries having money is a passport to better health and a longer life,while being poor all too often means more sickness and an earlier grave. Peace from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries,a child from a poor family is twice as likely to die before the age of five than a child from a rich family
5. Inequality is sexist:with less income and fewr assets than men, women make up the greatest proportion of world’s poorest households and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labour. They are also supporting the state through billions of hours of unpaid or underpaid care work,a huge but unrecognized contribution to our societies and economic prosperity.

4. What are the Sources of national and international economic growth?
The sources of international and national growth are;
1. Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force. Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth. A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.
2. Natural Resources:
The second classical factor of production is natural resources. The quantity and availability of natural resources affect the rate of economic growth. The discovery of more natural resources, such as oil or mineral deposits, will give a boost to the economy by increasing a country’s production capacity.
Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
3. Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.
Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists
4. Technological Change and Innovation:
In addition to the three classical factors discussed above, technological advancement has been a vital fourth ingredient in the rapid growth of living standards.
Technological change denotes changes in the processes of production or introduction of new products or services. Improvements in technology have a high impact on economic growth. The application of better technology means the same amount of labor will be more productive, and economic growth will advance at a lower cost.
In conclusion, Economic growth inevitably rides on the four wheels of labour, natural resources, capital, and technology. But the wheels may differ greatly among countries, and some countries combine them more effectively than others.
Ii. Why some countries make rapid progress towards development while others remain poor.
Throughout history, some economies have expanded faster than others. Some differences can be traced to such inherent factors as climate and geography. At times people living near navigation routes or in temperate climates have fared better than people living far away from coastlines or in frigid climates. Some analysts also argue that culture plays a role in growth. While inherent traits are responsible for some differences in economic growth, government and central bank policies also play a role.
Government: In most countries government has a significant influence on economic performance, especially due to its size. In the United States, government spending accounts for one-fifth of GDP. The taxing and spending policies of the government affect the incentives to spend and invest. Some economists argue that the government may affect the overall performance of the economy. Regulations, taxes and government spending can vitalize or stifle economic activity in various sectors of the economy. On one hand, if the government spends more than it collects in tax revenues, deficits can slow the economy. On the other hand, a well-planned road system can increase market efficiency and help improve the economy. The government also plays a role in the economy by correcting for market failures and protecting property rights. Market failures happen when the market has an effect outside the buyers and sellers.
International trade and finance: Just as individuals specialize in an occupation they do best, countries specialize in producing particular goods and services depending on their natural resources and education of their labor force. Countries with large areas of nutritious soil might specialize in agriculture, whereas a country with a labor force trained in electronics might specialize in producing computer chips. Countries can specialize in the goods and services they produce best and trade for the goods and services they produce relatively less efficiently. The more countries can specialize and trade, the more economic growth they will realize in the long run.
Technology and investment: Technology refers to advancement in knowledge and how it’s employed in the productive process. For example, the micro-chip processor helped businesses incorporate computer systems into the production process and sales. Countries that have a wealth of research and development and/or access to new technology often have a more productive work force than countries without access to technology. As productivity increases, economic growth increases. Investment in new technology or buildings can lay the groundwork for growth in years to come. Countries with institutions that facilitate the appropriation of technology and accommodate investment will realize increases in total output.
Political, social and geographical conditions: Countries with challenging terrain or weather may need to find creative ways to adapt to their surroundings. The political and social climate of a country influences the total output of a country’s economy. Crime, poverty, income disparity and armed conflicts can be a cause, or a result, of low economic growth. Nevertheless, social problems can develop despite high economic growth. The culture of a country can have an effect on what and how goods and services are produced. Cultural tendencies can create biases for and against various market mechanisms and may influence the pace of production. The location and climate of a country can also contribute to economic success or difficulty.
Money and banking: A central bank, such as the Federal Reserve in the United States or the Bundesbank in Germany, is responsible for regulating the amount of money in circulation. Too much money in circulation can drive prices up, causing inflation. Too little money can pull prices down, which can depress economic activity. Finding the right balance is a central bank’s primary responsibility. This places a central bank in a position to facilitate economic growth by stabilizing overall prices.

Onochie Odo Godsmark
2017/249540
Economics department
20/08/2021

Online Discussion Quiz 2—Some Vital Questions on Development Economics I
Critically discuss and analyse these questions as a potential Special Adviser to Mr. President on Poverty Alleviation and Economic Development.

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

There are a lot of things to learn from the historical record of the economic progress of developed countries. Regions like the U.S.A, Japan, Europe etc. are all classed as developed regions because of the following features:
High per capita income
Security
Availability of excellent health facilities
Low unemployment rate
Effective use of technology
Positive balance of payment etc.
Now, economic progression in these regions did not only take cognizance of increase in economic output, that is, GDP; but also incorporated improvement in wellbeing, living standard and life chances of the people.
In these regions, people have the right attitude to life and work. There is also respect for fellow humans, respect for human dignity and respect for the natural environment.

The initial conditions are similar for all countries before industrialization; what is different is the attitude of the people towards economic progression. For instance, the developed countries factor in the people wellbeing and social welfare in any development or industrialization plan. The same cannot be said for developing countries like Nigeria where personal interest rule over national interest.
Countries at the onset of industrialization, have to understand the need to structure development to include everyone including the poor and the rich. In this way economic development or industrialization can be attained in the real sense.

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development

Economic institutions are those institutions set up to facilitate the management of Economic activities in a country, they include central banks, commercial banks, microfinance banks, development finance institutions etc.
In describing their roles in shaping underdevelopment and prospects for successful development, two of the above listed Economic institutions will be discussed.
CENTRAL BANKS: A Central bank is the apex bank in a country. It regulates the volume of currency and credit in the country. The goals of the central bank are stabililisation of currency, inflation management and reduction of unemployment in the economy. The central bank can shape the problem of underdevelopment and prospects for successful economic development in the country by using tools of economic stabililisation like monetary policy.
By enacting monetary policy measure, the central bank can utilise implementing tools like interest rate adjustment, bank reserve ratio and open market operations.
The central bank can stimulate economic activities in the country by lowering interest rate, this will entice investors to borrow more money for investment. The investors can use this money to set up private corporations which will need to hire workers for its operations; in this way employment will be generated. Also, these corporations will produce goods and render services, thus increasing aggregate demand in the economy and thus pave the way for successful economic development.
Micro-Finance Institutions: these are economic institutions that lend money to low income groups, who lack access to banking and other related services. They provide financial services to the poor. MFIs can shape the problem of underdevelopment and prospects of successful development by performing functions like encouraging entrepreneurship and self sufficiency through providing access to funds for the poor through loans. They help to reduce poverty because the loans given to the poor can help them start up a business and earn income and thus alleviate poverty. They also encourage gender equality by providing women with financial backing needed to start up their own business and actively contribute to the economy and thus put the economy on a sound development path.

3. How can the extremes between rich and poor be so very great?

Extreme inequality is out of control. As millions of people get poorer, we have a higher number of millionaires in the country. Nigeria have the richest man in Africa, but also have the dubious honour of being labelled the poverty capital of the world. The government is fueling this inequality by enacting negative policies that favour the rich and encumber the poor. For instance, the government policy of under taxing private corporations and wealthy individuals and under funding public services like healthcare and education has the effect of hitting the poor people hardest because, the poor make use of the under funded public services, while the rich are able to fly abroad either for proper medical treatment or education of their wards. Also, corruption, insecurity, weak institutions and lack of adequate credit disbursement facilities etc. help in increasing the income disparity between the rich and the poor; thus resulting in an economy where the rich get richer, and the poor, poorer.
4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?

Sources of national and international economic growth include the following:
Natural resources
Human capital
Physical capital
Technology
Trade
Industrialization
Strong social and political institutions

Some of the reasons some Countries make rapid progress toward development while many others remain poor are:
Government policies affecting access to credit
Government policies affecting access to Technology
Prudent taxing and spending by the Government
Effective utilisation of resources
Climate and Geography
But the main reasons for economic development disparity between nations are; the culture of the people and Government policies.
CULTURE OF THE PEOPLE: Some cultures can hardly tolerate change and bring about development. As such, the citizens mistrust anything they see as foreign. The Boko Haram terrorist group is a good example. The terrorist group officially detest western education, which is necessary for development to take place.
GOVERNMENT POLICIES: Policies adopted by the government also contribute to the economic development disparity between nations. For instance, where the government organize their economies to allow private ownership of corporations, property and market; the contribution of the country’s citizens in the economy will increase and thus spur economic growth and development. Conversely, where private ownership of corporations, property and market is abolished by the government; it will reduce the citizens participation in the economy and negatively influence the economy by slowing its growth and development.

Name: Edeh Amarachukwu Jennifer
Reg no: 2018/248241
Dept: Economics/Psychology

Question 1- What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries face on the eve of their industrialization?

-Why are certain nations more developed than others? Were developed nations once underdeveloped? Did these advanced nations face similar conditions the underdeveloped nations are currently experiencing?

These kinds of questions have continuously lingered, but the answers lie in rich historical records of the economic progress of advanced nations. There are several lessons and strategies that can be learnt from the history of these developed countries.

First, we will begin with examining the vital lessons we can learn from this history.

Lesson 1: The role of exports
There is a clear-cut connection between export expansion and economic progress. Historical records of the developed world reveal this clearly. High-growth countries feature a rapid export expansion. However, the present developing countries seem to slack or centre their exports on natural resources rather than products with added value.

Indeed, there was a very visible expansion in the export of labour intensive, manufactured goods. The history of Taiwan as well as South Korea and Turkey does justice to highlighting the role of exports in economic progress. The aforementioned countries experienced high levels of economic growth in the 1950’s as a result of export expansion.

In fact, a good number of economic analysts have indicated a few reasons why countries with rapid expansion of export seem to experience economic growth. One of these reasons includes the fact that a nation would be able to specialize and engage it’s comparative advantage. Another is the reduction in unemployment this policy offers.

Lesson 2: Increased government spending is not a necessary condition for economic progress

Historical records reveal that on average, the governments of the low-income nations of today spend twice what the developed countries spent a century ago. Government revenues of past years accrued majorly from custom duties and excise duties. VAT and personal income taxes are fairly present policies. In addition, the expectation from the government was far less than it is now.

For instance, government spending on both pensions, health, housing and unemployment accounted for just 0.7 percent of GDP in the U.S and 1.1 percent of GDP in the Scandinavian countries. And with these low levels of government spending, these countries experienced a high rate of development at the close of the 20th century.

However, this was because priority was given to infrastructural advancements and educational improvements. So while it is important to increase revenue and government expenditure, the focus should be improving the economic climate to be able attract private investment and capital.

Lesson 3: The negative effect of controls

Many low-income countries are negligent of the negative effects of controls. They basically do not get enough revenue to construct infrastructure and build institutions for higher growth. Even with increased pressure and grants from institutions and more advanced economies, low-income nations seem to slack on growth levels.

One lesson or reason for this is the responsiveness to incentives. Certain incentives have negative effects. For instance, nominal exchange rates they trigger domestic inflation have serious negative effects on exports. So controls on factored such as price and rates are key disincentives for production as well as exchange. Controls usually lead to black marketing activities as well smuggling and seeking of import licence.

-Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

The gap between the advanced industrialized countries and the underdeveloped nations has continued to increase over the years. Hence, the need for this question- -Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

No doubt, Europe, France and even the United States may have been a different country if not for a few favourable initial conditions. And while a few third-world countries continue to wail about the torments of colonization. The fact remains that certain formerly colonized countries have also embraced technology and development and gone ahead.

First, most developing and underdeveloped nations have more severe population problems than those experiences by the western countries far back on the 19th century. For instance, Asia particularly has problems with population density in relation to resources and land mass.

Unemployment is yet another problem facing currently developing nations. However, presently disguised unemployment is on the rise in this nations. This is certainly not the case with the developed nations as they had willing and enterprising labour. Finally, the international context is different as well. The international context is less favorable for the development of these poor countries when compared to the conditions of the past. These days, private foreign investors prefer to utilize their capital in safer and more stable regions. And indeed, this is a disadvantage to the developing nations as they are usually unstable and characterized with insecurity.

And so, many poor and underdeveloped countries lack the prerequisite for development and industrialization.
Yes, certain industrialized nations have directly or indirectly worsened the conditions of poor nations, but history also reveals that many underdeveloped countries have been poor since history. And so we can say that even if the initial conditions are not exactly similar, the underdeveloped nations seem to have chances to advance if certain factors are put in place for development.

Question 2. -What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development

-First, what are economic institutions?

-Economic institutions are institutions charged with the role of organizing the activities of production, exchange and distribution as well as consumption of goods and services. Every nation needs to effectively utilize it’s scarce resources and basic needs need to be met by the activities of production and exchange. Hence, the need for effective economic institutions. These economic institutions include; Central bank, development finance institutions, commercial banks etc. There are also international economic institutions and they include; the world bank, WTO and IMF.

So what do these economic institutions do?

Economic institutions have continuously surfaces and taken their place at the centre of development economics. The quality of economic institutions makes a great difference between a thriving and wealthy nation and a clueless, underdeveloped one. Economic institutions provide guidelines for the creation of policies. They determine the structure of economies and the blueprint of execution of policies.

-But how do economic institutions shape problems of underdevelopment and prospects for successful development?

The functioning of economic institutions shape or determine the level of development of nations in different ways. Let’s consider three factors that help these institutions shape problems of underdevelopment and prospects for successful development.

Policies and investment
The policies of economic institutions to a large extent determine the level of investment. For instance, if property rights are clearly defined and secure, investors are more likely to disburse capital. Investment can also be stimulated by the policies of the economic institutions. Economic institutions also indirectly affect the investment in human capital. This is because economic growth accelerates human capital development.

Encouragement of technical innovation
The economic institutions also largely determine the level of technic investments and development of innovation. If intellectual property rights are secure, investment in research and innovative ventures are promoted.

Economic organisation
One of the functions of economic institutions as stated above is the organization if the activities of production and exchange in the economy. This role is very crucial as more efficient and effective organization promotes specialization and brings economies of scale. Smooth running nations enhanced by economic organizations are likely to attract more foreign investments and therefore, bring more growth and reduce poverty.

Question 3- How can the extremes between rich and poor be so very great?

Since the 1980s, income inequalities have increased in most countries. These developments have not been continuous over time, but have taken place in spurts in a number of countries, both in times of growth and in times of crisis. The increase in precarious employment, technical progress biased in favor of skilled workers and the weakening of redistributive systems, are highlighted as the main factors responsible for this rise in inequalities.

Promoting the creation of quality jobs, supporting the participation of women in the labor market, guaranteeing access to quality education for all and strengthening the efficiency of redistribution systems are ways of remedying this widening inequality between rich and poor.

Some of the most unequal countries are Mexico, Chile, and Turkey, followed by the United States. The Gini coefficient exceeds 0.40, a threshold often considered critical, and even exceeds 0.48 in Chile and Mexico.

In emerging countries, the (high) level of inequalities has, on the contrary, tended to decrease since the mid-1990s, in particular in Latin America and Brazil. This decrease in inequalities is explained by a strengthening of social protection and an intensification of redistribution measures in these countries.

Contrary to popular belief, income inequality can increase in times of job growth as well as in times of crisis. The upward trend for several decades is proof of this: during the 2000s, for example, employment rates increased, but the jobs created – mostly atypical jobs (temporary, part-time or self-employed) – have widened the gaps in the labor market.

-Factors behind the rise in inequalities

Three main factors have fueled the increase in inequality over the past three decades. The first, mentioned above, is the evolution of forms of employment and working conditions. The proliferation of atypical jobs, less stable, less well paid and mainly occupied by young and poorly qualified people, has fostered a polarization of the labor market.

The second major factor is the evolution of the technological and economic context, in particular the advances in information and communication technologies (ICT) which tend to favor skilled workers and widen the wage gap between them and unskilled workers.

The third factor is the weakening of redistribution. As fiscal and social policies become less effective, the stabilizing effect of taxes and benefits on household income inequality declines. and the fiscal and social systems of many countries offset more than half of the increase in market income inequality.

Question 4- What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?

The production of wealth is obtained by combining the factors of production . Growth will therefore be made possible by increasing the quantity of production factors mobilized. Thus, if overall more labor and more capital are used, production increases. We are talking about extensive growth .

The factors of production are the sustainable elements used to produce: labor (human activity) and fixed capital (machines, buildings, etc.). The increase in the amount of work used is driven by the increase in the employed labor force (more workers produce more wealth) or by the increase in the legal working time.

Investment is the operation by which the company buys capital. It allows the accumulation of capital and promotes growth. Factors of production also contribute to growth by becoming more efficient . The investment allows the use of more efficient machines. It is in favor of improving labor productivity: better endowed with capital, labor is more efficient. Labor productivity also improves through workforce training and better organization of work.

The part of growth that cannot be explained by the accumulation of factors of production is attributed to technical progress . By generating productivity gains, technical progress makes it possible to produce more with the same quantity of production factors: total factor productivity (TFP) increases.

So why do some countries make rapid progress toward development while many others remain poor?

There have always been rich countries and poor countries side by side in the world. Hence the questions- where does this difference between rich and poor countries come from? Are some countries rich because they are particularly well endowed with natural resources? Let’s answer these questions with examples. Switzerland, which has hardly any natural resources, should be a very poor country, and yet we know that it is among the richest. Nigeria, on the other hand, should then be one of the richest countries, because it has a real treasure in its soil, in particular oil but it is not.

So what makes a nation head towards development and what makes another poor? Let’s consider our aforementioned sources of economic growth. The production of wealth depends on the level of investment as well as the level of production and industrialization. A nation which has a higher level of productivity heads towards growth and development. Whereas a nation which lacks in vital factors such as; security, technical knowledge, human capital development, and investment heads towards poverty.

AKACHUKWU PRECIOUS C.
2018/SD/37433
DEPARTMENT OF EDUCATION/ECONOMICS
Questions
1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development
3. How can the extremes between rich and poor be so very great?
4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
Solutions
1. Virtually all of today’s developed countries used tariff protection and subsidies to develop their industries, and in the earlier stages of their development, they did not even have such ‘basic’ institutions as democracy, central banks, patent law, or professional civil services. The conditions for the development countries are similar but the attitude of people towards economic development varies from one country to another and so every country should find a favorable conditions for themselves. The historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now recommend to, or even force upon, the developing countries.
2. Economic institutions refers to various bodies, institutions or agencies that deals with the management of money and distribution of goods and services with the aim of ensuring the well-being of masses, healthy and sustainable growth of an economy. These institutions help to shape the problems of underdevelopment such as smuggling, recession, balance of payment deficit, fear of business risks, high unemployment arising from low investment and poor growth of small and medium scale enterprises(SMEs), Lack of infrastructural facilities, poor housing aid among others.
These institutions are established based on the peculiar economic needs of an economy and are drawn from different sectors of the economy but they all work to achieve sustainable growth and development in an economy. In Nigeria, there are numerous economic institutions and agencies. The CBN plays a major role because they control the supply of Money with the use of monetary policy and it’s instruments to maintain the value of naira. Some function of economic institutions in Nigeria includes:
– Provision of house loan at low interest rate to help the poor citizens to build their own house by Federal Mortgage Bank Of Nigeria.
– Promoting the establishment and growth of existing SMES by providing loans at low interest rate by Small and Medium Enterprise Development Agency of Nigeria.
– Ensuring efficiency in business operation through privatization of some public enterprises by the National Council Of Privatization.
– Provision of Agricultural credit facilities to Farmers to help them expand production of agricultural product domestic consumption and export by the Agricultural bank
– Provision of insurance on business risks by the National Insurance Commission
– Prevention of recession or persistent inflation through proper management of money by the CBN
3. How can the extremes between rich and poor be so very great?
Extreme inequality is out of control. Hundreds of millions of people are living in extreme poverty while huge rewards go to those at the very top. This is so because of the following reasons.
– The income gap between highly skilled workers and low-skilled or no-skills workers- not everyone had the opportunity to go to school but it’s now taken to be their fault as they get paid peanuts compared to the highly trained and skilled workers
– Poor Mentality- The poor have a different view of things while the rich see the bigger picture. They don’t think big or take the risk and they are fine with whatever they get. In Nigeria today you see a lot of able bodied men, children and women who could easily get a job and cater for their needs but instead they choose to beg on the streets
– Racism- in major foreign countries, people face racism alot and the race seen to be the better race are giving higher pay, better working conditions, nice jobs while the other races have to endure with anything they are giving.
– wealth concentration in the hands of a few- in Nigeria today, the rich get richer by taking from the poor because of the kind of people that are put in political offices, high positions and so one who collect what the people have worked for just so that they can enrich themselves.
4. Sources of national and international economic growths:
* Increased human capital.
* Natural resources endowment.
* Balance of trade equilibrium.
* Efficiency and effective economics policies.
* Increased capital formation and accumulation.
* Balance of payment equilibrium.
* Balanced budgetary policy.
* Exchange rate stability.
4b. some countries are developing more than others because:
– Technology and investment
Countries that have a wealth of research and development and/or access to new technology often have a more productive work force than countries without access to technology. Technology refers to advancement in knowledge and how it’s employed in the productive process. As productivity increases, economic growth increases. Countries with institutions that facilitate the appropriation of technology and accommodate investment will realize increases in total output. Investment in new technology or buildings can lay the groundwork for growth in years to come.
– International trade and finance
Countries can specialize in the goods and services they produce best and trade for the goods and services they produce relatively less efficiently. The more countries can specialize and trade, the more economic growth they will realize in the long run. If trade is slowed, countries will have to produce goods and services that they produce less efficiently instead of trading for them. Trade policy, such as quotas and tariffs, directly affects trade flows. Also, exchange rates among countries can affect trade as the cost of goods and services from other countries fluctuates with movements in exchange rates.
– Money and banking
The central bank is responsible for regulating the amount of money in circulation. Central banks act as a regulator of banks and provide oversight for the payments system, which includes cash, checks and electronic payments. Finding the right balance is a central bank’s primary responsibility. Too much money in circulation can drive prices up, causing inflation. Too little money can pull prices down, which can depress economic activity. This places a central bank in a position to facilitate economic growth by stabilizing overall prices.
– Political, social and geographical conditions.
Crime, poverty, income disparity and armed conflicts can be a cause, or a result, of low economic growth. The political and social climate of a country influences the total output of a country’s economy. Countries with challenging terrain or weather may need to find creative ways to adapt to their surroundings. The culture of a country can have an effect on what and how goods and services are produced. Cultural tendencies can create biases for and against various market mechanisms and may influence the pace of production. The location and climate of a country can also contribute to economic success or difficulty. Nevertheless, social problems can develop despite high economic growth.

GWOM PAUL JACOB
2018/243820
DEPARTMENT: ECONOMICS

Question 1
.What can be learned from the historical record of economicss in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
For the last two decades or so, the developing countries have been under great pressure from the developed countries and the international institutions that they control – such as the International Monetary Fund, the World Bank, the World Trade Organisation – to adopt a set of ‘good policies’, especially free trade, and ‘good institutions’, such as strong patent law, in order to foster their economic development.

The historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now recommend to, or even force upon, the developing countries.

Virtually all of today’s developed countries used tariff pro development, they did not even have such ‘basic’ institutions as democracy, central banks, patent law, or professional civil services.

Given that the adoption of ‘good policies’ and ‘good institutions’ has failed to generate the promised acceleration of economic development in the developing world, and has in some cases even led to economic and social collapses, a radical re-thinking of the development orthodoxy is required.

Above all, the conditions attached to bilateral and multilateral financial assistance to developing countries should be radically changed, on the recognition that the orthodox recipe is not working, and that there can be no single recipe of ‘best practice’ policies that everyone should use.

Second, the WTO rules should be re-written so that the developing countries can more actively use tariffs and subsidies for industrial development.

Third, improvements in institutions should be encouraged, but this should not be equated with imposing a fixed set of today’s – not even yesterday’s – Anglo-American institutions on all countries; nor should it be attempted in haste, as institutional development is a lengthy and costly process.

Question 2.
What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development?
The term “Economic Institutions” refers to two things: … Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions
This essay aims to explain why institutions are important to economic development and to provide evidence for the arguments made. It argues that institutions support economic development through four broad channels: determining the costs of economic transactions, determining the degree of appropriability of return to investment, determining the level for oppression and expropriation, and determining the degree to which the environment is conducive to cooperation and increased social capital. Evidence is derived from the literature, from comparison of countries, and from examples at the micro level.
In the words of North (1990, p. 4): “Institutions are the rules of the game in a society, […] the humanly devised constraints that shape human interaction. […] They structure incentives in human exchange, whether political, social or economic”. Institutions comprise for example contracts and contract enforcement, protection of property rights, the rule of law, government bureaucracies, financial markets. They also, however, include habits and beliefs, norms, social cleavages and traditions in education (so-called informal institutions). Formal institutions typically tend to be the crystallization of informal institutions (North, 1990), as social norms in the realms of gender, class and caste, for example, determine rules of political participation and representation, methods of economic exchange, and inclusion of different groups in society (Pateman, 1988).In a landmark study of new institutional economics, Rodrik, Subramanian and Trebbi (2002) assess the relative importance of institutions, geography and integration (trade) in determining the differences in incomes between the world’s most developed countries and the poorest ones. They find that institutional determinants “trump” all others. It is not a new intuition that for the prospering of economic activity institutions matter. Adam Smith had already noted this is surprising detail, referring to the importance of a justice system, private property rights, and the rule of law (The Wealth of Nations). Aron (2000) surveys the studies which correlate indices of development to institutional ones: 7 find a positive correlation with property rights and enforcement, 10 with civil liberties, 10 others with political rights and democracy, 4 with institutions for cooperation (e.g. clubs and associations), and 15 find a negative correlation of development with political instability. The paragraphs below explain why institutions appear so important to economic development.
Institutions conducive to economic development reduce the costs of economic activity. The costs include transaction costs such as search and information costs, bargaining and decision costs, policing and enforcement costs (Coase, 1992, p 197; Dahlman, 1979, p. 149). They lower transaction costs by providing common legal frameworks (e.g. contracts and contract enforcement, commercial norms and rules), and they encourage trust  by providing policing and justice systems for the adherence to common laws and regulations. Communities in LDCs typically rely on kinship or ethnic and religious ties for trade. Norms and networks of common language and religion may be enough to ensure compliance with agreements on economic exchange; collective punishment and social reputation may be enough to ensure the enforcement of (often informal) contracts even in the absence of a third party. Greif (1993) describes the trade networks of Maghribi traders which permitted the sharing of information on dishonest traders and their collective punishment. To take advantage of opportunities for trade with different groups and increase the size of economic transactions, however, cultural ties are not enough. There is need for greater information about trading partners, and for institutions which ensure agreements on the details of exchange and compliance to the agreed conditions. These take the form of contracts, codes of conduct, standardized weights and measures, disclosure agreements, and enforcement through courts and policing. Where transaction costs are small, the private enforcement of contracts may still be preferred. But as economic relations develop and become increasingly impersonal, the role of a third party to enforce compliance to rules is increasingly necessary (Shirley, 2003, p. 2).
There is wide-ranging evidence that institutions matter a great deal in determining the level of economic development of a country. Cross-country analyses use indicators such as degree of protection of property rights, the rule of law, and civic liberties and find that they are strongly correlated to economic performance. This essay has described why institutions are so important for economic development and has provided evidence for the claims made. It has identified four broad channels through which the correlation can be explained. Institutions determine the costs of economic transactions: they spur development in the form of contracts and contract enforcement, common commercial codes, and increased availability of information, all of which reduce the costs of transactions, risk, and uncertainty. Institutions determine the degree of appropriability of return to investment: protection of property rights and the rule of law spur investment and thus increase incomes. Institutions also determine the scope for oppression and expropriation of resources by elites: unequal institutions which allow the dominance of powerful elites over economic exchange strongly limit development, as can be seen in the case of many ex-colonial countries. Lastly, institutions determine the degree to which the environment is conducive to cooperation and increased social capital; inclusive and participatory institutions increase the flow of information and the extent to which resources can be pooled to reduce risk and ensure sustained levels of wealth. This fits nicely with the finding of historical studies that high quality institutions today are rooted in greater equality, political competition and cooperative norms in the distant past. Institutions strongly affect the economic development of countries and act in society at all levels by determining the frameworks in which economic exchange occurs. They determine the volume of interactions available, the benefits from economic exchange and the form which they can take.

Question 3.
.How can the extremes between rich and poor be so very great?.
1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.
2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
3. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.
4. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.
5. Inequality is sexist. With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity.

Question 4.
What are the sources of national and international economic growth?
The first is improving the quality of entrepreneurship through consulting more innovators and visionaries who give new ideas on improving the production process. An example includes employing entrepreneurs from a more improved business to give new and more ideas about productivity.

Secondly, is increasing the quality and quantity of labor by offering more training to the workers and also increasing the number of workers in the business, thus increasing production. An example of increasing the quality of labor includes offering training programs in the business.

Thirdly, is increasing the quality and quantity of capital through introducing more improvised equipment to ease and increase productivity. An example includes introducing the new trends of machines in the business, which increase production.

Lastly, is increasing the quantity and making better use of the natural resources used in the production process. The natural resources may include oil. Therefore, increasing the quality and quantity of production factors leads to increased production thus economic growth.

Name: Ajuluchukwu Joy ifeoma
Reg no: 2018/241840.
Email: jlady3936@gmail.com

Q1. What can be learned from the historical records of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization.

from the historical records of the now developed countries, I learnt that there were policies that was implemented to accelerate the growth of the economy.
Britain and US succeeded by infact industry protection which was invented by the first Treasury secretary of the US Alexander Hamilton. he developed the theory of infant industry protection in 1791 report to the congress.
in terms of trade policy with few exceptions such as Switzerland and Netherlands all of today’s rich countries used protectionism.
many countries regulated FDI( foreign direct investment) when they are at the receiving end. in 19th century US regulated FDI in Finance, banking, shipping mining and logging, especially in banking, only American citizens could be directors in a national bank and foreign shareholders could not vote in AGMs.

Many countries explicitly allowed patenting Japan (Korea and Taiwan to a lesser extent) virtually banned
foreign direct investment until the 1980s. Between the 1930s and the 1980s, Finland classified all
firms with more than 20% foreign ownership as “dangerous enterprises”.
Same story with SOEs. Germany (textile, steel) and Japan (steel, shipbuilding) used SOEs
to kick start their industrialization. SOEs were extensively used in France, Finland, Austria,
Norway, Taiwan, and Singapore in the post-WWII period. SOEs produced 22% of Singapore’s
GDP and 16% of Taiwan’s GDP. Most famous French firms are either still state-owned or were so until recently.
Many countries explicitly allowed patenting of
foreigners’ inventions (Britain, the Netherlands, USA, France, Austria). In the 19th century, the
Germans mass-produced fake ‘Made in England’ products. Switzerland (until 1907) and the
Netherlands (until 1912) refused to protect patents. The US refused to protect foreigners’
copyrights until 1891 (refused to protect copyrights for materials printed abroad until 1998.

Of course, Africa today is developing in national and international contexts that are very different
from what today’s rich countries faced in their own epochs of development, so we cannot apply
lessons from, say, 1960s South Korea – not to speak of 18th century Britain – to today’s African
countries. Moreover, Africa is very diverse, so we cannot have a uniform recommendation for all
countries, especially from a set of experiences that are diverse themselves. Exactly what policy
mplications we draw from which historical cases will depend on the exact natural, economic,
social, political, and cultural conditions that a country faces and on what their goals, preferences,
and aspirations are. However, knowing the ‘real’ – as opposed to ‘official’ – history of today’s
developed countries allows us to break off from the ideological shackle imposed by today’s dominant view that Africa’s economic problems are not due to the failures of neo-liberal policies
but because of some structural problems that we cannot do anything about.

2. what are Economic institutions and how do they shape problems of underdevelopment and prospects for successful development.

The term “Economic Institutions” refers to two things:

1. Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. The Internal Revenue Service (the IRS—the government tax-collection agency), the U.S. Federal Reserve (the government producer of money), the National Bureau of Economic Research (a private research agency) are all examples of economic institutions.
2. Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.

b. There is wide-ranging evidence that institutions matter a great deal in determining the level of economic development of a country. Cross-country analyses use indicators such as degree of protection of property rights, the rule of law, and civic liberties and find that they are strongly correlated to economic performance. This essay has described why institutions are so important for economic development and has provided evidence for the claims made. It has identified four broad channels through which the correlation can be explained. Institutions determine the costs of economic transactions: they spur development in the form of contracts and contract enforcement, common commercial codes, and increased availability of information, all of which reduce the costs of transactions, risk, and uncertainty. Institutions determine the degree of appropriability of return to investment: protection of property rights and the rule of law spur investment and thus increase incomes. Institutions also determine the scope for oppression and expropriation of resources by elites: unequal institutions which allow the dominance of powerful elites over economic exchange strongly limit development, as can be seen in the case of many ex-colonial countries. Lastly, institutions determine the degree to which the environment is conducive to cooperation and increased social capital; inclusive and participatory institutions increase the flow of information and the extent to which resources can be pooled to reduce risk and ensure sustained levels of wealth. This fits nicely with the finding of historical studies that high quality institutions today are rooted in greater equality, political competition and cooperative norms in the distant past. Institutions strongly affect the economic development of countries and act in society at all levels by determining the frameworks in which economic exchange occurs. They determine the volume of interactions available, the benefits from economic exchange and the form which they can take.

3. How can the extremes between the rich and poor be so very great?

The gap between the rich and the poor keeps widening, the Organisation for Economic Cooperation and Development (OECD) says.

In its 34 member states, the richest 10% of the population earn 9.6 times the income of the poorest 10%.

There is no standard measure of inequality, but most indicators suggest it slowed or fell during the financial crisis and is now growing again.
The OECD warns that such inequality is a threat to economic growth.
The report says this is partly because there is a wider gap in education in the most unequal countries, which leads to a less effective workforce.

OECD member states include most of the European Union as well as developed economies such as the US, Canada, Australia and Japan.

One of the factors that the OECD blames for growing inequality is the growth in what it calls non-standard work, which includes temporary contracts and self-employment.

The OECD says that since the mid-1990s more than half of all job creation in its member states has been in non-standard work. It says that households dependent on such work have higher poverty rates than other households and that this has led to greater inequality.
Tax and benefit systems have become less effective at redistributing income.
On the other hand it says that one of the factors limiting the growth in inequality has been the increasing number of women working

Analysis: Robert Peston, economics editor
The main theory the OECD puts forward for why inequality and growth are negatively correlated is that poorer people invest less in their own education and self improvement – which is why its main anti-inequality prescriptions are government investment in skills and education, and a focus on a promoting better quality jobs.

4. what are the sources of national and international economic growth? who benefits from such growth and why? why do countries make rapid progress towards development and many others remain poor.
SOURCES OF ECONOMIC GROWTH.
(a) Natural resources; natural resources includes land and productive raw materials of a nation.
(b) New production methods.
New production methods could improve the quality of goods and/or reduce the cost of production. For instance, a new production technology can produce stronger concrete at a faster rate and at lower cost of production. Thanks to this technology, better buildings can be constructed with lower costs. Technology also allows the country to combine resources to produce new goods or more value-added products. Thus, an improvement in production technology allows the country to expand its PPF (experiences economic growth) with existing supply of resources. In the Harrod-Domar Growth Model, this translates into a reduction in the capital-output ratio and thus leads to more economic growth.
(c) Informational Technology.
A cell phone, access to internet, and fax can improve the ability to gather live information that can improve productivity. Ability to access accurate weather forecasts can help farmers to make important decisions about sowing seeds, transplanting, harvesting, and storage of harvest. Thus, informational technology can be used to increase agricultural produce. Internet access, a reliable and cheap transportation system, and a reliable and cheap method of collection of payment over the internet allows enterprising businesses to expand their markets abroad and effectively increase output. Access to satellite communication is partly responsible for the success of Bangalore, India being transformed into the back office of large companies based in developed nations.
i. Financial sector & efficiency.
A developed and efficienct financial system instills confidence in consumers to save with this financial institutions. In this case, savings can be fed back into the economy through the financial system as borrowing to firms.

The financial system’s role is to intermediate between savings and investments and cycle funds. “The ratio of domestic credit provided by the banking sector to GDP is used to measure the growth of the banking system because it reflects the extent to which savings are financial. Liquid liabilities include bank deposits of generally less than one year plus currency. Their ratio to GDP indicates the ease with which their owners can use them to buy goods and services without incurring any cost. Quasi-liquid liabilities are long-term deposits and assets -such as certificates of deposits, commercial paper, and bonds- that can be converted into currency or demand deposits, but at a cost.”

ii. Education System.
III. “Health Care.
Here, I like to include clean running water and hygienic waste disposal. If potential workers are not healthy then they cannot contribute as much to economic development as they could. Moreover, in many poor community, a day without work usually means a day without pay and thus no or less food on the table for that day. Moreover, illness takes up resources from the community. Researchers have estimated that AIDS could reduced the real GDP growth of badly affected economies by 0.3% to 1.5% annually.
iv. Infrastructure includes all essential facilities and services such as transportation network, communication network, power (electricity, gas, etc.) network, running water network, irrigation, and waste disposal network that are necessary for economic activities. Cheap, fast and easy communication, for example, reduces the cost of doing business. A good transportation network allows resources and goods to be transported quickly and cheaply. Thus, a good network of road, railways and access to seaports can facilitate trade that allows an economy to exploit economies of scales by producing for a larger market. This shifts the PPF outward.
Basically, growth is usually possible in a stable political environment.

b. I think the masses and government benefits from economic growth with the points below;

Economic growth enables consumers to consume more goods and services and enjoy better standards of living.
It helps in reducing absolute poverty and enabling a rise in life expectancy.

It lowers unemployment rate because firm will employ more workers.

It lowers government borrowing, economic growth creates higher tax revenue.
It encourages firms to invest in order to meet future demand.
Lastly the biggest factor for promoting economic development is sustained economic growth.

(C) The reason some countries make rapid development while others remain poor is that the countries that makes progress employed feasible policy and followed the implementation tenaciously,
Also good leadership is very important for country’s progress, where there is competent and knowledgeable personnels In authority, things work out better.
Inequality also contributes to a country’s set back.
Some countries that progress has a diversified economy which enables them to generate revenue from Various sources.
Lastly, developed countries has a stable economic environment for businesses to strive, and Entrepreneurs are encouraged by such environment.

Okafor chukwuma Philip
2018/246611

What can be learned from the historical record of economic progress in the new developed world?
Use of tariffs and subsidies;
Almost all of today’s rich countries used tariff protection and subsidies to develop their industries in the earlier stages of their development. It is particularly important to note that Britain and the USA, the two countries that are supposed to have reached the summit of the world economy through free-market, free-trade policy, are actually the ones that most aggressively used protection and subsidies.
Long road to institutional development :
Whatever one’s position is on the relationship between democracy and economic growth in today’s world, it is indisputable that today’s developed countries did not develop under democracy. Until the 1920s even universal male suffrage was a rarity. It was not until the late 20th century that all developed countries became truly democratic. Spain and Portugal were dictatorships until the 1970s; votes were given to all ethnic minorities in Australia and the USA only in 1962 and 1965 respectively; while women in many countries were given the suffrage only after the Second World War and in Switzerland as late as 1971. Until the Second World War, even when democracy formally existed, its quality was extremely poor. Secret balloting was introduced only in the early 20th century in France and Germany, and corrupt electoral practices, such as vote buying, electoral fraud, and legislative corruption, lasted in most of today’s developed countries well into the 20th century.
1b. Are the initial conditions similar or different for contemporary developing countries
Its actually almost the same conditions only the addition of more developed countries and companies that can do anything to make sure their goods penetrate into several countries. And also the external force from development worlds on developing countries for their own interests is more now than ever.
2. In the words of North (1990, p. 4): “Institutions are the rules of the game in a society, […] the humanly devised constraints that shape human interaction. […] They structure incentives in human exchange, whether political, social or economic”. Institutions comprise for example contracts and contract enforcement, protection of property rights, the rule of law, government bureaucracies, financial markets. They also, however, include habits and beliefs, norms, social cleavages and traditions in education (so-called informal institutions). Formal institutions typically tend to be the crystallization of informal institutions (North, 1990), as social norms in the realms of gender, class and caste, for example, determine rules of political participation and representation, methods of economic exchange, and inclusion of different groups in society (Pateman, 1988).
In a landmark study of new institutional economics, Rodrik, Subramanian and Trebbi (2002) assess the relative importance of institutions, geography and integration (trade) in determining the differences in incomes between the world’s most developed countries and the poorest ones. They find that institutional determinants “trump” all others. It is not a new intuition that for the prospering of economic activity institutions matter. Adam Smith had already noted this is surprising detail, referring to the importance of a justice system, private property rights, and the rule of law (The Wealth of Nations). Aron (2000) surveys the studies which correlate indices of development to institutional ones: 7 find a positive correlation with property rights and enforcement, 10 with civil liberties, 10 others with political rights and democracy, 4 with institutions for cooperation (e.g. clubs and associations), and 15 find a negative correlation of development with political instability. The paragraphs below explain why institutions appear so important to economic development.
Institutions conducive to economic development reduce the costs of economic activity. The costs include transaction costs such as search and information costs, bargaining and decision costs, policing and enforcement costs (Coase, 1992, p 197; Dahlman, 1979, p. 149). They lower transaction costs by providing common legal frameworks (e.g. contracts and contract enforcement, commercial norms and rules), and they encourage trust by providing policing and justice systems for the adherence to common laws and regulations. Communities in LDCs typically rely on kinship or ethnic and religious ties for trade. Norms and networks of common language and religion may be enough to ensure compliance with agreements on economic exchange; collective punishment and social reputation may be enough to ensure the enforcement of (often informal) contracts even in the absence of a third party. Greif (1993) describes the trade networks of Maghribi traders which permitted the sharing of information on dishonest traders and their collective punishment. To take advantage of opportunities for trade with different groups and increase the size of economic transactions, however, cultural ties are not enough. There is need for greater information about trading partners, and for institutions which ensure agreements on the details of exchange and compliance to the agreed conditions. These take the form of contracts, codes of conduct, standardized weights and measures, disclosure agreements, and enforcement through courts and policing. Where transaction costs are small, the private enforcement of contracts may still be preferred. But as economic relations develop and become increasingly impersonal, the role of a third party to enforce compliance to rules is increasingly necessary (Shirley, 2003, p. 2).
Such institutions increase the security that the risk of incurring in an economic transaction is matched by the full appropriation of its eventual benefits. This includes the presence of individual private property rights. If property is protected individuals are more willing to invest and to incur sunk costs. Recounting the land-ownership system in Ghana, Pande and Udry (2005) are able to show that where individual perception of security of land tenure is low, investment in the land is significantly reduced, and output consequently drops. In fact, in the few cases in which land is obtained through commercial transactions (as opposed to the traditional informal system of land redistribution), there ceases to be any difference in levels of investment because security of tenure is assured. This increases output and thus is conducive to economic development
3. But though the gap between rich and poor may be widening, this obsession with inequality — and this preferred approach to mitigating it — are fundamentally counterproductive. They are born of a misconception rooted in a flawed understanding of both justice and economic fact. Even if their premises and objectives were sound, these policies would have perverse unintended consequences — fostering class resentment, destroying jobs, and reducing wages and opportunities for the poor most of all. Such policies also tend to undermine the family and create a culture of dependence on the state — unleashing harmful consequences that would, again, fall disproportionately on the poor.
4a. Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
Natural Resources:
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.
Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.
Accumulating capital, as we have seen, requires a sacrifice of current consumption over many years. Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists believe that the low national savings rate in the United States—only 4 percent of output in 1996— poses a major economic problem for the country.
All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure investments are effectively undertaken.
Technological Change and Innovation:
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.
Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.
4b. Economic growth is a sustained rise over time in a nation’s production of goods and services. How can a country increase its production? Well, an economy’s production is a function of its inputs, or factors of production (natural resources, labor resources, and capital resources), and the productivity of those factors (specifically the productivity of labor and capital resources), which is called total factor productivity (TFP). Consider a shoe factory. Total shoe production is a function of the inputs (raw materials such as leather, labor supplied by workers, and capital resources, which are the tools and equipment in the factory), but it also depends on how skilled the workers are and how useful the equipment is. Now, imagine two factories with the same number of workers. In the first factory, workers with basic skills move goods around with push carts, assemble goods with hand tools, and work at benches. In the second factory, highly trained workers use motorized forklifts to move pallets of goods and power tools to assemble goods that move along a conveyer belt. Because the second factory has higher TFP, it will have higher output, earn greater income, and provide higher wages for its workers. Similarly, for a country, higher TFP will result in a higher rate of economic growth. A higher rate of economic growth means more goods are produced per person, which creates higher incomes and enables more people to escape poverty at a faster rate. But, how can nations increase TFP to escape poverty? While there are many factors to consider, two stand out.

Reg no: 2018/241840.

Q1. What can be learned from the historical records of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization.

from the historical records of the now developed countries, I learnt that there were policies that was implemented to accelerate the growth of the economy.
Britain and US succeeded by infact industry protection which was invented by the first Treasury secretary of the US Alexander Hamilton. he developed the theory of infant industry protection in 1791 report to the congress.
in terms of trade policy with few exceptions such as Switzerland and Netherlands all of today’s rich countries used protectionism.
many countries regulated FDI( foreign direct investment) when they are at the receiving end. in 19th century US regulated FDI in Finance, banking, shipping mining and logging, especially in banking, only American citizens could be directors in a national bank and foreign shareholders could not vote in AGMs.

Many countries explicitly allowed patenting Japan (Korea and Taiwan to a lesser extent) virtually banned
foreign direct investment until the 1980s. Between the 1930s and the 1980s, Finland classified all
firms with more than 20% foreign ownership as “dangerous enterprises”.
Same story with SOEs. Germany (textile, steel) and Japan (steel, shipbuilding) used SOEs
to kick start their industrialization. SOEs were extensively used in France, Finland, Austria,
Norway, Taiwan, and Singapore in the post-WWII period. SOEs produced 22% of Singapore’s
GDP and 16% of Taiwan’s GDP. Most famous French firms are either still state-owned or were so
until recently.
Many countries explicitly allowed patenting of
foreigners’ inventions (Britain, the Netherlands, USA, France, Austria). In the 19th century, the
Germans mass-produced fake ‘Made in England’ products. Switzerland (until 1907) and the
Netherlands (until 1912) refused to protect patents. The US refused to protect foreigners’
copyrights until 1891 (refused to protect copyrights for materials printed abroad until 1998.

Of course, Africa today is developing in national and international contexts that are very different
from what today’s rich countries faced in their own epochs of development, so we cannot apply
lessons from, say, 1960s South Korea – not to speak of 18th century Britain – to today’s African
countries. Moreover, Africa is very diverse, so we cannot have a uniform recommendation for all
countries, especially from a set of experiences that are diverse themselves. Exactly what policy
mplications we draw from which historical cases will depend on the exact natural, economic,
social, political, and cultural conditions that a country faces and on what their goals, preferences,
and aspirations are. However, knowing the ‘real’ – as opposed to ‘official’ – history of today’s
developed countries allows us to break off from the ideological shackle imposed by today’s dominant view that Africa’s economic problems are not due to the failures of neo-liberal policies
but because of some structural problems that we cannot do anything about.

2. what are Economic institutions and how do they shape problems of underdevelopment and prospects for successful development.

The term “Economic Institutions” refers to two things:

1. Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. The Internal Revenue Service (the IRS—the government tax-collection agency), the U.S. Federal Reserve (the government producer of money), the National Bureau of Economic Research (a private research agency) are all examples of economic institutions.
2. Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.

b. There is wide-ranging evidence that institutions matter a great deal in determining the level of economic development of a country. Cross-country analyses use indicators such as degree of protection of property rights, the rule of law, and civic liberties and find that they are strongly correlated to economic performance. This essay has described why institutions are so important for economic development and has provided evidence for the claims made. It has identified four broad channels through which the correlation can be explained. Institutions determine the costs of economic transactions: they spur development in the form of contracts and contract enforcement, common commercial codes, and increased availability of information, all of which reduce the costs of transactions, risk, and uncertainty. Institutions determine the degree of appropriability of return to investment: protection of property rights and the rule of law spur investment and thus increase incomes. Institutions also determine the scope for oppression and expropriation of resources by elites: unequal institutions which allow the dominance of powerful elites over economic exchange strongly limit development, as can be seen in the case of many ex-colonial countries. Lastly, institutions determine the degree to which the environment is conducive to cooperation and increased social capital; inclusive and participatory institutions increase the flow of information and the extent to which resources can be pooled to reduce risk and ensure sustained levels of wealth. This fits nicely with the finding of historical studies that high quality institutions today are rooted in greater equality, political competition and cooperative norms in the distant past. Institutions strongly affect the economic development of countries and act in society at all levels by determining the frameworks in which economic exchange occurs. They determine the volume of interactions available, the benefits from economic exchange and the form which they can take.

3. How can the extremes between the rich and poor be so very great?

The gap between the rich and the poor keeps widening, the Organisation for Economic Cooperation and Development (OECD) says.

In its 34 member states, the richest 10% of the population earn 9.6 times the income of the poorest 10%.

There is no standard measure of inequality, but most indicators suggest it slowed or fell during the financial crisis and is now growing again.
The OECD warns that such inequality is a threat to economic growth.
The report says this is partly because there is a wider gap in education in the most unequal countries, which leads to a less effective workforce.

OECD member states include most of the European Union as well as developed economies such as the US, Canada, Australia and Japan.

One of the factors that the OECD blames for growing inequality is the growth in what it calls non-standard work, which includes temporary contracts and self-employment.

The OECD says that since the mid-1990s more than half of all job creation in its member states has been in non-standard work. It says that households dependent on such work have higher poverty rates than other households and that this has led to greater inequality.
Tax and benefit systems have become less effective at redistributing income.
On the other hand it says that one of the factors limiting the growth in inequality has been the increasing number of women working

Analysis: Robert Peston, economics editor
The main theory the OECD puts forward for why inequality and growth are negatively correlated is that poorer people invest less in their own education and self improvement – which is why its main anti-inequality prescriptions are government investment in skills and education, and a focus on a promoting better quality jobs.

4. what are the sources of national and international economic growth? who benefits from such growth and why? why do countries make rapid progress towards development and many others remain poor.

(b) New production methods.
New production methods could improve the quality of goods and/or reduce the cost of production. For instance, a new production technology can produce stronger concrete at a faster rate and at lower cost of production. Thanks to this technology, better buildings can be constructed with lower costs. Technology also allows the country to combine resources to produce new goods or more value-added products. Thus, an improvement in production technology allows the country to expand its PPF (experiences economic growth) with existing supply of resources. In the Harrod-Domar Growth Model, this translates into a reduction in the capital-output ratio and thus leads to more economic growth.
(c) Informational Technology.
A cell phone, access to internet, and fax can improve the ability to gather live information that can improve productivity. Ability to access accurate weather forecasts can help farmers to make important decisions about sowing seeds, transplanting, harvesting, and storage of harvest. Thus, informational technology can be used to increase agricultural produce. Internet access, a reliable and cheap transportation system, and a reliable and cheap method of collection of payment over the internet allows enterprising businesses to expand their markets abroad and effectively increase output. Access to satellite communication is partly responsible for the success of Bangalore, India being transformed into the back office of large companies based in developed nations.
i. Financial sector & efficiency.
A developed and efficienct financial system instills confidence in consumers to save with this financial institutions. In this case, savings can be fed back into the economy through the financial system as borrowing to firms.

The financial system’s role is to intermediate between savings and investments and cycle funds. “The ratio of domestic credit provided by the banking sector to GDP is used to measure the growth of the banking system because it reflects the extent to which savings are financial. Liquid liabilities include bank deposits of generally less than one year plus currency. Their ratio to GDP indicates the ease with which their owners can use them to buy goods and services without incurring any cost. Quasi-liquid liabilities are long-term deposits and assets -such as certificates of deposits, commercial paper, and bonds- that can be converted into currency or demand deposits, but at a cost.”

ii. Education System.
III. “Health Care.
Here, I like to include clean running water and hygienic waste disposal. If potential workers are not healthy then they cannot contribute as much to economic development as they could. Moreover, in many poor community, a day without work usually means a day without pay and thus no or less food on the table for that day. Moreover, illness takes up resources from the community. Researchers have estimated that AIDS could reduced the real GDP growth of badly affected economies by 0.3% to 1.5% annually.
iv. Infrastructure includes all essential facilities and services such as transportation network, communication network, power (electricity, gas, etc.) network, running water network, irrigation, and waste disposal network that are necessary for economic activities. Cheap, fast and easy communication, for example, reduces the cost of doing business. A good transportation network allows resources and goods to be transported quickly and cheaply. Thus, a good network of road, railways and access to seaports can facilitate trade that allows an economy to exploit economies of scales by producing for a larger market. This shifts the PPF outward.
Basically, growth is usually possible in a stable political environment.

b. I think the masses and government benefits from economic growth with the points below;

Economic growth enables consumers to consume more goods and services and enjoy better standards of living.
It helps in reducing absolute poverty and enabling a rise in life expectancy.

It lowers unemployment rate because firm will employ more workers.

It lowers government borrowing, economic growth creates higher tax revenue.
It encourages firms to invest in order to meet future demand.
Lastly the biggest factor for promoting economic development is sustained economic growth.

Name: Onyemelukwe Chinenye Favour
Reg. No.: 2018/241854
Economics (UNN)

1. The record of economic progress in the now developed world drives home the lesson of developing all by developing one. Human capital development was an indispensable aspect of their brilliantly implemented plan. They started educating and improving their working force at a very early stage; in fact, it was their priority. This made each active member a power house filled with brilliant and innovative ideas that gave them a growing edge over most of the world.
The now developed world began their industrialization quite early and at a time where most of the world especially Africa were still in gross darkness and ignorance. The nations went to them for many of their needs placing more capital in their hands for greater development.

B) The initial conditions are quite different with greater advantages and ease enjoyed by the now developed countries. The developing countries are now experiencing a fierce competition which improves growth due to the desire to do better but stifles it at the same time.
They had extra labour and resources at their disposal due to colonization. The system of colonization most of them adopted did not require them to pay the labourers the full worth making them enjoy growth at very little cost.

2) Economic institutions are responsible for organizing the production, exchange, distribution, and consumption of goods and services.
Economic institutions determine how the affairs of a nation can be run. Their policies, operations and inadequacies shape the problems we see. It can drive a nation towards under development or lay viable platforms for development. This all depends on the nature of their policies and the choices they make in the running of the economy. This policies and choices may either be to the good or detriment of that economy.
On the other side, efficient and well functioning economic institutions pace the way for a smooth and successful development.
Their strategies and mode of operation plays a huge part and is equivalent to a track for the train of successful development to pass through.

3. The never ending desire of the rich to control the economy of the world will continually be the drive that widens the gap between the rich and poor.
Also, a sexist system exists whereby not enough women are given the opportunity to climb the wealth ladder and that’s why we notice the very top of the financial ladder greatly wanting of women. But this counters the notion that if you want an economy to advance, empower the women.
There’s also the issue of a far low minimum wage, the poor system of income distribution (the most hardworking aren’t necessarily the most paid) and a government that massively undertaxes corporations and wealthy individuals at the expense of the masses.

4i. The sources of national and international economic growth include but are not limited to the following;
a. Natural resources: The more endowed a country is in land and raw materials, the more likely it is to make rapid progress. Although it can obtain some of its needed resources through trade, it’s more in its favor if these can be sourced locally.
b. Human capital: Quantity of labour also contributes to growth. Larger population connotes more entrepreneurs and a larger market which can sustain more firms and industries.
c. Physical capital: This includes factories, plants and machineries, offices, vehicles, artificial intelligence, technological tools etc. It improves the technical skills of the labour force thereby increasing their efficiency and productivity.

It is note worthy that because a Nation checks all these boxes, it doesn’t necessarily guarantee growth and development.

4ii. Some countries make rapid progress toward development than others for various reasons:
a. Management: No matter how endowed a nation is, if it is unable to manage its resources properly it will definitely lag behind on the progress train. This is seen when the government of the nation does not make use of the economic tools at its disposal when making managerial decisions in the allocation of resources of the nation
b. Institutionalized corruption: A nation that has corruption deeply rooted in its skin cannot make progress. With attributes like red-tapism, bureaucracy, nepotism, greed and so on, it is evident that policies made will be for selfish reasons rather than nation building.
c. Wars: Countries that are constantly at war channel their resources more towards the production of nuclear weapons and ammunition for war to the detriment of its economy.

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

* There are lots of things that can be learned from the historical record of Economic progress in the now developed world or countries such as, USA, China, Russia, etc. One of them is “Active citizenship”. Countries that are termed developed today attained that through active citizenship. Majority of her citizens have in mind their rights and Obligations which makes them participate actively in growing their economy.
– Another thing that can be learned from them is their style of education.
In the developed countries and before they became developed they adopted the mode of training students on ‘invention and innovation’ even from the grassroot. They didn’t just establish school to teach theories, no. Practical knowledge were thought and it has tremendously improved the welfare and standard of living of the citizens.
– Independence of the Judiciary.
This is one of the challenging factors that has held many third world countries from developing. If we can learn this from the developed countries our country would be a better place. In the developed countries, the Judiciary is free from external control which curbed the rate of corruption and embezzlement of funds.
– Diversification of resources.
These Developed countries did not just focus on one aspect of their resources. They diversified and utilized other economic resources to the maximum. Using Nigeria as a case study. After he discovery of crude oil, she left other of her natural endowments because crude was seen as a get rich quick resource.
– Government spending.
Today’s low-income countries spend more than twice on average than today’s advanced economies spent more than a century ago (Figure 1). To be sure, this difference reflects the lack of the tax instruments and systems we have today. From 1850 until the early 1900s, customs duties and excises provided the bulk of government revenues, while the personal income tax and VAT were not introduced in countries until later.
– fiscal and market institutions.
Government spending in the developed countries increased substantially as they reevaluated the role of government amid rapid industrialization and globalization and new taxes became commonplace. The shift from agrarian to industrial to post-industrial economies required different worker skills. Economic disruptions reshaped governments in the past, as is happening now with the changing world of work, leading to a large expansion of social insurance and protection spending.
There are many lessons to be learned from this developed countries which if enforced will boost our economy and other underdeveloped countries.

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.

*Economics institutions are established government organizations to control the economy, regulate the economy and improve the welfare of its citizens in general. Example includes the Central bank of Nigeria, Bank of Agriculture, Marchant banks, mortgage banks, etc.
So how do these economic institutions shape problems of underdevelopment and prospects for successful development?
-Regulation of Monetary Supply
Financial institutions like the central bank help in regulating the money supply in the economy. They do it to maintain stability and control inflation. The central bank applies various measures like increasing or decreasing repo rate, cash reserve ratio, open market operations, i.e., buying and selling government securities to regulate liquidity in the economy.
– youth and women empowerment
Some of this economic institution train youths and women to learn certain skill like soap making, tailoring, etc.
– lending of funds.
They also lend funds to people who wish to borrow money to fund their ideas under certain terms and conditions.
– Investment Advice
There are a number of investment options available at the disposal of individuals as well as businesses. But in the current swift changing environment, it is very difficult to choose the best option. Almost all financial institutions (banking or non-banking) have an investment advisory desk that helps customers, investors, businesses to choose the best investment option available in the market according to their risk appetite
and other factors.
– Insurance Services
Financial institutions, like insurance companies which helps to mobilize savings and investment in productive activities. In return, they provide assurance to investors against their life or some particular asset at the time of need. In other words, they transfer their customer’s risk of loss to themselves.

3. How can the extremes between rich and poor be so very great?

– the level of education.
This is the number one factor that creates wealth inequality between the rich and the poor especially in the underdeveloped countries. The number of illiterates and school drop outs are so much. There is a popular saying that the difference between the rich and the poor is what they know. And because there are lots of uneducated women, children, youths in most underdeveloped country and few educated, it creates the inequality.
– collateral.
Loan opportunities most times favours the rich more that the poor because of the required collateral like landed aassets, etc by banks and other institutions which the rich can easily have and the poor don’t. Making the rich easily make use of opportunities.
– Risk and investment.
The poor most times spends more on consumption than investment while the rich spends more on investment than consumption.

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
– Natural resources.
– level of technology
– Human resources
– industrialization
– Trade
– Invention and Innovation
– Social and political structure
* Why do some countries make rapid progress toward development while many others remain poor?
In answering this question, I’m going to mention one point and that is;
– Good leadership.
Using Nigeria as a case study, we have all the resources that can made a country blossom yet we are the capital poverty city of the world. Why?
BAD LEADERSHIP.

Name: Asogwa Rita chekwube, Reg No:2018/SD/37347 , Dept:Edu/Economics, course code Eco 361.

Question No 1; What can be learned from the historical of economic world? are the initial conditions similar or different for contemporary developing countries faced on the eve of their industrialization.

Answer

For the last two decades or so, the developing countries have been under great pressure from the developed countries and the international institutions that they control – such as the International Monetary Fund, the World Bank, the World Trade Organisation – to adopt a set of ‘good policies’, especially free trade, and ‘good institutions’, such as strong patent law, in order to foster their economic development.

The historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now recommend to, or even force upon, the developing countries.
Virtually all of today’s developed countries used tariff protection and subsidies to develop their industries, and in the earlier stages of their development, they did not even have such ‘basic’ institutions as democracy, central banks, patent law, or professional civil services.

Given that the adoption of ‘good policies’ and ‘good institutions’ has failed to generate the promised acceleration of economic development in the developing world, and has in some cases even led to economic and social collapses, a radical re-thinking of the development orthodoxy is required.

Above all, the conditions attached to bilateral and multilateral financial assistance to developing countries should be radically changed, on the recognition that the orthodox recipe is not working, and that there can be no single recipe of ‘best practice’ policies that everyone should use.

Second, the WTO rules should be re-written so that the developing countries can more actively use tariffs and subsidies for industrial development.

Third, improvements in institutions should be encouraged, but this should not be equated with imposing a fixed set of today’s – not even yesterday’s –
Anglo-American institutions on all countries; nor should it be attempted in haste, as institutional development is a lengthy and costly process.

Question No 2 : what are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development

Answer

The term “Economic Institutions” refers to two things:

1. Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. The Internal Revenue Service (the IRS—the government tax-collection agency), the U.S. Federal Reserve (the government producer of money), the National Bureau of Economic Research (a private research agency) are all examples of economic institutions.
2. Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.
Economists are interested not only in understanding specific existing institutional agencies, but also in the more exciting question of why some institutions evolve and others don’t. Why do institutions differ in one country to the next? Why do some institutions take centuries to get started while other spring up in a few years? Why do some institutions evolve spontaneously in general society? When does government get involved in supervising societal institutions? Does the wording of a Constitution or the structure of a country’s legal or religious background influence the economic institutions that arise in a country?

Question No 3: How can the extremes between rich and poor be so very great.

Answer

Extreme inequality is out of control. Hundreds of millions of people are living in extreme poverty while huge rewards go to those at the very top. There are more billionaires than ever before, and their fortunes have grown to record levels. Meanwhile, the world’s poorest got even poorer.

Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education.

These policies hit the poor hardest. The human costs are devastating, with women and girls suffering the most. Despite their huge contribution to our societies through unpaid care work, they are among those who benefit the least from today’s economic system.

This has to change – and change is possible.

1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.

2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls

3. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.

4. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.

5. Inequality is sexist. With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity.

A fairer world is possible
The growing gap between rich and poor is undermining the fight against poverty, damaging our economies and tearing our societies apart.

Yet inequality is not inevitable – it is a political choice.

Governments around the world must act now to build a new, human economy that values what truly matters to society, rather than fueling an endless pursuit of profit. An economy that values the care work of women and girls instead of billionaires’ wealth. An economy that works for everyone, not just a fortunate few.

Question No 4: what are the sources of national and international economic growth? Why do some countries make rapid progress towards development while many others remains poor.

Answer

The following points highlight the four important sources of national and international economic growth. The sources are: 1. Human Resources 2. Natural Resources 3. Capital Formation 4. Technological Change and Innovation.

1. Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force.

Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.

A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.

Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.

2. Natural Resources:
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.

Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.

Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.

3. Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.

In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.

Accumulating capital, as we have seen, requires a sacrifice of current consumption over many years. Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists believe that the low national savings rate in the United States—only 4 percent of output in 1996— poses a major economic problem for the country.

When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples.

All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure investments are effectively undertaken.

4. Technological Change and Innovation:
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.

Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.

Technological change denotes changes in the processes of production or introduction of new products or services. Process inventions that have greatly increased productivity were the steam engine, the generation of electricity, the internal-combustion engine, the wide-body jet, the photocopier machine, and the fax machine. Fundamental product inventions include the telephone, the radio, the airplane, the phonograph, the television, and the VCR.

The most dramatic technological developments of the modern era are occurring in electronics and computers, where today’s tiny notebook computers can outperform the fastest computer of the 1960s. These inventions provide the most spectacular examples of technological change, but technological change is in fact a continuous process of small and large improvements, as witnessed by the fact that the United States issues over 100,000 new patents annually and that there are millions of other small refinements that are part of the routine progress of an economy. For the most part, technology advances in a quiet, unnoticed fashion as small improvements increase the quality of products or the quantity of output.

Occasionally, however, changes in technology create headlines and produce unforgettable visual images. During the war in the Persian Gulf in 1991, the world was stunned by the tremendous advantage that high-technology weapons—stealth aircraft, “smart” bombs, antimissile missiles—gave to the United States and its allies against an opponent armed with a technology that was but a few years behind. Civilian technological advances—computers, telecommunications, and other high-technology sectors—are less dramatic but contribute greatly to the increase in living standards of market economies.

Because of its importance in raising living standards, economists have long pondered how to encourage technological progress. Increasingly, it is becoming clear that technological change is not a mechanical procedure of simply finding better products and processes.

Instead, rapid innovation requires the fostering of an entrepreneurial spirit. Consider today’s U.S. computer industry, where even enthusiasts can hardly keep up with the stream of new hardware configurations and software packages

Why did the entrepreneurial spirit thrive here and not in Russia, home to many of the great scientists, engineers, and mathematicians? One key reason is the combination of an open spirit of inquiry and the lure of free-market profits in Silicon Valley in comparison to the secrecy and deadening atmosphere of central planning in Moscow.

Economic growth inevitably rides on the four wheels of labour, natural resources, capital, and technology. But the wheels may differ greatly among countries, and some countries combine them more effectively than others.

Name: ogbogu precious adanna
Reg no: 2018/242467
Dept: EDUCATION/ECONOMICS
ASSIGNMENT
1A. What can be learned from the historical record of economic progress in the now developed world?Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
All of today’s developed countries used tariff protection and subsidies to develop their industries. A tariff is a tax imposed by a government of a country or a supranational union on imports or exports of goods. Taxing imports means people are less likely to buy them as they become more expensive. The intention is that they buy local products instead, boosting their country’s economy.Their motive then was to protect infant industries and to allow import substitution industrialization i.e replacing foreign import with domestic production.
Government seek to implement subsidies to encourage production and consumption in specific industries. When government subsidies are implemented to the supplier, an industry is able to allow its producers to produce more goods and services. This increases the overall supply of that good or service, which increases the quantity demanded of that good or service and lowers the overall price of the good or service.
There should be the good economic policies and institutions that the developed countries themselves used in order to develop_such liberalization of trade and investment and strong patent law.
The initial conditions are similar to what the developed countries faced on the eve of their industrialization.
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development?
Economic institutions are laws, common practices and organization in the society that affects the economy. It can also be defined as the formal and informal rules that organizes the economic flow and activity of a country.
A company or an organization that deals with money or with managing the distribution of money, goods and services in an economy. Examples are banks, government organization and investment funds.
They help solve problem of underdevelopment by:
1. Providing employment
2. Social stratification
3. They also make sure that resources are properly allocated and also ensure that the poor or those with fewer resources are protected.
4. They also encourage trust by providing policing and justice system which adhere to a common set of laws.
3. How can the extremes between rich and poor be so very great?
Many government are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet understanding vital public services like healthcare and education. Thereby making the rich to have more money to fund their businesses and send their children to a good and expensive schools while the poor keep getting poorer as the money left after the taxes has been paid is barely enough to feed their families talk less of sending their children to a better school thereby leaving them with no choice but to settle for the underfunded public services like the education and healthcare.
4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
The sources of national and international economic growth include
1. Natural resources
2. Technology
3. Human capital
4. Trade
5. Innovation
6. Industrialization
7. Social and political structure.
The reasons why some countries make rapid progress toward development is because they make use of these of national and international economic growth listed above while others only depend on natural resources and human capital.

Name: OYIBE, EBERE IZUINYA
Reg no: 2018/245131
Dept: Economics
Course: Eco 361.
Email: ebereoyibe@gmail.com

1a. What can be learned from the historical record of economic progress in the now developed world?
In the last 25 years, the dominant development paradigm has been based on the belief that the role of the government should be confined to providing macroeconomic stability, protection of property rights, and the provision of public goods. Starting in the late 1970s and the early 1980s, state-led and nationalistic development strategies, which most developing countries pursued in the 1960s and the 1970s, were denounced as having created inefficiencies, corruption, and slow growth.
As a result, a set of policies, known as neo-liberal policies, was recommended, comprising liberalisation of trade and foreign investment, privatisation of state-owned enterprises, deregulation of domestic industries, more ‘prudent’ macroeconomic policy, and a stronger protection of intellectual property rights.
For good and bad reasons, neo-liberal policies have been very influential in Africa. The relatively sluggish economic performance of the continent in the 1960s and the 1970s, compared to
the rest of the developing world, created greater scepticism about the state-led development
strategies. The continuous foreign exchange crises that most countries in the continent have
experienced have made it necessary for them to go to the Bretton Woods institutions – that is, the IMF and the World Bank – more frequently, making it unavoidable for them to accept the neo-liberal policies conditionalities imposed by those institutions.
Unfortunately, neo-liberal policies have produced very poor outcomes in Africa.
Per capita income in Sub-Saharan Africa used to grow at 1.6% in the 1960s and the 1970s. Between
1980 and 2004, it shrank at the rate of 0.3%
The following are measures the developing countries need to take:

i. Governments can advance development even with low levels of government spending:-
Today’s low-income countries spend more than twice on average than today’s advanced economies spent more than a century ago.
ii.Developing economies need to focus on building fiscal and market institutions before rising spending needs—and not after they materialize:-
Government spending in the Advanced 14 increased substantially since 1960 as they reevaluated the role of government amid rapid industrialization and globalization and new taxes became commonplace. The shift from agrarian to industrial to post-industrial economies required different worker skills. Economic disruptions reshaped governments in the past, as is happening now with the changing world of work, leading to a large expansion of social insurance
iii. The use of tariffs and subsidies:-
Almost all of today’s rich countries used tariff protection and subsidies to develop their industries in the earlier stages of their development.
iv. Government spending has been countercyclical since World War II in almost all advanced economies, even with the sustained trend of spending increases:-
Countercyclical fiscal policy is a must for today’s developing countries, especially for those with abundant natural resources. However, there is overwhelming evidence that fiscal policy has been consistently pro-cyclical in developing countries, resulting in profound macroeconomic imbalances, unproductive debt build-ups, and ongoing instability
v. A radical rethinking of the development orthodoxy is required since the adoption of ‘good policies’ and ‘good institutions’ has failed to generate the promised acceleration of economic development in the developing world, and has in some cases even led to economic and social collapses.
1b. Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
The initial conditions for contemporary developing countries are not different from what the developed countries faced on the eve of their industrialization because they (developed countries) also encountered some challenges.

2a. What are economic institutions?
Economic institutions are institutions responsible for organizing the production, exchange, distribution and consumption of goods and services in an economy. They create the right environment to allocate scarce resources.
Economic institutions are responsible for organizing
the production, exchange, distribution and consumption
of goods and services.
Economic institution is also one of the basic institutions.
For the sake of survival each society has an economic system ranging from simple to complex.
2b. How do they (economic institutions) shape problems of underdevelopment and prospects for successful development?
i. Determining the costs of economic transactions
ii. Determining the degree of appropriability of return to investment,
iii. Determining the level for oppression and expropriation, and
iv. Determining the degree to which the environment is conducive to cooperation and increased social capital.
3. How can the extremes between the rich and the poor be very great?
i. Tax Evasion:
High tax rates are a major reason for the gap between rich and poor especially in India. Tax avoidance follows a high tax rate which leads to a parallel economy. In India the unofficial economy is as strong as the official economy. This is turn leads to more and more concentration of income and wealth in few hands.
ii. Unemployment:
Despite the governments continued efforts to generate employment, unemployment and underemployment continue to be a major reason for wealth inequality. This leads to a low labour productivity and ultimately pushes the unemployed and their families below the poverty line.
iii. Literacy among people:
Variation in levels of education plays an important role in creating inequality among people. An educated individual has the potential to reach higher positions and ultimately earn more as compared to a person is uneducated. As a result of this those who are not able to afford education or choose not too, are at a disadvantaged position as they earn lower salaries.
iv. Inflation:
Inflation is another major reason for the wide gap between rich and poor. During inflation the rising prices are not bagged by sufficient increase in wages. This leads to concentration of profits in few hands while the people with lower wages become losers. Moreover during rise in prices the workers in the organised sector get wages which partly offset the increase in prices but the real income of the informal sector does not rise.

v. Regressive Tax Structure:
The government highly depends on the indirect taxation system. But the system in regressive in nature and exaggerate the already existing financial burden on the common people. Over the years such taxes have created more and inequality.
vi. Wealth undertaxed:
While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments under tax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.

Other reasons like laws of inheritance, corruption and smuggling, gender discrimination,cost of professional training and the deteriorated condition of landless workers and marginal farmers have contributed to the increased wealth inequality.
4a. What are the sources of national and international economic growth?
i.Natural resources
ii.Human capital
iii.Trade
iv.Innovation
v.Technology
vi.Industrialization
vii. Social structure, and
viii.Political structures
ix. Entrepreneurship.
4b. Why do some countries make rapid progress towards development while many others remain poor?
The reasons are as follows:
i. Physical factors – some areas have a hostile or difficult landscape. This can make development more difficult. Examples of this are very hot climates or arid (a lack of water) climates which make it difficult to grow sufficient food.
ii. Economic factors – some countries have very high levels of debt. This means that they have to pay a lot of money in interest and repayments and there is very little left over for development projects.
iii. Environmental factors – some places experience environmental issues, which can prevent them from developing. Examples might be extreme flooding or desertification.
iv. Social factors – some parts of the world have issues that are caused by people. These include low levels of education, poor water quality or a lack of doctors.
v. Political factors – some countries are at war or the government may be corrupt. Therefore money does not reach the people who need it most and spending on areas such as education and infrastructure may be insufficient.
vi. Natural resources – some countries have an abundance of raw materials such as oil or precious minerals. These can be sold and the money invested into developing the country.

Name: Aziude Favour Ifunanyachukwu
Reg number: 2018/246568
Course: ECO 361(DEVELOPMENTAL ECONOMICS)
Department: COMBINED SOCIAL SCIENCE
Combination: (Economics/Sociology and Anthropology)
Questions
(1i) what can be learned from the historical record of economic progress in the now developed world.
For years now the developing countries have been under immense pressure from the developed countries and the international institutions that they control such as: The World Bank, The World Trade Organization etc. to adopt a set of ‘good policies’, especially free trade, and ‘good institutions’, such as strong patent law, in order to foster their economic development. However,the historical fact is that the rich countries did not develop on the basis of the policies and the institutions that they now recommend to, and force upon the developing countries.
The widespread use of tariffs and subsidies by almost all of today’s developed countries. They used tariff protection and subsidies to develop their industries in the earlier stages of their development. It is particularly crucial to note that Britain and the USA, the two countries that are supposed to have reached the summit of the world economy through free-market, free-trade policy, are actually the ones that most aggressively used protection and subsidies.
(1ii) Are the initial conditions similar or different from what the developed countries faced on the eve of their industrialization?
The initial condition above are totally different from what the developed countries faced on the eve of their industrialization. Most frequent problems faced by the developed countries are Inequality, high levels of unemployment and a lack of employment opportunities poor household amenities large areas of derelict land. While developing countries of today face Population growth, governmental efforts to combat population growth education for women to reduce population,shortage of resource capital and scarce human capital.

(2i) what are economic institutions? economic institutions are responsible for organizing the production, exchange, distribution and consumption of goods and services.Economic institution is also one of the basic institutions.Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior.
(2ii) How do they shape problems of underdevelopment and prospects for successful development.
Economic institutions have decisive influence on investments in physical and human capital, technology, and industrial production. … As a consequence, some groups or individuals will be able to gain more benefits than others given the set of the preexisting economic conditions and resource allocation.They determine attitudes, motivations and conditions for development. If institutions are elastic and encourage people to avail economic opportunities and further to lead higher standard of living and inspire them to work hard, then economic development will occur.
(3)how can the extreme between the rich and poor be so very great?
The world’s richest 1% have more than twice as much wealth as 6.9 billion people. Almost half of humanity is living on less than $5.50 a day.Because wealth is accumulated over time, it’s unsurprisingly typically higher on average than income. And as wealth is a source of investment, widening inequalities mean a growing gap between rich and poor in their abilities to take advantage of investment opportunities. policies to reduce economic inequality
Increase the minimum wage
Expand the Earned Income Tax,Build assets for working families,Invest in education, make the tax code more progressive.
(4)What are the sources of national and international economic growth?
a, human resources
b, natural resources
c, technology and innovation
d, Capital formation
(4ii) Why do some countries make rapid progress toward development while many others remain poor?
some parts of the world have issues that are caused by people. These include low levels of education, poor water quality or a lack of doctors.
Political factors: some countries are at war or the government may be corrupt.Some differences can be traced to such inherent factors as climate and geography. Policies affecting access to technology, sound money and banking practices, and prudent taxing and spending can improve or stifle economic growth.

Name: 0ffor chukwuebuka Donaldson
Reg no: 2018/248940
Course code: Eco 361
Department: Economics department

Questions
1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development

3. How can the extremes between rich and poor be so very great?

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?

Answer 1
economic progress in the new developed world is good planning and execution of government policies. Policies that brings development to the country and affects it’s people positively.
Such policies boils down to it’s formulation and articulation. That’s why the body that makes such laws must be ones with selfish minded people.
The historical record of such countries lies down in it’s well formulated policies which successive governments follows and adheres to.
The history of governments like United States of America, United kingdom etc that has embraced democracy has been there for successive administrations to follow. In such countries, they don’t change it’s policies overnight because it has been in existence for ages and any alteration may affect the country positively or negatively. The history of upcoming democracies like some African countries because of its inconsistencies and non adherance to the rule of law has resulted to policy summersault and disunity amongst it’s populace.
Countries with historical record of economic progress has witnessed steady development in all it’s frontiers because of its progressive economic policies.
Democracy: These countries has recommended very great success and their history is a case study for others to follow. For communist countries, they have equally followed their economic policies for years and it has been yielding good result for them.
What I came to realize in countries with historical record of economic progress is that there is consistency in government policies where it affects it’s economy and people. In my own opinion, I will say the initial conditions are similar for contemporary developing countries.

Answer 2
The term “Economic Institutions” refers to two things:

1. Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. The Internal Revenue Service (the IRS—the government tax-collection agency), the U.S. Federal Reserve (the government producer of money), the National Bureau of Economic Research (a private research agency) are all examples of economic institutions.

2. Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.
Economists are interested not only in understanding specific existing institutional agencies, but also in the more exciting question of why some institutions evolve and others don’t. Why do institutions differ in one country to the next?
Investment
when property rights are secure, owners of capital are more likely to invest, all other things being equal. If it is easy to trade, obtain credit, retain a reasonable share of the profits (that is, without excessive taxation) and to insure against risks, investment is again encouraged. Investment may also be stimulated when establishing companies or more informal economic groups, (and the organization of their functioning) is relatively straightforward.

Technical innovation
Again, secure intellectual property rights are likely to promote private investment in research and development of innovations.

Economic organisation
It is likely to be more effective and efficient, delivering the benefits of specialisation and economies of scale where they apply, when institutions facilitate transactions and co-operation between individuals, whether in formal companies or less formal co-operatives. It is easy to imagine that there will be reinforcing interactions between the factors. For example, economies that generate technical innovations readily and where economic organization is efficient are likely to be seen as having a good business environment and consequently likely to attract investment, thus it may well be that sets of institutions function in synergy to generate growth.
Institutions are also likely to have a profound influence on the pattern of economic growth and the distribution of rewards within economies and societies – and thereby affect levels of poverty. Property rights will clearly be important, since they assign entitlements to factors of production and may also affect the bargaining power of different groups in society. More subtle are the ways in which institutions governing transactions and economic co-operation allow those without immediate access to factors of production to obtain credit, rent land, trade and to form small companies or co-operatives, and thereby earn their livelihoods.
Establishing and protecting property rights.
Answer 3
Extreme inequality is out of control. Hundreds of millions of people are living in extreme poverty while huge rewards go to those at the very top. There are more billionaires than ever before, and their fortunes have grown to record levels. Meanwhile, the world’s poorest got even poorer.
Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education.
These policies hit the poor hardest. The human costs are devastating, with women and girls suffering the most. Despite their huge contribution to our societies through unpaid care work, they are among those who benefit the least from today’s economic system.

There are many reasons for economic inequality within societies, and they are often interrelated. Acknowledged factors that impact economic inequality include, but are not limited to:
1:Inequality in wages and salaries.
2: The income gap between highly skilled workers and low-skilled or no-skills workers.
3:Wealth concentration in the hands of a few individuals or institutions
4: Labor markets
5:Globalization
6:Technological changes
7:Policy reforms
8:Taxes
9:Education
10: Computerization and growing technology
major cause of economic inequality within modern economies is the determination of wages by the capitalist market. In the capitalist market, the wages for jobs are set by supply and demand. If there are many workers willing to do a job for a great amount of time, there is a high supply of labor for that job. If few people need that job done, there is low demand for that type of labor. When there is high supply and low demand for a job, it results in a low wage. Conversely, if there is low supply and high demand (as with particular highly skilled jobs), it will result in a high wage.

Answer 4
Human Resources
Labour inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.

Natural Resources
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.

Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.
Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.

Capital Formation
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.
Accumulating capital, as we have seen, requires a sacrifice of current consumption over many years. Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists believe that the low national savings rate in the United States—only 4 percent of output in 1996— poses a major economic problem for the country.
When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples.
All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure investments are effectively undertaken.

Technological Change and Innovation
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.
Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.
Technological change denotes changes in the processes of production or introduction of new products or services. Process inventions that have greatly increased productivity were the steam engine, the generation of electricity, the internal-combustion engine, the wide-body jet, the photocopier machine, and the fax machine. Fundamental product inventions include the telephone, the radio, the airplane, the phonograph, the television, and the VCR.

The most dramatic technological developments of the modern era are occurring in electronics and computers, where today’s tiny notebook computers can outperform the fastest computer of the 1960s. These inventions provide the most spectacular examples of technological change, but technological change is in fact a continuous process of small and large improvements, as witnessed by the fact that the United States issues over 100,000 new patents annually and that there are millions of other small refinements that are part of the routine progress of an economy. For the most part, technology advances in a quiet, unnoticed fashion as small improvements increase the quality of products or the quantity of output.

Why do some countries grow faster than others?

Government
In most countries government has a significant influence on economic performance, especially due to its size. In the United States, government spending accounts for one-fifth of GDP. The taxing and spending policies of the government affect the incentives to spend and invest.
Some economists argue that the government may affect the overall performance of the economy. Regulations, taxes and government spending can vitalize or stifle economic activity in various sectors of the economy. On one hand, if the government spends more than it collects in tax revenues, deficits can slow the economy. On the other hand, a well-planned road system can increase market efficiency and help improve the economy.
The government plays a role in the economy by correcting for market failures and protecting property rights. Market failures happen when the market has an effect outside the buyers and sellers. For example, companies that emit pollutants into the air may cause health risks for other people. In response, the government might regulate how much pollutants a company can release. Schools and other basic infrastructure, such as roads and bridges, benefit almost everyone. However, the market may not produce schools and roads since the costs and benefits of such projects are shared across a large number of people. In these cases, the government steps in to provide these needs.
Property rights provide the rules of ownership and trade so consumers and businesses know what they can and can’t do in the marketplace. For example, consumers are protected from misleading information by consumer protection laws and inventors are protected by patents and copyright laws. Without well-defined property rights, the players in the market can’t depend on particular outcomes important for making purchasing or investment plans. Countries with relatively well-organized and consistent legal systems will tend to have more efficient markets than countries with loose and inconsistent legal systems.
International trade and finance
Just as individuals specialize in an occupation they do best, countries specialize in producing particular goods and services depending on their natural resources and education of their labor force. Countries with large areas of nutritious soil might specialize in agriculture, whereas a country with a labor force trained in electronics might specialize in producing computer chips. Countries can specialize in the goods and services they produce best and trade for the goods and services they produce relatively less efficiently. The more countries can specialize and trade, the more economic growth they will realize in the long run. If trade is slowed, countries will have to produce goods and services that they produce less efficiently instead of trading for them.
Trade policy, such as quotas and tariffs, directly affects trade flows. Also, exchange rates among countries can affect trade as the cost of goods and services from other countries fluctuates with movements in exchange rates. Some economists consider these factors pivotal in terms of economic growth. For example, if the United States places a tariff on imported automobiles, the price of cars in the United States will likely increase.

Technology and investment
Technology refers to advancement in knowledge and how it’s employed in the productive process. For example, the micro-chip processor helped businesses incorporate computer systems into the production process and sales. Countries that have a wealth of research and development and/or access to new technology often have a more productive work force than countries without access to technology. As productivity increases, economic growth increases. Investment in new technology or buildings can lay the groundwork for growth in years to come. Countries with institutions that facilitate the appropriation of technology and accommodate investment will realize increases in total output.
Political, social and geographical conditions.
Countries with challenging terrain or weather may need to find creative ways to adapt to their surroundings. The political and social climate of a country influences the total output of a country’s economy. Crime, poverty, income disparity and armed conflicts can be a cause, or a result, of low economic growth. Nevertheless, social problems can develop despite high economic growth. The culture of a country can have an effect on what and how goods and services are produced. Cultural tendencies can create biases for and against various market mechanisms and may influence the pace of production. The location and climate of a country can also contribute to economic success or difficulty.

Money and banking
A central bank, such as the Federal Reserve in the United States or the Bundesbank in Germany, is responsible for regulating the amount of money in circulation. Too much money in circulation can drive prices up, causing inflation. Too little money can pull prices down, which can depress economic activity. Finding the right balance is a central bank’s primary responsibility. This places a central bank in a position to facilitate economic growth by stabilizing overall prices.
Some central banks act as a regulator of banks and provide oversight for the payments system, which includes cash, checks and electronic payments. At the turn of the century in the United States, widespread bank failures caused panic among depositors throughout the economy. Today, bank examiners of the Fed and other government agencies help locate small problems in banks before they become bigger. In its role as overseer of the payments system, the Fed helps keep the gears of the economy well greased, allowing for the easy flow of goods and services.Name: 0ffor chukwuebuka Donaldson
Reg no: 2018/248940
Course code: Eco 361
Department: Economics department

Questions
1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development

3. How can the extremes between rich and poor be so very great?

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?

Answer 1
economic progress in the new developed world is good planning and execution of government policies. Policies that brings development to the country and affects it’s people positively.
Such policies boils down to it’s formulation and articulation. That’s why the body that makes such laws must be ones with selfish minded people.
The historical record of such countries lies down in it’s well formulated policies which successive governments follows and adheres to.
The history of governments like United States of America, United kingdom etc that has embraced democracy has been there for successive administrations to follow. In such countries, they don’t change it’s policies overnight because it has been in existence for ages and any alteration may affect the country positively or negatively. The history of upcoming democracies like some African countries because of its inconsistencies and non adherance to the rule of law has resulted to policy summersault and disunity amongst it’s populace.
Countries with historical record of economic progress has witnessed steady development in all it’s frontiers because of its progressive economic policies.
Democracy: These countries has recommended very great success and their history is a case study for others to follow. For communist countries, they have equally followed their economic policies for years and it has been yielding good result for them.
What I came to realize in countries with historical record of economic progress is that there is consistency in government policies where it affects it’s economy and people. In my own opinion, I will say the initial conditions are similar for contemporary developing countries.

Answer 2
The term “Economic Institutions” refers to two things:

1. Specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. The Internal Revenue Service (the IRS—the government tax-collection agency), the U.S. Federal Reserve (the government producer of money), the National Bureau of Economic Research (a private research agency) are all examples of economic institutions.

2. Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.
Economists are interested not only in understanding specific existing institutional agencies, but also in the more exciting question of why some institutions evolve and others don’t. Why do institutions differ in one country to the next?
Investment
when property rights are secure, owners of capital are more likely to invest, all other things being equal. If it is easy to trade, obtain credit, retain a reasonable share of the profits (that is, without excessive taxation) and to insure against risks, investment is again encouraged. Investment may also be stimulated when establishing companies or more informal economic groups, (and the organization of their functioning) is relatively straightforward.

Technical innovation
Again, secure intellectual property rights are likely to promote private investment in research and development of innovations.

Economic organisation
It is likely to be more effective and efficient, delivering the benefits of specialisation and economies of scale where they apply, when institutions facilitate transactions and co-operation between individuals, whether in formal companies or less formal co-operatives. It is easy to imagine that there will be reinforcing interactions between the factors. For example, economies that generate technical innovations readily and where economic organization is efficient are likely to be seen as having a good business environment and consequently likely to attract investment, thus it may well be that sets of institutions function in synergy to generate growth.
Institutions are also likely to have a profound influence on the pattern of economic growth and the distribution of rewards within economies and societies – and thereby affect levels of poverty. Property rights will clearly be important, since they assign entitlements to factors of production and may also affect the bargaining power of different groups in society. More subtle are the ways in which institutions governing transactions and economic co-operation allow those without immediate access to factors of production to obtain credit, rent land, trade and to form small companies or co-operatives, and thereby earn their livelihoods.
Establishing and protecting property rights.
Answer 3
Extreme inequality is out of control. Hundreds of millions of people are living in extreme poverty while huge rewards go to those at the very top. There are more billionaires than ever before, and their fortunes have grown to record levels. Meanwhile, the world’s poorest got even poorer.
Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education.
These policies hit the poor hardest. The human costs are devastating, with women and girls suffering the most. Despite their huge contribution to our societies through unpaid care work, they are among those who benefit the least from today’s economic system.

There are many reasons for economic inequality within societies, and they are often interrelated. Acknowledged factors that impact economic inequality include, but are not limited to:
1:Inequality in wages and salaries.
2: The income gap between highly skilled workers and low-skilled or no-skills workers.
3:Wealth concentration in the hands of a few individuals or institutions
4: Labor markets
5:Globalization
6:Technological changes
7:Policy reforms
8:Taxes
9:Education
10: Computerization and growing technology
major cause of economic inequality within modern economies is the determination of wages by the capitalist market. In the capitalist market, the wages for jobs are set by supply and demand. If there are many workers willing to do a job for a great amount of time, there is a high supply of labor for that job. If few people need that job done, there is low demand for that type of labor. When there is high supply and low demand for a job, it results in a low wage. Conversely, if there is low supply and high demand (as with particular highly skilled jobs), it will result in a high wage.

Answer 4
Human Resources
Labour inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.

Natural Resources
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.

Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.
Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.

Capital Formation
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.
Accumulating capital, as we have seen, requires a sacrifice of current consumption over many years. Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists believe that the low national savings rate in the United States—only 4 percent of output in 1996— poses a major economic problem for the country.
When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples.
All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure investments are effectively undertaken.

Technological Change and Innovation
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.
Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.
Technological change denotes changes in the processes of production or introduction of new products or services. Process inventions that have greatly increased productivity were the steam engine, the generation of electricity, the internal-combustion engine, the wide-body jet, the photocopier machine, and the fax machine. Fundamental product inventions include the telephone, the radio, the airplane, the phonograph, the television, and the VCR.

The most dramatic technological developments of the modern era are occurring in electronics and computers, where today’s tiny notebook computers can outperform the fastest computer of the 1960s. These inventions provide the most spectacular examples of technological change, but technological change is in fact a continuous process of small and large improvements, as witnessed by the fact that the United States issues over 100,000 new patents annually and that there are millions of other small refinements that are part of the routine progress of an economy. For the most part, technology advances in a quiet, unnoticed fashion as small improvements increase the quality of products or the quantity of output.

Why do some countries grow faster than others?

Government
In most countries government has a significant influence on economic performance, especially due to its size. In the United States, government spending accounts for one-fifth of GDP. The taxing and spending policies of the government affect the incentives to spend and invest.
Some economists argue that the government may affect the overall performance of the economy. Regulations, taxes and government spending can vitalize or stifle economic activity in various sectors of the economy. On one hand, if the government spends more than it collects in tax revenues, deficits can slow the economy. On the other hand, a well-planned road system can increase market efficiency and help improve the economy.
The government plays a role in the economy by correcting for market failures and protecting property rights. Market failures happen when the market has an effect outside the buyers and sellers. For example, companies that emit pollutants into the air may cause health risks for other people. In response, the government might regulate how much pollutants a company can release. Schools and other basic infrastructure, such as roads and bridges, benefit almost everyone. However, the market may not produce schools and roads since the costs and benefits of such projects are shared across a large number of people. In these cases, the government steps in to provide these needs.
Property rights provide the rules of ownership and trade so consumers and businesses know what they can and can’t do in the marketplace. For example, consumers are protected from misleading information by consumer protection laws and inventors are protected by patents and copyright laws. Without well-defined property rights, the players in the market can’t depend on particular outcomes important for making purchasing or investment plans. Countries with relatively well-organized and consistent legal systems will tend to have more efficient markets than countries with loose and inconsistent legal systems.
International trade and finance
Just as individuals specialize in an occupation they do best, countries specialize in producing particular goods and services depending on their natural resources and education of their labor force. Countries with large areas of nutritious soil might specialize in agriculture, whereas a country with a labor force trained in electronics might specialize in producing computer chips. Countries can specialize in the goods and services they produce best and trade for the goods and services they produce relatively less efficiently. The more countries can specialize and trade, the more economic growth they will realize in the long run. If trade is slowed, countries will have to produce goods and services that they produce less efficiently instead of trading for them.
Trade policy, such as quotas and tariffs, directly affects trade flows. Also, exchange rates among countries can affect trade as the cost of goods and services from other countries fluctuates with movements in exchange rates. Some economists consider these factors pivotal in terms of economic growth. For example, if the United States places a tariff on imported automobiles, the price of cars in the United States will likely increase.

Technology and investment
Technology refers to advancement in knowledge and how it’s employed in the productive process. For example, the micro-chip processor helped businesses incorporate computer systems into the production process and sales. Countries that have a wealth of research and development and/or access to new technology often have a more productive work force than countries without access to technology. As productivity increases, economic growth increases. Investment in new technology or buildings can lay the groundwork for growth in years to come. Countries with institutions that facilitate the appropriation of technology and accommodate investment will realize increases in total output.
Political, social and geographical conditions.
Countries with challenging terrain or weather may need to find creative ways to adapt to their surroundings. The political and social climate of a country influences the total output of a country’s economy. Crime, poverty, income disparity and armed conflicts can be a cause, or a result, of low economic growth. Nevertheless, social problems can develop despite high economic growth. The culture of a country can have an effect on what and how goods and services are produced. Cultural tendencies can create biases for and against various market mechanisms and may influence the pace of production. The location and climate of a country can also contribute to economic success or difficulty.

Money and banking
A central bank, such as the Federal Reserve in the United States or the Bundesbank in Germany, is responsible for regulating the amount of money in circulation. Too much money in circulation can drive prices up, causing inflation. Too little money can pull prices down, which can depress economic activity. Finding the right balance is a central bank’s primary responsibility. This places a central bank in a position to facilitate economic growth by stabilizing overall prices.
Some central banks act as a regulator of banks and provide oversight for the payments system, which includes cash, checks and electronic payments. At the turn of the century in the United States, widespread bank failures caused panic among depositors throughout the economy. Today, bank examiners of the Fed and other government agencies help locate small problems in banks before they become bigger. In its role as overseer of the payments system, the Fed helps keep the gears of the economy well greased, allowing for the easy flow of goods and services.

NAME: CHUKWU PRECIOUS ADA
REG NO: 2018/244278
DEPT: ECONOMICS EDUCATION
COURSE NO: ECO 361
COURSE TITLE: DEVELOPMENT ECONOMICS
EMAIL: chukwuprecious09@gmail.com

QUESTION 1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

ANSWER: The last two decades have been a bad time for the developing countries. Their average annual per capita income growth rate has been halved (from 3% to 1.5%) between the 1960-80 period and the 1980-2000 period. In particular, Latin America has virtually stopped growing, while Sub-Saharan Africa and most ex-Communist countries have experienced a fall in absolute income. Economic instability has increased markedly, as manifested in the dozens of financial crises we have witnessed over the last decade alone. Income inequality has been growing in many developing countries and poverty has increased, rather than decreased, in a significant number of them.
To most of those who govern the global economy today – the developed country policy-makers, international business leaders, and the international economic organisations (the International Monetary Fund, the World Bank, and the World Trade Organisation) – the solution to this problem is clear. What the developing countries need, they argue, is the ‘good’ economic policies and institutions that the developed countries themselves used in order to develop – such as liberalisation of trade and investment and strong patent law. Their belief in their own recommendations is so absolute that in their view it has to be imposed on the developing countries at all costs through strong bilateral and multilateral external pressures.
As is well known, there have been heated debates on whether these policies and institutions are suitable to the developing countries. The curious thing is that even those who are sceptical of their suitability rarely question whether these are the policies and the institutions that the developed countries actually used in order to become rich. However, the historical fact is that the rich countries did not develop on the basis of the policies and the institutions that they now recommend to, and often force upon, the developing countries.

(B) The initial conditions are similar for all countries before industrialization; what is different is the attitude of the people towards economic progression. For instance, the developed countries factor in the people wellbeing and social welfare in any development or industrialization plan. The same cannot be said for developing countries like Nigeria.

QUESTION 2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.

ANSWER: Economic Institutions can be defined as an organization, whether public or private, that engages in the collection and research of economic data or that provides a service or product deemed economically central to a nation’s economy. Examples include national economic bureaus, tax collection agencies or university departments dedicated to economic research. These institutions are also considered foundational structures or organizations in society that are inherent to the economic system or culture, such as the banking systems, investment markets or even a custom, such as providing children with a weekly allowance.

This essay aims to explain how institutions shapes the economic development and to provide evidence for the arguments made. It argues that institutions support economic development through four broad channels: determining the costs of economic transactions, determining the degree of appropriability of return to investment, determining the level for oppression and expropriation, and determining the degree to which the environment is conducive to cooperation and increased social capital. Evidence is derived from the literature, from comparison of countries, and from examples at the micro level.

In the words of North (1990, p. 4): “Institutions are the rules of the game in a society, […] the humanly devised constraints that shape human interaction. […] They structure incentives in human exchange, whether political, social or economic”. Institutions comprise for example contracts and contract enforcement, protection of property rights, the rule of law, government bureaucracies, financial markets. They also, however, include habits and beliefs, norms, social cleavages and traditions in education (so-called informal institutions). Formal institutions typically tend to be the crystallization of informal institutions (North, 1990), as social norms in the realms of gender, class and caste, for example, determine rules of political participation and representation, methods of economic exchange, and inclusion of different groups in society (Pateman, 1988).

In a landmark study of new institutional economics, Rodrik, Subramanian and Trebbi (2002) assess the relative importance of institutions, geography and integration (trade) in determining the differences in incomes between the world’s most developed countries and the poorest ones. They find that institutional determinants “trump” all others. It is not a new intuition that for the prospering of economic activity institutions matter. Adam Smith had already noted this is surprising detail, referring to the importance of a justice system, private property rights, and the rule of law (The Wealth of Nations). Aron (2000) surveys the studies which correlate indices of development to institutional ones: 7 find a positive correlation with property rights and enforcement, 10 with civil liberties, 10 others with political rights and democracy, 4 with institutions for cooperation (e.g. clubs and associations), and 15 find a negative correlation of development with political instability. The paragraphs below explain why institutions appear so important to economic development.

(a) Thus institutions determine the extent to which those in power are able to expropriate the economy’s resources to their private advantage. Unequal institutions strongly limit development by reducing the capacity of individuals to access resources, expand production and increase their incomes. A comparative analysis of development trajectories of countries indicates that institutions which benefit elites and allow their appropriation of resources and products have perpetuated underdevelopment.
Countries which have undergone colonial domination tend to be plagued by such extractive institutions. These have outlived the gaining of independence on behalf of these countries, and their control has largely been taken over by local elites. There are countless examples of societal outcomes the cause of which can be traced to institutional arrangements of many decades before.

(b) The unequal landownership system in Latin America (latifundios) has been indicated a fundamental cause of its underdevelopment. There is evidence that it limits the development of greater rural employment and higher rural incomes (World Bank, 2008, ch 6). ECLA, the Economic Commission for Latin America, has repeatedly flagged the importance of land reform in the process of poverty-reducing agriculture and rural development. A report by the United Nations Food and Agriculture Organization stresses that this is particularly urgent as population growth threatens to increase income inequalities, and technological developments in agriculture may serve the landowner elites to further consolidate their grip on land and agriculture, thus perpetuating the process of path dependency in the formation of institutions (UNFAO, 2006; see also Myrdal, 1992).

(c) Institutions which are conducive to development ensure greater self-expression, allow the free flow of information and encourage the formation of associations and clubs. These form prosperous social relationships, which are conducive to greater economic interaction by increasing levels of trust and wider availability of information (Putnam, 1993). They allow greater sharing of resources through democratic institutions and the use of the state to reduce the risk attached to economic activity (Bardhan, 2006, p.5). The welfare state is an example of an institution which pools resources to limit the negative effects of business cycles on incomes and unemployment. Institutions conducive to development pool resources to provide the investments in education, health and infrastructure which lie at the basis of economic interaction and are necessary and complementary to private investment. Informal institutions lie at the basis of an economy. They include public agencies, trade unions, community structures and professional associations. They make up the fabric which determines the response to laws and government decisions. Most often they shape these outcomes themselves.
There is wide-ranging evidence that institutions matter a great deal in determining the level of economic development of a country. Cross-country analyses use indicators such as degree of protection of property rights, the rule of law, and civic liberties and find that they are strongly correlated to economic performance. This essay has described why institutions are so important for economic development and has provided evidence for the claims made. It has identified four broad channels through which the correlation can be explained. Institutions determine the costs of economic transactions: they spur development in the form of contracts and contract enforcement, common commercial codes, and increased availability of information, all of which reduce the costs of transactions, risk, and uncertainty. Institutions determine the degree of appropriability of return to investment: protection of property rights and the rule of law spur investment and thus increase incomes.

(d) Institutions also determine the scope for oppression and expropriation of resources by elites: unequal institutions which allow the dominance of powerful elites over economic exchange strongly limit development, as can be seen in the case of many ex-colonial countries. Lastly, institutions determine the degree to which the environment is conducive to cooperation and increased social capital; inclusive and participatory institutions increase the flow of information and the extent to which resources can be pooled to reduce risk and ensure sustained levels of wealth. This fits nicely with the finding of historical studies that high quality institutions today are rooted in greater equality, political competition and cooperative norms in the distant past. Institutions strongly affect the economic development of countries and act in society at all levels by determining the frameworks in which economic exchange occurs. They determine the volume of interactions available, the benefits from economic exchange and the form which they can take.

QUESTION 3. How can the extremes between rich and poor be so very great?

ANSWER:
Economic inequality affects many areas of life, including life expectancy, education opportunities and health. According to Oxfam, it reinforces other inequalities such as those owed to gender, ethnicity or religion. In countries with growing income gaps, crime and violent conflicts are to increase too. Contrary to former beliefs, inequality hampers economic growth and its effects on reducing poverty, the NGO states.

The global community has acknowledged the problem. Reducing inequality is one of the Sustainable Development Goals (SDGs) that the UN adopted in 2015. Accordingly,  money and power must radically be redistributed, Oxfam argues. “Governments can close the gap between poor and rich if they break away from pure belief in the market and confront the interests of powerful elites,” the NGO states in a recent update of the summary of its 2014 report „Even it up – time to end extreme inequality“. Redistribution is the only way to create equal chances for all.

Ensuring equal opportunities  for women is another essential issue. Gender inequality and income inequality are closely related. Studies have shown that, in highly unequal societies, girls are less likely to get higher education, parliaments have fewer female members and the income gap between men and women is bigger. In Ethiopia, for instance, the poorest women residing in the countryside are six times less likely to have ever gone to school than the richest male city dwellers.
Oxfam demands equal rights for men and women, for example in laws concerning inheritance and land ownership. Moreover, the NGO is in favour of a fairer division of labour between the sexes. It also wants unpaid care work to be paid.
Most people all over the world reject strong inequality as unfair, unethical and harmful for society, as surveys show. Current debate on excessive manager salaries in Germany and Europe are a sign of such awareness, and so is criticism of corrupt “elites” who  are enriching themselves worldwide.  According to Oxfam, governments should listen to their people and exercise more control and regulation to reverse the trend towards growing inequality.

QUESTION 4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?

1. Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.

2. Natural Resources:
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.
Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.

3. Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.

When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples.
All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure investments are effectively undertaken.

4. Technological Change and Innovation:
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.
Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.

In conclusion economic growth inevitably rides on the four wheels of labour, natural resources, capital, and technology. But the wheels may differ greatly among countries, and some countries combine them more effectively than others.

(4b) Why do some countries make rapid progress toward development while many others remain poor?

A hundred years ago, Argentina was amongst the seven wealthiest nations in the world, but now ranks 43rd in terms of real per capita income. In 1950, Ghana’s per capita income was higher than that of South Korea; now South Korean people are more than 11 times wealthier than the citizens of Ghana. Meanwhile, more than 20 failed states and over a billion people have seen little progress in development in recent decades, whilst over three billion people have seen remarkable improvements in health, education and incomes.
Within countries, the contrast is even greater than between countries. Extraordinary achievements enjoyed by some occur alongside both the absolute and relative deprivation of others. What is true for advanced societies, such as the United Kingdom and United States, is even more so in most, but not all, developing countries.
Many factors accounting for the successes and failures in the extreme unevenness of development outcomes. There is an extensive literature which seeks to explain outcomes on the basis of natural resource endowments, geography, history, cultural or other.

The World Bank attributed the “East Asian Miracle” to sound macroeconomic policies with limited deficits and low debt, high rates of savings and investment, universal primary and secondary education, low taxation of agriculture, export promotion, promotion of selective industries, a technocratic civil service, and authoritative leaders. However, the Bank failed to highlight the extent to which the achievements came at the expense of civil liberties, and that far from being free markets the governments concerned subjugated the market (and suppressed organised labour), often with the generous support of the United States and other development and military aid programmes, following the Korean and Vietnam Wars.
Others have argued that South East Asia’s relative success had more to do with pursuing strategic rather than “close” forms of integration with the world economy. In other words instead of opting for unbridled economic liberalisation in line with the Neo-Classical market friendly approach to development, countries such as Japan, South Korea and Taiwan selectively intervened in the economy in an effort to ensure that markets flourished. Several well-known commentators including Ajit Singh, Alice Amsden and Robert Wade have documented the full range of measures adopted by these countries, which appear to constitute a purposive and comprehensive industrial policy. These measures include the use of long-term credit (at negative real interest rates), the heavy subsidization and coercion of exports, the strict control of multinational investment and foreign equity ownership of industry (in the case of Korea), highly active technology policies, and the promotion of large scale conglomerates together with restrictions on the entry and exit of firms in key industrial sectors. The relative contribution of selective forms of intervention on the one hand, and market friendly liberalisation and export orientation on the other, to the success of the South East Asian economies remains a subject of debate.

Poverty and Inequality
Income measures are only one dimension of poverty. Other indicators, including those relating to infant and child mortality, illiteracy, infectious disease, malnutrition and schooling are also important. A number of countries have made extraordinary strides in overcoming poverty. In some, progress has been across the board, whereas others have managed to achieve very significant progress on one dimension but fallen back on others. With similar levels of average per capita incomes, in Bangladesh average life expectancy is 71, whereas in Zimbabwe it is 60 and in Tanzania it is 61.
Inequality between countries and within countries requires an analysis which goes beyond the headline economic indicators. While average per capita incomes are growing in most countries, inequality is also growing almost everywhere. The world’s richest 20% of people account for three quarters of global income and consume about 80% of global resources, while the world’s poorest 20% consume well under 2% of global resources. Where poor people are is also changing. Twenty years ago over 90% of the poor lived in low income countries; today approximately three quarters of the world’s estimated one billion people living on less than $1.25 per day live in middle income countries.

Reference

Acemoglu, D., Johnson, S., and Robinson, J.A., 2001. “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review, 91, 5, December, pp. 1369-1401.

https://www.oxfam.de/system/files/20141029-even-it-up-extreme-inequality.pdf

Anup, S. (2010). Poverty facts and stats, global issues. Accessed October 10, 2015, from http://www.globalissues.org/article/26/poverty-facts-and-stats#src2

Cruz, M., Foster, J., Quillin, B., & Schellekens, P. (2015). Ending extreme poverty and sharing prosperity: Progress and policies. No 101740. Policy Research Notes (PRNs), The World Bank, p. 6 and table 1.Google Scholar

Diamond, J. (1997). Guns, germs and steel: A short history of everybody for the last 13,000 years. Geographical explanations of development. London: Vintage.Google Scholar

Easterly, W., & Levine, R. (2003). Tropics, germs and crops: How endowments influence economic development. Journal of Monetary Economics, 50(1), 3–30.CrossRefGoogle Scholar

Hirschman, A. (1973). The changing tolerance for income inequality in the course of economic development. Inequality and development. Quarterly Journal of Economics, 87(4), 544–566.
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Name ;AGBO PEACE UCHECHUKWU
Reg No; 2018/242343
Department;Economics

Number 1a;
The lessons include;
•The importance of agriculture
Despite early emphasis on industrialization through import substitution, a first major lesson of postwar experience was that there is a close connection between the rate of growth in the output of the agricultural sector and the general rate of economic development. The high rates of economic growth are associated with rapid expansion of agricultural output and low rates of economic growth with the slow growth of agriculture. This is (in hindsight, at least) to be expected, since agriculture forms a large part of the total domestic product and of the exports of the developing countries. What is more interesting is that the expansion of agricultural output was by no means confined to those countries with an abundant supply of unused land to be brought under cultivation. Taiwan and South Korea, with some of the highest population densities in the world, were able to expand their agricultural output rapidly by a vigorous pursuit of appropriate policies. These included the provision of adequate irrigation facilities, enabling a succession of crops to be grown on the same piece of land throughout the year; the use of high-yielding seeds and fertilizers, which raised the yields per acre in a dramatic fashion; provision of adequate incentives for producers by setting producer prices at reasonable levels; and improvements in credit and marketing facilities and a general improvement in the economic organization of the agricultural sector. Agricultural development is important because it raises the incomes of the mass of the people in the countryside; in addition, it increases the size of the domestic market for the manufacturing sector and reduces internal economic disparities between the urban centres and the rural districts.

•The role of exports
A second conclusion to be drawn from experience is the close connection between export expansion and economic development. The high-growth countries were characterized by rapid expansion in exports. Here again it is important to note that export expansion was not confined to those countries fortunate in their natural resources, such as the oil-exporting countries. Some of the developing countries were able to expand their exports in spite of limitations in natural resources by initiating economic policies that shifted resources from inefficient domestic manufacturing industries to export production. Nor was export expansion from the developing countries confined to primary products. There was very rapid expansion of exports of labour-intensive manufactured goods. This phenomenon occurred not only in the extremely rapidly growing, newly industrialized countries (NICs)—Singapore, South Korea, and Taiwan, as well as Hong Kong—but also from other developing countries including Brazil, Argentina, and Turkey. Countries that adopted export-oriented development strategies (of which the most notable were the NICs) experienced extremely high rates of growth that were regarded as unattainable in the 1950s and ’60s. They were also able to maintain their growth momentum during periods of worldwide recession better than were the countries that maintained their import substitution policies.

•The importance of agriculture
Despite early emphasis on industrialization through import substitution, a first major lesson of postwar experience was that there is a close connection between the rate of growth in the output of the agricultural sector and the general rate of economic development. The high rates of economic growth are associated with rapid expansion of agricultural output and low rates of economic growth with the slow growth of agriculture. This is (in hindsight, at least) to be expected, since agriculture forms a large part of the total domestic product and of the exports of the developing countries. What is more interesting is that the expansion of agricultural output was by no means confined to those countries with an abundant supply of unused land to be brought under cultivation. Taiwan and South Korea, with some of the highest population densities in the world, were able to expand their agricultural output rapidly by a vigorous pursuit of appropriate policies. These included the provision of adequate irrigation facilities, enabling a succession of crops to be grown on the same piece of land throughout the year; the use of high-yielding seeds and fertilizers, which raised the yields per acre in a dramatic fashion; provision of adequate incentives for producers by setting producer prices at reasonable levels; and improvements in credit and marketing facilities and a general improvement in the economic organization of the agricultural sector. Agricultural development is important because it raises the incomes of the mass of the people in the countryside; in addition, it increases the size of the domestic market for the manufacturing sector and reduces internal economic disparities between the urban centres and the rural districts.

•The role of exports
A second conclusion to be drawn from experience is the close connection between export expansion and economic development. The high-growth countries were characterized by rapid expansion in exports. Here again it is important to note that export expansion was not confined to those countries fortunate in their natural resources, such as the oil-exporting countries. Some of the developing countries were able to expand their exports in spite of limitations in natural resources by initiating economic policies that shifted resources from inefficient domestic manufacturing industries to export production. Nor was export expansion from the developing countries confined to primary products. There was very rapid expansion of exports of labour-intensive manufactured goods. This phenomenon occurred not only in the extremely rapidly growing, newly industrialized countries (NICs)—Singapore, South Korea, and Taiwan, as well as Hong Kong—but also from other developing countries including Brazil, Argentina, and Turkey. Countries that adopted export-oriented development strategies (of which the most notable were the NICs) experienced extremely high rates of growth that were regarded as unattainable in the 1950s and ’60s. They were also able to maintain their growth momentum during periods of worldwide recession better than were the countries that maintained their import substitution policies.
Analysts have pointed to a number of reasons why the export-oriented growth strategy seems to deliver more rapid economic development than the import substitution strategy. First, a developing country able to specialize in producing labour-intensive commodities uses its comparative advantage in the international market and is also better able to use its most abundant resource—unskilled labour. The experience of export-oriented countries has been that there is little or no disguised unemployment once labour-market regulations are dismantled and incentives are created for individual firms to sell in the export market. Second, most developing countries have such small domestic markets that efforts to grow by starting industries that rely on domestic demand result in uneconomically small, inefficient enterprises. Moreover, those enterprises will typically be protected from international competition and the incentives it provides for efficient production techniques. Third, an export-oriented strategy is inconsistent with the impulse to impose detailed economic controls; the absence of such controls, and their replacement by incentives, provides a great stimulus to increases in output and to the efficiency with which resources are employed. The increasing capacity of a developing country’s entrepreneurs to adapt their resources and internal economic organization to the pressures of world-market demand and international competition is a very important connecting link between export expansion and economic development. It is important in this connection to stress the educative effect of freer international trade in creating an environment conducive to the acceptance of new ideas, new wants, and new techniques of production and methods of organization from abroad.

•The role of the international economy
In the modern view of development, an open, expanding international economy is the greatest support that the developed countries can provide for developing countries. Foreign aid can be extremely helpful in situations in which policies are conducive to development, but development will in any event be accelerated if the international economy is experiencing healthy growth. Removal of the trade barriers that developed countries have erected against developing countries is at least as important as economic aid. Trade barriers are many. They include restrictions on temperate-zone agricultural products and sugar; restrictions on the simpler labour-intensive manufactured goods (which often can be produced more cheaply in developing countries) including especially the Multifibre Arrangement under which imports of textiles and clothing into developed countries are greatly restricted; and tariff escalation, or higher rates of duties on processed products as compared with raw materials, which discourages the growth of processing industries in the developing countries. The removal of these trade barriers can help those developing countries that have already shown their capacity to take advantage of the available external economic opportunities to grow even more satisfactorily and can also provide additional incentives for other developing countries to alter their economic policies.

•Population growth
Still another lesson is the desirability of slowing down the rapid population growth that characterizes most developing countries. Their average rate of population growth is about 2.2 percent per year, but there are some countries where population growth is 3 percent or more. If the aim of economic development is to raise the level of per capita incomes, it is obvious that this can be achieved both by increasing the rate of growth of total output and by reducing the rate of growth of population. Development economists of the 1950s tended to neglect population-control policies. They were partly seduced by theories of dramatically raising total output through crash investment programs and partly by the belief that population growth could be controlled only slowly, through gradual changes in social attitudes and values. But it is now recognized that some births in developing countries are unwanted. Great technical advances in methods of birth control about the same time made possible mass dissemination at very low cost. Countries where these methods were made available experienced significant declines in birth rates, although significant changes in social attitudes and values are necessary before average family size declines enough to halt population growth. As soon as birth rates stop rising, the relative increase in population in the working-age groups and the higher income available to existing family members immediately start to release resources for increasing consumption and saving.

•Development of domestic industry
The positive case for the expansion of the manufacturing sector may now be considered. It is based on the general assumption that the manufacturing sector will in due course become the leading sector, drawing in workers (in part, siphoning off a portion of the increase in the labour force that would otherwise tend to drive down labour productivity in agriculture) from the traditional agricultural sector and providing them with higher-productivity jobs than could be obtained in agriculture. Agricultural productivity would necessarily be rising simultaneously, as investments in that sector permitted increasing output. Whereas it was earlier thought that this process would follow the historical experience of countries such as England and Japan, the lesson from the successful developing countries is that by providing incentives and infrastructural support to encourage exports, there are significant opportunities for expansion of manufacturing of labour-intensive commodities, opportunities that can promote rapid growth.
Thus, given the much greater size of the international economy, and the much lower transport and communications costs that confront contemporary developing countries as contrasted with conditions in the 19th century, the potential for rapid growth is much greater now. Countries such as South Korea and Taiwan have experienced in a decade proportionate increases in per capita incomes that it took England and Japan a century to achieve. Whether other developing countries can follow this lead depends on a number of factors, including their economic policies and the continued growth of the international economy.
The central problem of countries with low per capita output is that they have not as yet succeeded in making use of their potential economic opportunities. To do so, they must achieve an efficient allocation of the available resources and provide incentives for resource accumulation. But efficient allocation of resources is not merely a matter of the formal optimum conditions of economic theory. It requires the building up of an effective institutional and organizational framework to carry out the allocation of resources. In the private sector this requires the development of a well-articulated market system that embraces the markets for final products and the markets for factors of production. In the public sector the development of the organizational framework requires improvements in the administrative machinery of the government, especially in its fiscal machinery.
In the setting of the developing countries, one is concerned not only with the once for all problem of efficient allocation of resources but also with improving the capacity of these countries to make a more effective use of their resources over a period of time. That is to say, one is concerned not only with the static problem of the efficient allocation of given resources with the given organizational framework but also with dynamic problems of improving the capability of this framework. From this point of view, there is no conflict, as some have maintained, between the static, or the short-run, considerations and the dynamic, or long-run, considerations. The two sets of requirements move in the same direction.

Number 1b;
The initial conditions are totally different for contemporary developing countries from what the developed countries faced on the eve of their industrialization hinges on economic growth,
the more efficient division of labor, and the use of technological innovation to solve problems as opposed to dependency on conditions outside of human control.

Number 2a;
An economic institution is a company or an organization that deals with money or with managing the distribution of money, goods, and services in an economy. Banks, government organizations, and investment funds are all economic institutions.

Number 2b;
1. General Attitude to Economic Effort:
Institutions have greatly influenced people’s attitude towards work, will and efficiency for economic development. They will be growth oriented if they inspire people to work hard to undertake risks. If they do not do so, they will be growth retarding. This mean that institutions promote or restrict growth to the extent, they accord protection to effort.
In this connection, Prof. W.A. Lewis writes, “Men will not make effort unless the fruit of that effort is assured to themselves or to those whose claims they recognised.” Therefore, the institutions must establish some sort of relationship between effort and reward in order to get economic growth.
For this, nobody should be allowed to share the earnings of others and suitable differentiation in remuneration must be maintained according to effort. The institution of private property, economic freedom and laws of inheritance boost economic development as they ensure reward for effort and provide freedom of action.
While, on the other hand, exploitation of labour, defective land tenures, absentee landlordism, feudal system, slavery, joint family system and casteism all subdue the incentive to make economic development.

2. Technological Knowledge:
As there is lack of technical knowledge in under-developed countries, resources are lying unutilized and strict institutional structure is not in a position to accept technological change.
Scientific attitude of the society can go a long way in bringing at such a change. If there is favourable change in the institutional structure, there can be an atmosphere for progress all round and with the development of technical knowledge favourable changes occur themselves.
In this way, there is ample chance to utilize abundant capital and special emphasis on research are other requisite conditions for development and use of new techniques. In fact, institutional structure must be favourable to the commercialization of high entrepreneurial class. Hence, it is clear evidence that social institutions have been much influenced by technological changes for economic progress.

3. Entrepreneurship:
The growth of entrepreneurship of a country depends on its institutional structure and value system. They are necessary for the automatic increase in supply of entrepreneurs. Therefore, high suitable prestige and suitable reward is the foremost condition for the success of entrepreneurship. Less restriction be imposed and excessive taxation may be avoided.
An effective supply of entrepreneurship will only occur in a society if accumulation of material wealth well up in its hierarchy of social values and confers sufficient monetary rewards to the successful entrepreneurs. It is called ‘pecuniary culture’ which helps to smooth the path of the entrepreneur, channelizing his energy and motivation in commercial, financial and industrial directions.
To put in the words of Prof. D. Bright Singh, “For self development in enterprise and risk, social and institutional terms must be fulfilled.”

4. Labour Productivity:
The social set up of a country affects the productivity of labour to a considerable extent. Meritorious development of labourers is not possible due to unfavourable change in social institutions. This means that the size and quality of labour force are greatly influenced by social institutions and value system in a society.
Therefore, to raise the productivity of labourers, it is desirable traditional customs and social institutions. They not only determine the size of the labourers but also influences its productivity. Mostly in under-developed countries, many institutions are prevalent which are harmful for labour productivity.
Some of such institutions are joint family system, family attachment, traditional values, contentment, minimum wants, caste system, religious feelings and principle of equality in the distribution of property etc.

5. Saving and Capital:
The institutional structure of a country exercises a great influence on the will and power to save and capital formation. To promote capital formation, proper legislation protecting the right to property should be made. In other words, suitable institutions must provide legal security to protect private property against misuse by the government and of government property by individual.
If institutions pay due honour to material capital, then investors are encouraged to invest their money.
Consequently, society will also save and rate of capital formation will be stimulated accordingly. Hence, people’s sense of conducts, behaviour, customs gets appropriate changes in accordance with institutional structure of the society, thereby social institutions have imperative influence on saving and capital formation.
A study of UNO reveals that for attaining economic development, social value and institutional structure need timely change.
However, its report conveys, “Rapid economic development is impossible without painful changes, traditional philosophical thoughts should be discarded, old institutions need to be disorganised, caste and class bondages should be abolished and large number of people, who are not up keeping with progress will have to abandon hopes of own luxurious life”.
In the same manner, Prof. Rostow favoured changing attitude of the society in order to promote investment. Emphasizing this aspect, he stated, “The rise in the rate of investment requires a radical shift in society’s effective attitude towards fundamental and applied science; towards the initiation of change in productive techniques; towards the taking of risks and towards the conditions and methods of work.”

Number 3;
The following factors attributes to the great extremes between the rich and the poor;
1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.

2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.

3. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.

4. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.

5. Inequality is sexist. With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity.

Number 4a;
The sources of economic growth includes;
1. Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.

2. Natural Resources:
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.
Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.

3. Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.
Accumulating capital, as we have seen, requires a sacrifice of current consumption over many years. Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists believe that the low national savings rate in the United States—only 4 percent of output in 1996— poses a major economic problem for the country.
When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples.
All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure investments are effectively undertaken.

4. Technological Change and Innovation:
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.
Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.

Number 4b;
The following explains why some countries economically develop rapily while others do not;
1)Ins and outs:
Economists think of production in terms of inputs and outputs. The outputs are the goods that a country produces. The inputs are everything that’s required to produce those goods. In 19th-century America, lumber was an example of a product with relatively few inputs. Exporting it required little more than the manpower and tools to chop down trees and haul them to shipping ports. Twentieth-century digital-signal-processing chips, on the other hand, are products that require a lot of inputs: the ability to extract and purify exotic materials like gallium arsenide, computer-aided design software to produce circuit layouts, and the chemicals and vacuum chambers required for the deposition of different layers of material, among other things.
Hidalgo and Hausmann argue that the diversity of a country’s production capacity, and thus the true strength of its economy, depends on the diversity of both its outputs and its inputs. Two countries could export the same number of products — they could have the same diversity of outputs — but if one exports only garments, it’s likely to have many fewer inputs than a country that exports a mix of garments and other light manufacturing, agricultural products, electronics and cultural goods. And the country with more inputs, the researchers claim, will adapt better to a changing world economy.
It’s an intuitively plausible claim, but getting a quantitative handle on it is difficult. Diversity of outputs is easy enough to measure: Economists have developed some standard schemes for classifying products that have borne up well in empirical studies. But almost anything could count as an input: not just natural resources or factories but, say, a good public-transportation system that makes the labor market more efficient, or intellectual-property laws that reward entrepreneurship.
That’s where Hidalgo’s mathematical tools come in. Rather than try to exhaustively categorize inputs — probably an impossible task — Hidalgo simply assumes that products that require a lot of inputs are scarcer than those that don’t: More countries export lumber than export digital-signal-processing chips. By analyzing both the diversity of a country’s products and the number of other countries capable of producing the same products, Hidalgo is able to quantitatively assess the diversity of the country’s inputs.

2)Cash value:
Hidalgo and Hausmann have found that GDP correlates pretty well with diversity of outputs, but it correlates much better with diversity of inputs. And the cases where the correlation breaks down could actually be more interesting than the cases where it holds, because they could indicate economies poised for growth. In 1970, for instance, the Korean economy had much greater diversity of inputs, according to Hidalgo’s measure, than the Peruvian economy; but Peru had twice Korea’s GDP per capita. Over the next 30 years, the relative diversity of inputs in the two countries’ economies stayed more or less the same, but by 2003, Korea had four times Peru’s GDP per capita.
Moreover, Hidalgo points out, Korea’s surge is impossible to explain using the standard factors of production. “In 1970, Peruvian workers were working with four times the capital per worker, and they were working with two and a half times the land per worker, and they had the same level of education as Korean workers,” Hidalgo says.

2. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

Most developing countries were once colonies of Europe or otherwise dominated by European or other foreign powers, and institutions created during the colonial period often had pernicious effects on development that in many cases have persisted to the present day. Development for now developed nations happened in different settings as with what is obtainable now for developing countries. This is as regards to Physical and Human Endowments, Per capita incomes and levels of GDP in relation to the rest of the world Climate differences, Population size, distribution, and growth, Historical role of international migration, International trade benefits , Basic scientific and technological research and development capabilities, Efficacy of domestic institutions

3. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development?

Economic Institutions are Humanly devised constraints that shape interactions (or “rules of the game”) in an economy, including formal rules embodied in constitutions, laws, contracts, and market regulations, plus informal rules reflected in norms of behavior and conduct, values, customs, and generally accepted ways of doing thing. Economic institutions of Europe and North America are in most cases closer to optimal than those of many developing countries. This has lead to problems of underdevelopment in developing countries and can lead to prospective success is probably employed

4. How can the extremes between rich and poor be so very great?

Two of the most commonly used income distribution measures are the shares of aggregate household income received by each quintile and the Gini index. Nigeria scores 35.1 on this index, meaning that inequality is high in the country. Countries considered to scoring within 0-10 on the Gini index have low levels of inequality. The extremes between the rich and poor can most notably be the results of;
Lack of altering the functional distribution—the returns to labor, land, and capital as determined by factor prices, utilization levels, and the consequent shares of national income that accrue to the owners of each factor; Lack of Mitigating the size distribution; Absence of Moderating (reducing) the size distribution at the upper levels through progressive taxation of personal income and wealth;Absence of Moderating (increasing) the size distribution at the lower levels through public expenditures of tax revenues to raise the incomes of the poor either directly (e.g., by conditional or unconditional cash transfers) or indirectly (e.g., through public employment creation such as local infrastructure projects or the provision of primary education and health care)

5. What are the sources of national and international economic growth? Who benefits from such growth and why? Why do some countries make rapid progress toward development while many others remain poor?

Natural Factors; Human Factors; Physical capital and technological factors; institutional factors are all sources cited by experts that encourage economic growth, beneficiaries of these growth depends on the economic system existent in such country. For the likes of USA, the owners of capital are often the beneficiaries while for more socialist states like Russia, the government benefits from these growths which is then distributed in the society. Taking account the factors the allow for Economic growth, developing countries can lean forward to Development.

JULIUS LOVETH OLACHI
2018/242294
juliusloveth2002@gmail.com

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

Developed countries before they became developed took steps towards: a reduction in poverty, inequality, and unemployment; the provision of basic education, health, housing, and food to every citizen; the broadening of economic and social opportunities; and the forging of a cohesive nation-state. Developing countries need to formulate policies to attain these in order to develop.
The position of developing countries today is in many important ways significantly different from that of the currently developed countries when they embarked on their era of modern economic growth. We can identify some significant differences in initial conditions that require a special analysis of the
growth prospects and requirements of modern economic development:

1. Historical role of international migration
2. International trade benefits
3. Basic scientific and technological research and development capabilities
4. Efficacy of domestic institutions

In comparing development performance between developed and developing countries and considering lessons to learn from the developed, it is appropriate to consider whether, with strenuous economic development efforts being made throughout the developing world, living standards of developing and developed nations are exhibiting convergence.
If the growth experience of developing and developed countries were similar, there are two important reasons to expect that developing countries
would be “catching up” by growing faster on average than developed countries. The first reason is due to technology transfer. Today’s developing countries do not have to “reinvent the wheel”. Even if royalties must be paid, it is cheaper to replicate technology than to undertake original R&D, partly because one does not have to pay for mistakes and dead ends along the way. This should enable developing countries to “leapfrog” over some of the
earlier stages of technological development, moving immediately to high productivity techniques of production. As a result, they should be able to
grow much faster than today’s developed countries are growing now or were
able to grow in the past, when they had to invent the technology as they went
along and proceed step by step through the historical stages of innovation.
(This is known as an “advantage of backwardness,” a term coined by eco-
nomic historian Alexander Gerschenkron). In fact, if we confine our attention to cases of successful development, the later a country begins its modern economic growth, the shorter the time needed to double output per worker. For example, Britain doubled its output per person in the first 60 years of its industrial development, and the United States did so in 45 years. South Korea
once doubled per capita output in less than 12 years and China has done so in
less than nine.
The second reason to expect convergence if conditions are similar is based on factor accumulation. Today’s developed countries have high levels of physical and human capital; in a production function analysis, this would explain their high levels of output per person. But in traditional neoclassical analysis, the marginal product of capital and the profitability of investments would be lower in developed countries where capital intensity is higher, provided that the law of diminishing returns applies. That is, the impact of additional capital on output would be expected to be smaller in a developed country that already has a lot of capital in relation to the size of its workforce than in a developing country where capital is scarce. As a result, we would expect higher investment rates in developing countries, either through domestic sources or through attracting foreign
investment.

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.

Economic institutions, play an important role in development. They are defined by Nobel laureate Douglass North as the “rules of the game” of economic life. Examples of Economic institutions include Banking institutions, government Institutions, investment institutions, etc.
As such, institutions provide the underpinning of a market economy by establishing the rules of property rights and contract enforcement; improving coordination; restricting coercive, fraudulent, and anti-competitive behavior—providing access to opportunities for the broad population; constraining the power of elites; and managing conflict more generally.
Moreover, institutions include social insurance (which also serves to legitimize market competition) and the provision of predictable macroeconomic stability.

3. How can the extremes between rich and poor be so very great?

Widespread poverty creates conditions in which the poor have no access to credit, are unable to finance their children’s education, and, in the absence of physical or monetary investment opportunities, have many children as a
source of old-age financial security. Together these factors cause there to be greater inequality.
Second, a wealth of empirical data bears witness to the fact that unlike the
historical experience of the now developed countries, the rich in many contemporary poor countries are generally not noted for their frugality or for their desire to save and invest substantial proportions of their incomes in the local economy. This attitude plunges the poor deeper into poverty and even reduces the wealth of the rich till they get closer to poverty.
Third, the low incomes and low levels of living for the poor, which are manifested
in poor health, nutrition, and education, can lower their economic productivity and thereby lead directly and indirectly to a slower-growing economy. Strategies to raise the incomes and levels of living of the poor would therefore contribute not
only to their material well-being but also to the productivity and income of the economy as a whole.

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
a. Capital/labour: The growth that results from increases in capital and labour represents growth due to increase in inputs. It leads to economic development.
b. Natural Resources: The important natural resources includes: land, oil and gas, forests, water, and mineral resources. Some high-income countries have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
c. Technological Advancement: Technological advance has been a vital ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication. Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities.
d. Human Resources: This factor of Labour inputs consist of quantities of workers and of the skills of the work force. However, these capital goods such as modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft etc can be effectively used and maintained only by skilled and trained workers.

There are some factors that allow some countries to make rapid progress toward development while many others remain poor and they include:

Effective Government policies, Effective utilization of resources, differences in natural endowments, Culture of the people, Climate, Geography and Technological investments.

Name: Olayiwola Nurudeen Akanni
Reg No: 2018/246563
Department: Economics
Course: Eco 361
Assignment
Critically discuss and analyse these questions as a potential Special Adviser to Mr. President of Poverty Alleviation and Economic Development.
1. What can be learned from the historical record of economic progress in the now developed world? Answer
Lesson 1: Governments can advance development even with low levels of government spending.
Today’s low-income countries spend more than twice on average than today’s advanced economies spent more than a century ago. To be sure, this difference reflects the lack of the tax instruments and systems we have today. From 1850 until the early 1900s, customs duties and excises provided the bulk of government revenues, while the personal income tax and VAT were not introduced in countries until later. Moreover, society’s expectations from the government were much different then. In 1900, for example, spending on unemployment, health, pensions, and housing amounted to only 1.1 percent of GDP in the Scandinavian countries on average and to 0.7 percent of GDP in the U.S. Even with low level of government spending, economic development was brisk in most of the Advanced 14 at the turn of the 20th century, with infrastructure improvements financed by private capital and the strong expansion of primary and secondary education. And here lies the lesson for today’s developing economies: While working on strengthening domestic taxation and raising more revenues to finance public goods, the priority needs to be on improving the business environment to attract private capital—mobilizing private finance for development.
Lesson 2: Today’s developing economies need to focus on building fiscal and market institutions before rising spending needs—and not after they materialize.
Government spending in the Advanced 14 increased substantially since 1960 as they reevaluated the role of government amid rapid industrialization and globalization and new taxes became commonplace (Figure 2). The shift from agrarian to industrial to post-industrial economies required different worker skills. Economic disruptions reshaped governments in the past, as is happening now with the changing world of work, leading to a large expansion of social insurance and protection spending.
Lesson 3: Government spending by today’s developing economies is likely to increase, but there is a choice to make to the extent of redistribution and government services. Government spending among the advanced economies has increased, but so has its variability. Before 1913, spending among the advanced economies ranged from less than 2 percent of GDP in Japan to 13 percent in Italy, or a span of 11 percentage points. Today, the span of spending among the advanced economies is 39 percentage points: from 17.3 percent in Hong Kong to 56.4 percent in France. Development paradigms vary among today’s advanced and developing countries. Robust growth can happen with a smaller or a larger government, in general. Too large of a redistribution, however, may create substantial disincentives to work and invest, or lead to tensions between formal and informal workers, employees of large companies or state-owned enterprises and small private firms. This danger now is clearer than ever: The changing world of work is clashing with persistent informality in developing countries and social protection systems that cover only part of the population.
Lesson 4: Government spending has been countercyclical since World War II in almost all advanced economies, even with the sustained trend of spending increases. Countercyclical fiscal policy is a must for today’s developing countries, especially for those with abundant natural resources. However, there is overwhelming evidence that fiscal policy has been consistently pro-cyclical in developing countries, resulting in profound macroeconomic imbalances, unproductive debt build-ups, and ongoing instability.
1b. Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
The conditions are Similar
Our main results are the following: (i) as generally found in the literature, financial development, governance and labor market regulation have significant effects on industry; (ii) exchange rate appreciation is detrimental to the industrialization process (iii) financial and institutional factors are the main determinants of industrialization in the northern and eastern countries while socioeconomic factors matter more for the western and southern countries (iv) differences in the power of the industrialization determinants are not likely to emerge.

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.
Answer
The term “Economic Institutions” refers to two things: … Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.
Economic Institutions shape the problem of underdevelopment through the following process;
1. Investment: when property righs are secure, owners of capital are more likely to invest, all other things being equal.
2. Technical innovation: secure intellectual property rights are likely to promote private investment in research and development of innovation.
3. Economic Organization: this is likely to be more effective and efficient, delivering the benefits of specialization and economic of scale where they apply, when institutions facilitate transactions and cooperation between individuals whether in formal companies or less formal cooperatives.

3. How can the extremes between rich and poor be so very great?
Answer
1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.
2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
3. Underfunded public services. At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.
4. Denied a longer life. In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.
5. Inequality is sexist. With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
Answer
Source of Economic Growth
1. Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force.

Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.
2. Natural Resources:
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains.
3. Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.

In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times. When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large-scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples.
4. Technological Change and Innovation:
In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other. Rather, a never-ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.
Some countries make rapid progress while many others remain poor because;
Institutionalized corruption, low quality education and brain drain are the primary factors. In countries with institutionalized corruption and lack of rule of law, this system is purposely maintained by government officials, because they’re becoming very rich from it. They siphon off public funds from corruption, and also involve themselves in the market economy and then restrict competition for others through all kinds of tricks or threats or force if necessary. They maintain lack of rule of law, because having rule of law would affect their profits. These things make them very rich since they’re essentially putting their hands on a large share of the economy, while the entire population is paying the cost in terms of lawlessness, higher prices for all but basic things, and not being able to compete because the markets are owned by the gov’t connected big shots and they don’t like competition. The system works quite well – for them – and that’s why countries are stuck in this basically perpetually. They don’t want to change it.

Igwe Moses Ozioma
2018/246562
Economics Dept
300level

Assignment on Eco 361
(1)what can be learned from the historical record of economic progress in the now developed world ? Are the initial conditions similar or different from contemporary developing countries faced on the eve of their industrialization.
History plays an important roles in the development of a country.for example , the United States would be a different country today if France or Spain had ruled us instead of great britain.we might have different form of govt. Our culture and language likely would be different.
It is also through the historical record of economic progress tell us how the development come about, so it is the bedrock of development in the now developed world.
The initial condition is different from the contemporary developed countries as a result of industrialization advancement in the contemporary developed countries through the aid of science and technology.
Answer:The last two decades have been a bad time for the developing countries. Their average annual per capita income growth rate has been halved (from 3% to 1.5%) between the 1960-80 period and the 1980-2000 period. In particular, Latin America has virtually stopped growing, while Sub-Saharan Africa and most ex-Communist countries have experienced a fall in absolute income. Economic instability has increased markedly, as manifested in the dozens of financial crises we have witnessed over the last decade alone. Income inequality has been growing in many developing countries and poverty has increased, rather than decreased, in a significant number of them.To most of those who govern the global economy today – the developed country policy-makers, international business leaders, and the international economic organisations (the International Monetary Fund, the World Bank, and the World Trade Organisation) What the developing countries need, they argue, is the ‘good’ economic policies and institutions that the developed countries themselves used in order to develop – such as liberalisation of trade and investment and strong patent law. Their belief in their own recommendations is so absolute that in their view it has to be imposed on the developing countries at all costs through strong bilateral and multilateral external pressures.As is well known, there have been heated debates on whether these policies and institutions are suitable to the developing countries. The curious thing is that even those who are sceptical of their suitability rarely question whether these are the policies and the institutions that the developed countries actually used in order to become rich. However, the historical fact is that the rich countries did not develop on the basis of the policies and the institutions that they now recommend to, and often force upon, the developing countries. Hence, the initial conditions are similar for contemporary developing countries from what the developed countries faced on the eve of their industrialization.
(2)what are the economic institutions and how do they shape problems of underdevelopment and prospects for success development.
Economic institutions is defined as a company or an organization that deals with money or with managing the distribution of money, goods and services in an economy.Banks, government organization and investment funds are all economic institutions
They shape problems of underdevelopment and prospects for successful development through
(1) through the provision of development theories and approaches to poverty reduction
(2) Through that help of economic disparities in the underdeveloped countries
(3)They bring about the overview of the block chain technology, in other to recuce poverty and improve the living conditions of people in underdeveloped countries.
(3)How can the extremes between the rich and the poor be so very great.
The extremes between the rich and the poor undermine the fight against poverty, damaging our economies and tearing our societies apart.
The extremes gap between the rich and the poor can be great when government around the world must act now to build a new, human economy that values what truly matters to the society rather than fueling an endless pursuit of profit but an economy that can work for everyone, not just a fortunate few.
(4)what are the source of national and international economic growth? Why do some countries make rapid progress towards development while others remain poor.
There are four main sources of national and international economic growth such as(1)Human resources such as size of labour force, education,skills and discipline.
(2) National resources:oil and gas, soil and climate
(3)Capital formation: equipment and factories, social overhead capital
(4) Technology and enterprenurship: quality of scientific and engineers knowledge, managerial know how, reward of innovation.
Some countries makes rapid progress toward development while others remain poor because some countries are full of institutionalized corruption, low quality education and brain drain.In countries with institutionalized corruption and lack of rule of law, this system is purposely maintained by government officials because they are becoming very rich from it. They siphon off public funds from corruption and also involve themselves in the market economy and then restrict competition for others through all kinds of tricks or threats or force if necessary.
And also some countries are rich and others are poor because of their natural resources or national resources ,some are endowed with surplus natural resources

.NAME:-Chinedu Chiamaka Helen
REGISTRATION NUMBER:-2018/250394
DEPARTMENT:-COMBINED SOCIAL SCIENCES (ECONOMICS/PSYCHOLOGY)
AN ONLINE QUIZ ON ECO 361

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development

3. How can the extremes between rich and poor be so very great?

4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?

ANSWERS
QUESTION 1

In the last 25 years, the dominant development paradigm has been based on the belief that the role of the government should be confined to providing macroeconomic stability, protection of property rights, and the provision of public goods. Starting in the late 1970s and the early 1980s, state-led and nationalistic development strategies, which most developing countries pursued in the 1960s and the 1970s, were denounced as having created inefficiencies, corruption, and slow growth.
As a result, a set of policies, known as neo-liberal policies, was recommended, comprising liberalisation of trade and foreign investment, privatisation of state-owned enterprises, deregulation of domestic industries, more ‘prudent’ macroeconomic policy, and a stronger protection of intellectual property rights.
For good and bad reasons, neo-liberal policies have been very influential in Africa. The relatively sluggish economic performance of the continent in the 1960s and the 1970s, compared to the rest of the developing world, created greater scepticism about the state-led development strategies. The continuous foreign exchange crises that most countries in the continent have experienced have made it necessary for them to go to the Bretton Woods institutions – that is, the IMF and the World Bank – more frequently, making it unavoidable for them to accept the neo-liberal policies conditionalities imposed by those institutions.
Unfortunately, neo-liberal policies have produced very poor outcomes in Africa.Per capita income in Sub-Saharan Africa used to grow at 1.6% in the 1960s and the 1970s. Between 1980 and 2004, it shrank at the rate of 0.3%.
In addition to claiming that their policies are based on ‘scientifically proven’ economic theories, neo-liberal economists also make a big deal out of the fact that the policies that they recommend have been proven to work by the history of capitalism. They ask: “given that all of today’s rich countries became rich through free-market, free-trade policies, how does Mozambique, Kenya, or Senegal think that it can do it any other way?
So then the neoliberial economists claim that most rich countries have developed on the basis of liberal (or neo-liberal) policies.But with in depth research, this proves to be false.
Britain – the country that is supposed to have invented free trade and thereby became the first hegemon of the world economy. Contrary to the popular myth, Britain had been an aggressive user, and in many areas a pioneer, of activist industrial and trade policies intended to promote infant industries. Until the 17th century, Britain was a backward country dependent on raw wool exports to the Low Countries (or what are the Netherlands and Belgium today), so it implemented various schemes to promote ‘import substitution’ in woollen manufacturing.
Britain adopted free trade only in the 1860s, when its industrial superiority became unquestionable. It was on the basis of these historical facts that Friedrich List, the 19th-century German economist who is today commonly known as the father of infant industry protection argument, condemned the British advocacy of free trade in the 19th century as an act equivalent to “kicking away the ladder”, with which it climbed up to the top.
“It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him”. In this lies the secret of the formation of the neo-liberal policies.It is a classic example of “Do as we say,not as we did”.
In terms of trade policy, with few exceptions such as Switzerland (until the First World War) and the Netherlands, all of today’s rich countries used protectionism.2 Interestingly, countries like France, Germany, and Japan – countries normally thought to be the homes of protectionism – did not use infant industry protection as vigorously as Britain or the USA did.
Moreover, Developing countries are very diverse, so we cannot have a uniform recommendation for all countries, especially from a set of experiences that are diverse themselves. Exactly what policy implications we draw from which historical cases will depend on the exact natural, economic, social, political, and cultural conditions that a country faces and on what their goals, preferences, and aspirations are.

Question 2
Economic institutions can be defined as two things.First,specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country.
Second, Well-established arrangements and structures that are part of the culture or society, e.g., competitive markets, the banking system, kids’ allowances, customary tipping, and a system of property rights are examples of economic institutions.
Economic institutions are important to economic development.Such institutions support economic development through four broad channels: determining the costs of economic transactions, determining the degree of appropriability of return to investment, determining the level for oppression and expropriation, and determining the degree to which the environment is conducive to cooperation and increased social capital. Protection of property rights, effective law enforcement, and efficient bureaucracies, together with a broad range of norms and civic mores, are found to be strongly correlated to better economic performance over time,hence the importance of economic institutions.Economic institutions of the country are decided by the political institutions therefore,their functions vary from country to country.A country with good economic institutions experiences the financial system stability, low-interest rate and low inflation rate, consistent macroeconomic policies. This increases the investor confidence and as a result, higher investment, lower unemployment, higher income and advancement in socio-economic indicators can be reached. Further, the efficient allocation of resources can be observed in a country which has good economic institutions.
The contribution of institutions for economic development is obvious and based on the functions, the modern institutions can be divided into four categories as follows (Rodrik & Subramanian 2003).
1. Market creating institutes which promotes the market by ensuring property rights and promoting the private sector
2. Market regulating institutes which avoids market failures through the regulation processes.
3. Market stabilizing institutes which stabilize the macroeconomic conditions of the country
4. Market legitimizing institutes For the economic development, both economic growth and distribution are important. Institutions like pension schemes and other social policies can be considered as market legitimizing institutes.

QUESTION 3

Extreme inequality is out of control. Hundreds of millions of people are living in extreme poverty while huge rewards go to those at the very top. There are more billionaires than ever before, and their fortunes have grown to record levels. Meanwhile, the world’s poorest got even poorer.
Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education.
These policies hit the poor hardest. The human costs are devastating, with women and girls suffering the most. Despite their huge contribution to our societies through unpaid care work, they are among those who benefit the least from today’s economic system.
There are many reasons for this very wide gap between these extremities.

1. Lining the pockets of the world’s billionaires. The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.

2. Wealth undertaxed. While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
3.Financial disparities have widened in large part because the means by which people build wealth have become more exclusive since the Great Recession.
4.Globalization leads to an increase in income inequality around the globe. This is because globalization encourages prosperous nations to outsource production to locations which provide either cheap labor or cheap raw materials or both.

QUESTION 4
Source of National and International Economic Growth
Human Resources:
Labour inputs consist of quantities of workers and of the skills of the work force.
Many economists believe that the quality of labour inputs—the skills, knowledge, and discipline of the labour force—is the single most important element in economic growth.
A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers.
Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.
Natural Resources:
The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.
Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.
Capital Formation:
Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times.

Question 4b
Levels of development are determined by several factors:

Physical factors – some areas have a hostile or difficult landscape. This can make development more difficult. Examples of this are very hot climates or arid (a lack of water) climates which make it difficult to grow sufficient food.
Economic factors – some countries have very high levels of debt. This means that they have to pay a lot of money in interest and repayments and there is very little left over for development projects.
Environmental factors – some places experience environmental issues, which can prevent them from developing. Examples might be extreme flooding or desertification.
Social factors – some parts of the world have issues that are caused by people. These include low levels of education, poor water quality or a lack of doctors.
Political factors – some countries are at war or the government may be corrupt. Therefore money does not reach the people who need it most and spending on areas such as education and infrastructure may be insufficient.
Natural resources – some countries have an abundance of raw materials such as oil or precious minerals. These can be sold and the money invested into developing the country.
The cycle of poverty
The factors influencing development are often linked and countries can find themselves in a cycle of poverty. For example, if a country is in a lot of debt, it cannot afford good schools. If people are poorly educated they are less likely to understand about the causes of desertification. Desertification leads to poor crop growth and low incomes. This leads back to the country accumulating debt and the cycle continues.
Throughout history, some economies have expanded faster than others. Some differences can be traced to such inherent factors as climate and geography. At times people living near navigation routes or in temperate climates have fared better than people living far away from coastlines or in frigid climates. Some analysts also argue that culture plays a role in growth.
While inherent traits are responsible for some differences in economic growth, government and central bank policies also play a role. Policies affecting access to technology, sound money and banking practices, and prudent taxing and spending can improve or stifle economic growth.

Eco. 361–16-8-2021 (Online Discussion Quiz 2—Some Vital Questions on Development 1)

NAME: OKELEKE CHINEMEMMA VICTORY
REG NO:2018/247843
DEPT: ECONOMICS
LEVEL:300L
QUESTIONS:
1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development
3.can the extremes between rich and poor be so very great?
4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
CRITICAL EXPLANATION
1. The lessons to be learnt from the historical record of economic progress in the now developed world are as follows:
(a) Negligence of the rule of law: laws are made to guide and regulate human activities. Without law ,no country would be able to function properly. Laws are primarily important for government and development. Locke (1632-1704) maintained that in the absence of rule of law:
It may be too great a temptation to human frailty, apt to grasp at power,for have also in their hands the power to execute them, whereby they may exempt themselves from obedience to the laws they make ,and suit the law, both in it’s making and. Execution. Their own private advantage…(John Locke, Two Treatises of government, London,1690,p.68) which is not so in other developed.
(b) Lack of basic infrastructure and government support/ incentive: Developing country like Nigeria is a country with deficit of basic infrastructures. Despite rich human and natural resources, Nigeria has rated the poverty capital of the world, with over 16 million out of school children (Adamu,2019), 27.1 million unemployed youths (NBS,2020) and human development category index value of 0.534, which put the country in the low human development category, positioning it at 158 out 189 countries and territories (UNDP Report,2019). This sordid state of the nations is mainly due to the government lip service to the welfare of her citizens. There is a total lack of government support for citizens who would have contributed actively towards developing the country.According to Achebe,” if you want electricity, you buy generator; if you want water, you sink your own bore-hole; if you want to travel, you set your own airline” (Achebe,23).
(c) The populace were heart-based educated. Heart-based education implies that people understood the principles of unity, honesty, faithfulness, Compassion, diligence, Love, truthfulness to mention but few. They are not just head-based educated boasting with degrees and certificates but sweeping in the ocean of corruption and hatred.
(d) The importance of Agriculture: A major lesson of postwar experience is that there was a close connection between the rate of growth in the output of agricultural sector and the general rate of economic development.
(e) The role of exports: There’s close connection between export expansion and economic development. The high- growth countries were characterized by rapid expansion in exports.
(f) The role of international economy: In the modern view of development, an open ,expanding international economy is the greatest support that the developed country can provide for developing countries.
These conditions are different from the contemporary developing countries like Nigeria where the reverse is the case.

(2) Economic institutions are durable systems of established and embedded social rules and conventions that structure social interactions( Hodgson 2001 p.295).They shape the problem of underdevelopment by establishing and protecting property rights; facilitating transactions; and permitting economic co-operation and organization.
(3) Economic inequality in Nigeria has reached extreme levels, despite being the largest economy in Africa. The country has an expanding economy with abundant human capital and the economic potential to lift millions out of poverty.
(4)
(a) Clean up aid – Aid should serve the poor, not tied to serve donor, trade and political priorities. Corruption, fraud, waste and high administration costs must be reduced. The quality of aid is as important as the quantity.

(b) Outputs – Aid should be delivered to the best performing projects, dispersed through an independent, coordinated, transparent and competitive process. Aid should be properly evaluated, more effective and fully accountable to the public.

(c) Companies & Countries – Businesses should pay 1% of their profits to Foreign aid. BRIC’s and emerging economies should divert 2% of their company profits to development initiatives within their own Nations. Offshore territories’ should encourage residents to donate to Real Aid.
A “poor” person has less income, wealth, goods, or services than a “rich” person. When considering nations, economists often use gross domestic product (GDP) per capita as an indicator of average economic well-being within a country. GDP is the total market value, expressed in dollars, of all final goods and services produced in an economy in a given year. In a sense, a country’s GDP is like its yearly income. So, dividing a particular country’s GDP by its population is an estimate of how much income, on average, the economy produces per person (per capita) per year. In other words, GDP per capita is a measure of a nation’s standard of living.

Name:Kalu Rita Ngozi
Reg no:2018/24245
Dept:Economics
Question 1
What can be learned from the historical record of economic progress in the now developed world?Are the initial conditions similar or different from what the developed countries faced on the eve of their industrialization?
For the last two decades or so,the developing countries have been under great pressure from the developed countries and the international institutions that they control-such as the International Monetary Fund,world bank,the world trade organization,etc. to adopt a set of ‘good policies’ and ‘good’institutions, such as strong patent law,in order to foster their economic development.
The historical fact is that today’s developed countries did not develop on the basis of the policies and institutions that they now recommend to,or even force upon,the developing countries.
The initial conditions of contemporary developing countries is different from that of the developed countries because what the developing countries need is the ‘good’ economic policies and institutions that the developed countries themselves used in order to develop-such as liberalization of trade and investment and strong patent law.However the historical fact is that the rich countries did not develop on the basis of the policies and the institutions that they now recommend and often try to force upon the developing countries
(2)
What are the economic institutions and how do they shape problems of underdevelopment and prospects for successful development?
Economic institutions refers to well established arrangements and structures that are part of the culture or society e.g competitive market,the banking system,kid’s allowance,customary tipping and a system of property rights are examples of economic institutions.
Institutions strongly affects the economic development of countries and act in society at all levels by determining the framework in which economic exchange occurs.They determine the volume of interactions and the benefits from economic exchange and the form which they take.this general helps foster economic development.
(3)
How can the extreme extremes between the rich and poor be so very great?
The average federal income tax rate for the highest income tax payers has been falling steadily for the past 60 years,according to the report.The natural effect of lower tax rates is that the wealthiest gets to keep more of their income,which tends to widen the gap between the rich and poor,according to CRS analysis
(4)
What are the sources of national and international economic growth?why do some countries make rapid progress towards development while many others remain poor?
Natural factors:more lands and raw materials should lead to an outward shift of PPF and thus increase in potential growth
Human factor: The quality of labour is a factor that contributes to growth
Physical Capital: Enough of this is used to coordinate production thereby fostering growth
Institutional Factor: Enough or adequate economic institutions fosters economic development.

Name: Onuh Onyinye
Reg no : 2018 /241872
Department : Economics
Email : onuhonyinye7@gmail.com

Question 1 answer
By virtue of their success in growth and development, a number of countries have reached the status of advanced otherwise called first world countries and as such the historical walk to development in the economy of these countries can be seen as a valuable lesson for developing or third world countries today.
These developed countries include Norway, Denmark, Japan, Switzerland and the United States. They are seen a developed because they possess characteristics such as, low inflation rates, high levels of employment, better living standards, public financing, social risk minimization, egalitarianism, macro economic stability and political consistency.
Many studies have focused on countries in the developed world, as role models for developing economies as useful as these studies are, they omit useful lessons from more advanced countries, which show that development for them even has been a long winding road.
Taking Japan as a case study, the economic history of Japan has been the most studied for the spectacular economic growth in the 1800, it became the first non-western world power, until its defeat in the second world power.
Japan however recovered from the devastation to become the world’s second largest economy after the United States.
During the 1185-11333 periods, evidence shows that the Japanese economy relied heavily on greater use of iron tools, and fertilizers as well as improved irrigation for agriculture, Japan is characterized by two periods of economic development, since 1868, the first grew moderately and relied heavily on agriculture to finance modern industrial infrastructure. As can be seen, the first efforts which led to the industrial miracle Japan is currently, originates from early reliance on Agriculture.
For the last two decades or so, the developing countries have been under great pressure from the developed countries and the international institutions that they control – such as the International Monetary Fund, the World Bank, the World Trade Organisation – to adopt a set of ‘good policies’, especially free trade, and ‘good institutions’, such as strong patent law, in order to foster their economic development.
The historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now recommend to, or even force upon, the developing countries.
Virtually all of today’s developed countries used tariff protection and subsidies to develop their industries, and in the earlier stages of their development, they did not even have such ‘basic’ institutions as democracy, central banks, patent law, or professional civil services.
Given that the adoption of ‘good policies’ and ‘good institutions’ has failed to generate the promised acceleration of economic development in the developing world, and has in some cases even led to economic and social collapses, a radical re-thinking of the development orthodoxy is required.
Economic progress has been taken over the years to mean developing countries, importing, accepting and adopting western institutions I.e democracy and free trade etc, with out wondering if these institutions fit into the culture and way of life of the peie assimilating to such foreign changes. Owning to the fact that development conditions today are different in many aspects than what was formerly obtainable eg experience with colonization, string completion or even monopoly in the
World market.
Development in these economies ranked as third world must the tailored to the culture and way of life of the people it concerns if it must move such economies forward

Answer to question two:

When economists use this term “institutions” they mean properly rights, honest government, political stability, dependable legal system, and competitive and open markets.

This is because these institutions provide the right environment to allocate scarce resources
These institutions are specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country.
Economists are interested not only in understanding specific existing institutional agencies, but also in the more exciting question of why some institutions evolve and others don’t. Why do institutions differ in one country to the next? Etc
In the words of North 1990, institutions are the rules of the game in a society, the humanly deviced constraints that shape human interaction. They structure incentives in human exchange, whether political, social or economic. Institutions apart from those afore mentioned also include habits and beliefs, norms and traditions in education.
In the landmark study of new institutional economics it was found that institutional determinant tumps other factors such as geography and trade, when accounting for development.
Lack of these important institutions creates situations not conducive to economic growth and development, thereby leading to under development lack of these institutions lead to increased costs, cost of policing, enforcement costs, information costs decision costs. Lower citizen trust in justice systems and their willingness to adhere to rules and regulations

Answer to question three:

Equality like fairness is an important value in most societies, irrespective of ideology, culture and religion, people care about inequality. It could be seen as a signal, of lack of income mobility and opportunity, reflecting the disadvantage of certain segments of the society
Inequality in most emerging markets and developing countries have received considerable attention, and has been described by Former president Obama as a “defining challenge of our time”.
The inequality gap between the rich and poor in our society tends to widen as time goes on, with the rich becoming richer and the poor even poorer. Causes of in equality therefore includes

1. Exploitation of poor countries
Poor countries often get exploited by rich countries in several ways.
Since poor countries often depend on the demand of rich countries, they are heavily reliant and become dependent.
Thus, rich countries can often dictate the terms on which the countries interact and make business. Moreover, rich countries also tend to shift their problems to foreign countries.
An example of this is the transportation of waste from Western countries to poor countries in Africa in order to get rid of the waste problem.

2. Lack of education
Education is key to escape poverty and to build wealth. However, especially in poor countries, people often do not have access to education and therefore suffer from a lack of education.
Moreover, children often have to work in order to earn money for their families and do not have time to attend school.
In addition, in many developing countries, education levels are quite low in general, which makes it even harder for people to escape poverty.

3. Gender inequality

In many countries, men and women are not treated as equally valuable and women often have only pretty confined rights.
This gender inequality also contributes to global inequality since women are often not able to get proper education and therefore stay trapped in poverty.

4. Innate ability
Many people believe that there is a connection between differences in innate ability, such as intelligence, strength, or charisma, and between an individual’s level of wealth. Relating these innate abilities back to the labour market suggests that such innate abilities are in high demand relative to their supply and hence play a large role in increasing the wage of those who have them. Contrariwise, such innate abilities might also affect an individuals ability to operate within society in general, regardless of the labour market. Etc

Answer to question four:

Economic growth is the continuous improvement in the capacity to satisfy the demand for goods and services, resulting from increased production scale and improved productivity ( innovation in product and proccess).
There are different concepts of economic growth and ways of measuring it, but the core definition is in terms of growth in the long run productive capacity in the economy, typically measured by real growth In gross domestic product(GDP).

Factors / sources of improvement on this level of productivity are particularly improvement sources of growth for developing /developed economies facing domewor global competition in a rapidly changing technological environment.
Sources of growth are :
1. Human resources
2. Natural resources
3. Capital formation
4. Technological change and innovation

Economic growth inevitably rides on the four wheels of labour, natural resources, capital and technology.but the wheels may differ among countries. And some countries combine them more efficiently than others.

The disparity among countries in levels of economic development is by far the greatest source of global inequality. Differences between developing and developed countries are massive, this might stem from them lacking the afore mentioned sources for development or not being able to mange / combine these resources

Reasons why some countries make rapid progress and others don’t include :

1. General economic oppeness: extreme forms of “economic nationalism” from high protection barriers to the exclusion of foreign capital and technology, have clearly slowed growth.

2. Socio – political stability : uncertainty about social strife, political conflict and predictability of of government policies all dampen economic activity. Economic advances require gambling on the future, same as adopting new techniques, saving or making new investments. In ability to take these decisions in this line stagnate the economy.

3. Education : probably the single strongest relationship between a policy measure and growth regards education, human capital formation. Studies have shown government unwillingness or inability to provide a basic education for their citizens is associated with poor economic outcomes, definitely this is shown in the existing in equalities between countries such as Japan, India, China or Pakistan.

OGBONNA NGOZIKA
2018/SD/37371
Department of Social Sciences ( Education/Economics)
Ogbonnangozika@gmail.com
1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
Many developed countries faced various challenges which are similar or closely related to the challenges faced by developing countries, some of the lessons learnt from those challenges include:
– Comprehensive Plans: Every developing country should develop-with citizen input -a comprehensive plan addressing land use, infrastructure, capital improvements, and community economic development. Planning helps avoid the wasted time and resources associated with ad hoc development decisions and can help mitigate the adverse impact of sprawl on Nigeria. Such plans provide the framework for making development decisions
– Tapping the Best Leaders: True community leaders view a community as a whole, clearly see the interconnectedness of every component, and understand that economic development is not an activity isolated from the development of the entire community. Every successful community can point to the individual or individuals who are primarily responsible for its success.
– Accepting Change: Change is inevitable. It’s natural for some existing businesses to close or leave; these changes occur for a variety of reasons, often outside a community’s control. Businesses compete in a global environment, are influenced by external economic pressures, and are subject to normal business cycles. The commitment of additional financial or other incentives only prolongs the inevitable. There is little a community or economic developer can do to combat.
– Retaining Existing Businesses: Many existing businesses with growth potential are unaware of the many local and state resources available to assist them. These businesses have changing needs, and the community must be in a position to meet them. Those needs may include more skilled workers, more advanced telecommunications, access to an airport, or better lifestyle opportunities. The majority of new jobs are created by existing businesses. Unfortunately, few communities have an organized program for retaining and expanding existing businesses. These attributes are developed over time, and only constant contact with local companies can keep a community fully informed of their growing needs.
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development?
Economic institutions are those institutions set up to facilitate the management of Economic activities in a country. They are two broad categories; banking and non-banking institutions. Banking institutions include, central banks, commercial banks, while non-banking institutions include; CBN, microfinance banks, development finance institutions etc.
The goals of the central bank are stabilization of currency, inflation management and reduction of unemployment in the economy. The central bank can help shape problems of underdevelopment and prospects for successful development by using policies such as monetary policies and fiscal policies to encourage investment and promote industrialization in the country. The central bank is the apex bank in the country and as such regulates the volume of currency and credit in the country. This in turn will increase the amount of goods and services produced and create more jobs for the people, thereby increasing the rate of development in the country. The non-banking institutions can also help by rendering loans to firms and individuals to help improve their businesses and increase the rate of development in the country.
3. How can the extremes between rich and poor be so very great?
The workings in Nigeria favours the rich and enriches them more, while the poor struggles but gets poorer. One of the problems which development seeks to solve is the differences which exist between the rich and the poor, as the rich is too distant from the poor in terms of wealth especially in a country like Nigeria. For instance only one person is allowed to supply flour in Nigeria, this creates a monopolistic scenario as well as gives them excess profit as they can manipulate the price of cement however they like not minding whether it’s affordable by the poor. The poor is forced to pay for the cement because that’s the only way they can cater for their needs! There are many reasons for economic inequality within societies, and they are often interrelated. some of them includes:
-Education
-Taxes
-Globalization
-Labor markets
-Technological changes;
-Policy reforms;
– Inequality in wages and salaries

4a. What are the sources of national and international economic growth?

a). Capital formation: recall that tangible capital include structures like roads and power plant countries that grow rapidly tend to invest heavily on capital goods
b).Technological change and innovation: it means changes in the process of production or introduction of new products or services.
c). Education & Training: Education should be seen as an investment in human capital that enables the development of skills, enlarges the capacity to gather knowledge and information, and improves the utilization of knowledge and or information to increase productivity.
d). Stable Government: it is more likely to have a structured and long-term development plans for the country making it easier to accumulate social capitals like schools, universities, libraries, community centers, hospitals, roads, running water and sewage system.
4b. Why do some countries make rapid progress toward development while many others remain poor?
Inequality between countries and within countries requires an analysis which goes beyond the headline economic indicators while average per capita incomes are growing in most countries, inequality is also growing almost everywhere.

Many countries have made extraordinary strides in overcoming poverty, in some progress has been across the board, whereas others have managed to achieve very significant progress on one dimension but fallen back on others. some of these reasons include:
– Agriculture & Food: Agriculture provides the main sources of income and employment for the 70% of the world’s poor that live in rural areas. The price & availability of food and agricultural products also dramatically shapes the nutrition and potential to purchase staples for the urban poor.
– Infastructure: Infastructure is the basic physical and organisational structures and facilities required for the development of economics and societies. Infastructure includes water & sanitation, electricity etc. Investment
– Gender& Development: in infastructure tend to require very large and indivisible financial outlays & regular maintenance. Gender inequalities and unequal power relations skew the development process. In most developing countries, women’s opportunities for gainful forms of employment are limited to subsistence farming.

Name: Asadu Francisca Somtochukwu
Reg No: 2018/241230
Dept: Education Economics

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development
Answer
Generally, there are two ways to define economic institutions, depending on the context in which the term is used. First, it is thought of as an organization, whether public or private, that engages in the collection and research of economic data or that provides a service or product deemed economically central to a nation’s economy. Examples include national economic bureaus, tax collection agencies or university departments dedicated to economic research. These institutions are also considered foundational structures or organizations in society that are inherent to the economic system or culture, such as the banking systems, investment markets or even a custom, such as providing children with a weekly allowance.
No. 3
How can the extremes between rich and poor be so very great?
Answer
Extreme inequality is out of control. Hundreds of millions of people are living in extreme poverty while huge rewards go to those at the very top. There are more billionaires than ever before, and their fortunes have grown to record levels. Meanwhile, the world’s poorest got even poorer. Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education. These policies hit the poor hardest. The human costs are devastating, with women and girls suffering the most. Despite their huge contribution to our societies through unpaid care work, they are among those who benefit the least from today’s economic system.
Extreme poverty vs extreme wealth: how big is the inequality gap?
1. LINING THE POCKETS OF THE WORLD’S BILLIONAIRES: The very top of the economic pyramid sees trillions of dollars of wealth in the hands of a very small group of people, predominantly men, whose fortune and power grow exponentially. Billionaires have now more wealth than the 4.6 billion people who make up 60 percent of the planet’s population. Meanwhile, around 735 million people are still living in extreme poverty. Many others are just one hospital bill or failed harvest away from slipping into it.
2. WEALTH UNDERTAXED: While the richest continue to enjoy booming fortunes, they are also enjoying some of the lowest levels of tax in decades – as are the corporations that they own. Instead taxes are falling disproportionately on working people. When governments undertax the rich, there’s less money for vital services like healthcare and education, increasing the amount of care work that falls on the shoulders of women and girls.
3. UNDERFUNDED PUBLIC SERVICES: At the same time, public services are suffering from chronic underfunding or being outsourced to private companies that exclude the poorest people. In many countries a decent education or quality healthcare has become a luxury only the rich can afford. It has profound implications for the future of our children and the opportunities they will have to live a better and longer life.
4. DENIED A LONGER LIFE: In most countries having money is a passport to better health and a longer life, while being poor all too often means more sickness and an earlier grave. People from poor communities can expect to die ten or twenty years earlier than people in wealthy areas. In developing countries, a child from a poor family is twice as likely to die before the age of five than a child from a rich family.
5. INEQUALITY IS SEXIST: With less income and fewer assets than men, women make up the greatest proportion of the world’s poorest households, and that proportion is growing. They are more likely to be found in poorly paid and precarious employment, supporting the market economy with cheap or free labor. They are also supporting the state through billions of hours of unpaid or underpaid care work, a huge but unrecognized contribution to our societies and economic prosperity.
A fairer world is possible. The growing gap between rich and poor is undermining the fight against poverty, damaging our economies and tearing our societies apart. Yet inequality is not inevitable – it is a political choice. Governments around the world must act now to build a new, human economy that values what truly matters to society, rather than fueling an endless pursuit of profit. An economy that values the care work of women and girls instead of billionaires’ wealth. An economy that works for everyone, not just a fortunate few. Join us to urge our political leaders to invest in vital public services and tax the rich fairly, and to ensure everyone has secure jobs paying decent wages. It’s time to fight inequality, and beat poverty for good.
No. 4
What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
Answer
SOURCES OF ECONOMIC GROWTH
1. HUMAN RESOURCES: Labour inputs consist of quantities of workers and of the skills of the work force. Many economists believe that the quality of labour inputs the skills, knowledge, and discipline of the labour force is the single most important element in economic growth.
A country might buy the most modern telecommunications devices, computers, electricity-generating equipment, and fighter aircraft. However, these capital goods can be effectively used and maintained only by skilled and trained workers. Improvements in literacy, health, and discipline, and most recently the ability to use computers, add greatly to the productivity of labour.
2. NATURAL RESOURCES: The second classical factor of production is natural resources. The important resources here are arable land, oil and gas, forests, water, and mineral resources. Some high-income countries like Canada and Norway have grown primarily on the basis of their ample resource base, with large output in agriculture, fisheries, and forestry.
Similarly, the United States, with its temperate farmlands, is the world’s largest producer and exporter of grains. But the possession of natural resources is not necessary for economic success in the modern world. New York City prospers primarily on its high-density service industries.
Many countries that have virtually no natural resources, such as Japan, have thrived by concentrating on sectors that depend more on labour and capital than on indigenous resources. Indeed, tiny Hong Kong, with but a tiny fraction of the land area of resource-rich Russia, actually has a larger volume of international trade than does that giant country.
3. CAPITAL FORMATION: Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. The most dramatic stories in economic history often involve the accumulation of capital. In the nineteenth century, the transcontinental railroads of North America brought commerce to the American heartland, which had been living in isolation.
In this century, waves of investment in automobiles, roads, and power plants increased productivity and provided the infrastructure which created entire new industries. Many believe that computers and the information superhighway will do for the twenty-first century what railroads and highways did in earlier times. Accumulating capital, as we have seen, requires a sacrifice of current consumption over many years. Countries that grow rapidly tend to invest heavily in new capital goods; in the most rapidly growing countries, 10 to 20 percent of output may go into net capital formation. By contrast, many economists believe that the low national savings rate in the United States only 4 percent of output in 1996 poses a major economic problem for the country.
When we think of capital, we must not concentrate only on computers and factories. Many investments are undertaken only by governments and lay the framework for a thriving private sector. These investments are called social overhead capital and consist of the large scale projects that precede trade and commerce. Roads, irrigation and water projects, and public-health measures are important examples. All these involve large investments that tend to be “indivisible,” or lumpy, and sometimes have increasing returns to scale. These projects generally involve external economies, or spillovers that private firms cannot capture, so the government must step in to ensure that these social overhead or infrastructure investments are effectively undertaken.
4. TECHNOLOGICAL CHANGE AND INNOVATION: In addition to the three classical factors discussed above, technological advance has been a vital fourth ingredient in the rapid growth of living standards. Historically, growth has definitely not been a process of simple replication, adding rows of steel mills or power plants next to each other.
Rather, a never ending stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan. Technological change denotes changes in the processes of production or introduction of new products or services. Process inventions that have greatly increased productivity were the steam engine, the generation of electricity, the internal-combustion engine, the wide body jet, the photocopier machine, and the fax machine. Fundamental product inventions include the telephone, the radio, the airplane, the phonograph, the television, and the VCR.
Economic growth inevitably rides on the four wheels of labour, natural resources, capital, and technology. But the wheels may differ greatly among countries, and some countries combine them more effectively than others.

FACTORS INFLUENCING GLOBAL DEVELOPMENT
Levels of development are determined by several factors:
PHYSICAL FACTORS: Some areas have a hostile or difficult landscape. This can make development more difficult. Examples of this are very hot climates or arid (a lack of water) climates which make it difficult to grow sufficient food.
ECONOMIC FACTORS: Some countries have very high levels of debt. This means that they have to pay a lot of money in interest and repayments and there is very little left over for development projects.
ENVIRONMENTAL FACTORS: Some places experience environmental issues, which can prevent them from developing. Examples might be extreme flooding or desertification.
SOCIAL FACTORS: Some parts of the world have issues that are caused by people. These include low levels of education, poor water quality or a lack of doctors.
POLITICS FACTORS: Some countries are at war or the government may be corrupt. Therefore money does not reach the people who need it most and spending on areas such as education and infrastructure may be insufficient.
NATURAL RESOURCES: Some countries have an abundance of raw materials such as oil or precious minerals. These can be sold and the money invested into developing the country.
THE CYCLE OF POVERTY: The factors influencing development are often linked and countries can find themselves in a cycle of poverty. For example, if a country is in a lot of debt, it cannot afford good schools. If people are poorly educated they are less likely to understand about the causes of desertification. Desertification leads to poor crop growth and low incomes. This leads back to the country accumulating debt and the cycle continues.

What can be learned from the historical record of economic progress in the now developed world?are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
Answer- A lot can be learnt from them because they were faced with the problems that most developing countries are faced with right now.but through some factors such as planning and coordination there were able to scarp out such problems from their economy.history shows us how these countries after the war were able to manage both their human and Natural resources through management and resources through industrialization and agriculture.
Developing countries are not faced with the same problems that those once developing countries once faced, there are totally different.developed countries were faced with mostly war.but developing countries are faced with so many such as social, cultural and political factors.
What are economic institution, and how do they shape problems of underdevelopment and prospects for successful development.
Answer- economic institution are well established arrangements and structures that are part of the culture or society.good economic institution provide people a conducive environment for saving, learning, inventing and inventory.they determine attitudes, moments and conditions for development.
How can the extremes between rich and poor be so very great?
Answer- they are so great because of how the system of how most economics system are built in countries making the rich become richer and the poor more poor.right nau that how the world works for both the rich and poor the transaction is very hard
What are the source of national and international economics growth?why do some countries make rapid progress toward development while many others remain poor??
Answer- they are so many sources such as the human factor(workforce), physical capital, natural factors.more land and raw material.
some economies have expanded faster than others through so many factors,such as social factor- some parts of the world have issues that are caused by people they include low level of education,bad government and corruption.

NAME: ABONYI AMAKA MARY

REG NO: 2018/241874

DEPARTMENT: ECONOMICS

1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries face on the eve of their industrialization?

There are several things to learn from the historical record of economic progress in the now developed world. These lessons include the following:

The importance of agriculture: The first major lesson was that there is a close connection between the rate of growth in the output of the agricultural sector and the general rate of economic development. The high rates of economic growth are associated with the rapid expansion of agricultural output and low rates of economic growth with the slow growth of agriculture. Agriculture forms a large part of the total domestic product and of the exports of the developing countries. Taiwan and South Korea, with some of the highest population densities in the world, were able to expand their agricultural output rapidly by a vigorous pursuit of appropriate policies. These included the provision of adequate irrigation facilities, enabling a succession of crops to be grown on the same piece of land throughout the year; the use of high-yielding seeds and fertilizers, which raised the yields per acre in a dramatic fashion; provision of adequate incentives for producers by setting producer prices at reasonable levels; and improvements in credit and marketing facilities and a general improvement in the economic organization of the agricultural sector. Agricultural development is important because it raises the incomes of the mass of the people in the countryside; in addition, it increases the size of the domestic market for the manufacturing sector and reduces internal economic disparities between the urban centres and the rural areas.

The role of exports: Another lesson to learn from the historical record of developed countries is the role of exports. Developed countries were characterized by rapid expansion in exports. The export expansion was not confined to those countries fortunate in their natural resources, such as the oil-exporting countries. Some of the developing countries were able to expand their exports in spite of limitations in natural resources by initiating economic policies that shifted resources from inefficient domestic manufacturing industries to export production. There was a very rapid expansion of exports of labour-intensive manufactured goods. This phenomenon occurred not only in the extremely rapidly growing, newly industrialized countries —Singapore, South Korea, and Taiwan, as well as Hong Kong.

Therefore, the initial conditions are similar. The difference is the people’s attitude to work and life. There is respect for human dignity, the natural environment, and respect for people. Here, the development plan is structured to incorporate everyone in the society.

2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development?

Economic institutions are formal and informal rules that organize the economic flow and activity in an economy. It is also a system of rules and norms that governs the production, distribution, and consumption of goods and services.  It is one of the basic institutions because it helps in determining the aggregate economic growth potential of the economy. They include; central banks, commercial banks, microfinance institutions, development finance institutions, organizations like NAFDAC e. t. c

Central bank: A central bank is a financial institution that is responsible for overseeing the monetary system and policy of a nation or group of nations, regulating its money supply, and setting interest rates. The central bank must regulate the level of inflation by controlling money supplies by means of monetary policy. One of the ways through which the central bank shapes the economy is the use of open market operation. The central bank performs an open market operation (OMO) that either injects the market with liquidity or absorbs extra funds, directly affecting the level of inflation. To increase the amount of money in circulation and decrease the interest rate (cost) for borrowing, the central bank can buy government bonds, bills, or other government-issued notes. This buying can, however, also lead to higher inflation. When it needs to absorb money to reduce inflation, the central bank will sell government bonds on the open market, which increases the interest rate and discourages borrowing. Open market operations are the key means by which a central bank controls inflation, money supply, and prices.

Microfinance Institutions: These are institutions that provide financial services to the poor. They shape the economy by rendering services to the poor. These services include: to improve the quality of life of the poor by providing access to financial and support services; to be a viable financial institution developing sustainable communities; to mobilize resources in order to provide financial and support services to the poor, particularly women, for viable productive income generation enterprises enabling them to reduce their poverty; Learn and evaluate what helps people to move out of poverty faster.

Development Finance Institutions: A development financial institution (DFI), also known as a development bank or development finance company (DFC), is a financial institution that provides risk capital for economic development projects on a noncommercial basis. Development banks do not provide medium-term and long-term loans only but they help industrial enterprises in many other ways too. These banks subscribe to the bonds and debentures of the companies, underwrite to their shares and debentures and, guarantee the loans raised from foreign and domestic sources. They also help undertakings to acquire machinery from within and outside the country

3. How can the extremes between rich and poor be so very great?

The gap between the rich and the poor in this country is growing ever wider and many factors have led to this. They include; Inequitable distribution of resources, government policies that benefit the rich only, accessibility to basic amenities (education, health, good roads, etc). Many governments are culpable for enacting negative policies which are detrimental to the poor. For example, some governments make policies that under-tax private corporations and wealthy individuals and underfund public services like education and healthcare. The rich can afford to fly abroad for fitting medical care; they can also afford to send their children abroad for proper and quality education. now, the poor cannot afford to go abroad for proper medical care or be able to send their children abroad to attain quality education which is lacking in the country. Also, factors like lack of adequate credit facilities, corruption, insecurity, etc., further serve to widen the income disparity between the rich and the poor.

4. What are the sources of national and international economic growth? Who benefits from such growth and why? Why do some countries make rapid progress toward development while others remain poor?

Sources of national and international growth include the following;

Natural resources
Human capital
Technology
Innovation
Socal and Political structure
Trade
Industrialization, e.t.c

Economic growth is a means to an end that is, a better life for the masses which implies that the masses benefit from it. But today, almost none of the gains from economic growth is accrued to the bottom half of the population.

Some countries make rapid progress toward development while others remain poor because most of these less developed countries rely on only one source of economic growth which is natural resources while developed countries make use of more than sources of economic growth.

Name: CHUKWUDUBEM CHINEMEREM PEACE
Reg no: 2018/245426
Dept: EDUCATION/ECONOMICS
ASSIGNMENT
1A. What can be learned from the historical record of economic progress in the now developed world?Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
All of today’s developed countries used tariff protection and subsidies to develop their industries. A tariff is a tax imposed by a government of a country or a supranational union on imports or exports of goods. Tariffs therefore provide an incentive to develop production and replace imports with domestic products.
Here tariff was used to reduce pressure from foreign competition and reduce the trade deficit. Their motive then was to protect infant industries and to allow import substitution industrialization i.e replacing foreign import with domestic production.
Government seek to implement subsidies to encourage production and consumption in specific industries. In this sense, when the government gives subsidies to the supplier, what results is a win-win situation for both the supplier and the consumer. Essentially, the supplier is benefitting as if the good were selling at a higher price and is able to produce more of the product. Meanwhile, consumers get to enjoy the product for what would be a comparatively cheaper price, since suppliers do not need to charge exorbitant rates to break even on a production.
There were exceptions like the Netherlands and Switzerland that have maintained free trade since the late 18th century. However, these were countries that were already on the frontier of Technological development at that time and therefore did not need much protection.

The initial conditions are similar for contemporary developing countries faced on the eve of their industrialization.
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.
Economic institutions are specific agencies or foundations, both government and private, devoted to collecting or studying economic data, or commissioned with the job of supplying a good or service that is important to the economy of a country. E.g
A. The central bank
B. Infrastructure bank
C. Bank of Agriculture
A. The central bank: its main purpose is to regulate the supply of money and credit to the economy. To achieve this it have three monetary policy tools to achieve this goals and they are:
1. Cash reserve requirement
2. Open market operation
3. Interest rates adjustment.
2. Infrastructure bank: it offers find management services to both domestic and external sovereignty and institutions seeking to fund infrastructure development including the federal government of Nigeria, pension funds, finance institutions as well as bilateral and multilateral funds providers.
3. Bank of Agriculture: this bank provides credit facilities to both small and large scale farmers.

3. How can the extremes between rich and poor be so very great?
In a country like Nigeria where the richest man in Africa is from the same country is also considered as the poverty capital of the world, why.
The Government in Nigeria is massively undertaking corporations and wealthy individuals while overtaxing the poor masses yet underfunding vital public services like healthcare and education whereby this underfunded public services are accessed by the poor masses.
Another cause is the determination of wages by the capitalist market. In this market, the wages for jobs are set by supply and demand.
4.what are the sources of national and international economic growth?why do some countries make rapid progress toward development while many others remain poor?
The sources of national and international economic growth include.
1. Natural resources
2. Human capital
3. Technology
4. Social and political structure
5. Innovation
6. Trade
7. Industrialization
The reasons why some countries make rapid progress toward development while many others remain poor is because some countries make use of the majority of the sources of national and economic growth. While some are still in the natural resources phase.

NAME- CHIDOZIE JULIETH CHISOM
REG NO- 2018/250055
DEPT- EDUCATION ECONOMICS
EMAIL – chidoziejulieth165@gmail.com

(1) WHAT CAN BE LEARNT FROM RHE HISTORICAL RECORD OF ECONOMIC PROGRESS IN THE NOW DEVELOPED WORLD?

ANSWER:
Historical records of economic progress are the record of steps taken in the past geared towards achievement of desired economic development of a country over the years.
The historical records of economic progress of the now developed world is an evidence that the now developed world didnt just develope over time rather it has undergone some development processes in the past which led to its attainment of high rate of development
From the historical records of a developed country it can be learnt that for a country to considered as a developed country it must have attained a great level of industrialization and infrastructural development which wil in turn lead to creation of job opportunities ,education, hospitals ,good roads ,steady power supply etc, a country that lack some of this basic facilities are considered as underdeveloped and every country that wants to attained development should work towards the betterment of the people’s lives .
It can also be noted from the historical records of some developed nations like united state of America (USA), Canada etc that they were able to fight against selfish leadership and corruption, a nation that is lead by selfish leaders lag in development likewise corruption.therefore for a nation to experience development it must have selfless leaders who has the interest of the people at heart and also fight against corruption.

ARE THE INITIAL CONDITION’S SIMILAR OR DIFFERENT FOR CONTEMPORARY DEVELOPING COUNTRIES FROM WHAT THE DEVELOPED COUNTRIES FACED ON THE EVE OF THEIR INDUSTRIALISATION?

ANSWER:
The initial conditions are similar for contemporary developing country to what the developed countries faced in the eve of industrialization because every developing country are working towards attaining full development and this can only be achieved through imitation and practice
By imitating the conditions that the developed countries used to achieve industrialization and putting them into practice, the developing countries can achieve development.
For a country to be considered as a developing country it then means that it is working towards development and thereby following the processes that leads to development which was adopted by the developed countries therefore the initial conditions are similar and not different.

(2) WHAT ARE ECONOMIC INSTITUTIONS ?

Answer:

Economic institutions are agencies , foundations , structures or establishments both government or private commissioned with the responsibility of providing goods and services that are relevant to the economic development of a country ,eg the banking sectors,industrial sectors, competitive markets etc

HOW DO ECONOMIC INSTITUTIONS SHAPE PROBLEMS OF UNDERDEVELOPMENT AND PROSPECT FOR SUCCESSFUL DEVELOPMENT ?

Answer:
PROVISION OF FUNDS: Economic institution provide assistance to other institutions as well as providing funds for government in a particular country or society ,it also help in shaping the tax rate and the inflow of money in the economic market. when there is steady inflow of money in the economic market then it will help the underdeveloped country to be developed and this will in turn attract prospects from other countries to invest in the country’s economy.
EMPLOYMENT: economic institution create jobs opportunities for people through which they can generate income and earn their livelihood, that is how people in the society or country satisfy their basic needs. in our today’s world many businesses are developed under economic institutions.
POWER AND AUTHORITY: this can shape and solve problems in a particular country or society because those who have access and possess more economic resources are powerful and authoritative, this is because the holders of wealth can possibly control various agencies in a particular society or country there by assisting in their economic development .

(3) HOW CAN THE EXTREME BETWEEN THE RICH AND POOR BE SO VERY GREAT?

Answer:
The growing gap between the rich and poor is very wide and it is a fight against the poor that is damaging our economy and tearing our society apart today. yet inequality is not inevitable in our society with this huge gap between the poor and Rich.
When you look at the society very well extreme inequality is out of control because hundreds and millions of people are leaving in a extreme poverty while huge rewards go to those at the very top.
Another example is the government and its officials,many government today are fuelling this inequality crisis where they are massively under taxing corporations and wealthy individuals yet underfunding vital public services like healthcare and education sectors where the poor masses can benefit
Wealth under taxed : the richest has continued to enjoy booming fortunes because they are enjoying the lowest level of tax in our society.
In most countries having money is a passport to better health and a longer life while being poor often means more sickness and early grave , people in poor communities can expect to die ten to twenty years earlier than the wealthy areas.
in developing countries a child from poor family is likely to graduate and remain unemployed than a child from a wealthy home,the rich in higher authorities only give jobs to thier fellow rich men’s children while the poor ones struggle for their survival,this therefore makes the rich richer and the poor poorer.

(3) WHAT ARE THE SOURCES OF NATIONAL AND INTERNATIONAL ECONOMIC GROWTH?

Answer:
Follow the highlight,the important sources of economic growth are as follows:
* HUMAN RESOURCES- labour input in a work place consist of qualities of workers and their skills in a country might buy the most modern telecommunication devices,computer ,electricity, generating equipment and aircraft,however these Capita hoods can only be effectively used and maintained only by skilled and trained workers
* NATURAL RESOURCES- the second classical factor of production is natural resources and the important resources here are arable land oil and gas ,forest,water and mineral resources,these resources help boost the national and international market.
*TECHNOLOGICAL CHANGE AND INNOVATIONS- a country that is more developed in technological know how such as china grow more rapidly than than the countries that like in technology both in the national and international economic growth.

WHY DO SOME COUNTRIES MAKE RAPID PROGRESS TOWARDS DEVELOPMENT WHILE MANY OTHERS REMAIN POOR?

Answer:
The reasons are as follows:
(1) Natural endowment- the natural enjoyment of a country such as a crude oil and agricultural products,can a make it to have more economic advantage over the country’s that lack in those natural endowments
(2) Government- the kind of leaders a country has determine the extent of their development,a country that Has selfish and corrupt leaders such as our country Nigeria will always lag in development compared to the countries that have selfless and uncorrupt leaders
(3) Technological advancement.
(4) Industrialization .

Reg number:2018/243746

1) what we learnt from the historical record of economic progress in the now developed word?.

For the last two decades or so, the developing countries have been under great pressure from the developed countries and the international institutions that they control – such as the International Monetary Fund, the World Bank, the World Trade Organisation – to adopt a set of ‘good policies’, especially free trade, and ‘good institutions’, such as strong patent law, in order to foster their economic development.

The historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now recommend to, or even force upon, the developing countries.

Virtually all of today’s developed countries used tariff protection and subsidies to develop their industries, and in the earlier stages of their development, they did not even have such ‘basic’ institutions as democracy, central banks, patent law, or professional civil services.

Given that the adoption of ‘good policies’ and ‘good institutions’ has failed to generate the promised acceleration of economic development in the developing world, and has in some cases even led to economic and social collapses, a radical re-thinking of the development orthodoxy is required.

Above all, the conditions attached to bilateral and multilateral financial assistance to developing countries should be radically changed, on the recognition that the orthodox recipe is not working, and that there can be no single recipe of ‘best practice’ policies that everyone should use.

Second, the WTO rules should be re-written so that the developing countries can more actively use tariffs and subsidies for industrial development.

Third, improvements in institutions should be encouraged, but this should not be equated with imposing a fixed set of today’s – not even yesterday’s – Anglo-American institutions on all countries; nor should it be attempted in haste, as institutional development is a lengthy and costly process.

2) what are economic institution and how they shape problem of underdevelopment and prospects for successful development ?.

Cross-country empirical analyses, in combination with micro-level studies, provide strong support for the overwhelming importance of institutions in predicting the level of development in countries around the world (Hall and Jones, 1999; Acemoglu, Johnson and Robinson, 2001). Protection of property rights, effective law enforcement, and efficient bureaucracies, together with a broad range of norms and civic mores, are found to be strongly correlated to better economic performance over time. This essay aims to explain why institutions are important to economic development and to provide evidence for the arguments made. It argues that institutions support economic development through four broad channels: determining the costs of economic transactions, determining the degree of appropriability of return to investment, determining the level for oppression and expropriation, and determining the degree to which the environment is conducive to cooperation and increased social capital. Evidence is derived from the literature, from comparison of countries, and from examples at the micro level.

In the words of North (1990, p. 4): “Institutions are the rules of the game in a society, […] the humanly devised constraints that shape human interaction. […] They structure incentives in human exchange, whether political, social or economic”. Institutions comprise for example contracts and contract enforcement, protection of property rights, the rule of law, government bureaucracies, financial markets. They also, however, include habits and beliefs, norms, social cleavages and traditions in education (so-called informal institutions). Formal institutions typically tend to be the crystallization of informal institutions (North, 1990), as social norms in the realms of gender, class and caste, for example, determine rules of political participation and representation, methods of economic exchange, and inclusion of different groups in society (Pateman, 1988).

In a landmark study of new institutional economics, Rodrik, Subramanian and Trebbi (2002) assess the relative importance of institutions, geography and integration (trade) in determining the differences in incomes between the world’s most developed countries and the poorest ones. They find that institutional determinants “trump” all others. It is not a new intuition that for the prospering of economic activity institutions matter. Adam Smith had already noted this is surprising detail, referring to the importance of a justice system, private property rights, and the rule of law (The Wealth of Nations). Aron (2000) surveys the studies which correlate indices of development to institutional ones: 7 find a positive correlation with property rights and enforcement, 10 with civil liberties, 10 others with political rights and democracy, 4 with institutions for cooperation (e.g. clubs and associations), and 15 find a negative correlation of development with political instability. The paragraphs below explain why institutions appear so important to economic development.

Institutions conducive to economic development reduce the costs of economic activity. The costs include transaction costs such as search and information costs, bargaining and decision costs, policing and enforcement costs (Coase, 1992, p 197; Dahlman, 1979, p. 149). They lower transaction costs by providing common legal frameworks (e.g. contracts and contract enforcement, commercial norms and rules), and they encourage trust  by providing policing and justice systems for the adherence to common laws and regulations. Communities in LDCs typically rely on kinship or ethnic and religious ties for trade. Norms and networks of common language and religion may be enough to ensure compliance with agreements on economic exchange; collective punishment and social reputation may be enough to ensure the enforcement of (often informal) contracts even in the absence of a third party. Greif (1993) describes the trade networks of Maghribi traders which permitted the sharing of information on dishonest traders and their collective punishment. To take advantage of opportunities for trade with different groups and increase the size of economic transactions, however, cultural ties are not enough. There is need for greater information about trading partners, and for institutions which ensure agreements on the details of exchange and compliance to the agreed conditions. These take the form of contracts, codes of conduct, standardized weights and measures, disclosure agreements, and enforcement through courts and policing. Where transaction costs are small, the private enforcement of contracts may still be preferred. But as economic relations develop and become increasingly impersonal, the role of a third party to enforce compliance to rules is increasingly necessary (Shirley, 2003, p. 2).

Such institutions increase the security that the risk of incurring in an economic transaction is matched by the full appropriation of its eventual benefits. This includes the presence of individual private property rights. If property is protected individuals are more willing to invest and to incur sunk costs. Recounting the land-ownership system in Ghana, Pande and Udry (2005) are able to show that where individual perception of security of land tenure is low, investment in the land is significantly reduced, and output consequently drops. In fact, in the few cases in which land is obtained through commercial transactions (as opposed to the traditional informal system of land redistribution), there ceases to be any difference in levels of investment because security of tenure is assured. This increases output and thus is conducive to economic development.

The protection of property rights requires an expanded role for state authority. Individuals and groups sacrifice a degree of freedom in order to ensure state protection; they accept levies and taxes to cover policing expenses, and state monopoly over the use of force for common security (Bates, 2001, p. 65-66). However, there is a risk that states which have the power to enforce property rights may use that power to expropriate property too. Instead of reducing risk of economic transactions, this increases it. Thus property rights are by no means sufficient to spur economic growth, and must be balanced by institutions which limit the extractive capacity of state power. These typically involve independent parliaments and judiciaries. Democratic institutions of political representation strongly contribute to this process (Rodrik, 2000).

Thus institutions determine the extent to which those in power are able to expropriate the economy’s resources to their private advantage. Unequal institutions strongly limit development by reducing the capacity of individuals to access resources, expand production and increase their incomes. A comparative analysis of development trajectories of countries indicates that institutions which benefit elites and allow their appropriation of resources and products have perpetuated underdevelopment.

Countries which have undergone colonial domination tend to be plagued by such extractive institutions. These have outlived the gaining of independence on behalf of these countries, and their control has largely been taken over by local elites. There are countless examples of societal outcomes the cause of which can be traced to institutional arrangements of many decades before.

The unequal landownership system in Latin America (latifundios) has been indicated a fundamental cause of its underdevelopment. There is evidence that it limits the development of greater rural employment and higher rural incomes (World Bank, 2008, ch 6). ECLA, the Economic Commission for Latin America, has repeatedly flagged the importance of land reform in the process of poverty-reducing agriculture and rural development. A report by the United Nations Food and Agriculture Organization stresses that this is particularly urgent as population growth threatens to increase income inequalities, and technological developments in agriculture may serve the landowner elites to further consolidate their grip on land and agriculture, thus perpetuating the process of path dependency in the formation of institutions (UNFAO, 2006; see also Myrdal, 1992).

Greater equality and functional economic institutions are also seen as the cause for the successful development of Vietnam compared to a similar country as Nicaragua, where high inequality has concentrated power in the hands of a restricted elite, and governments have failed to adequately invest in infrastructure and public welfare. Similarly, institutional capacity to exploit domestic primary resources is indicated as the key to the success of Botswana and Mauritius in comparison to other developing countries for which primary resources have turned into a curse, i.e. Sierra Leone (diamonds), Angola, Equatorial Guinea and Nigeria (oil) (Birdsall et al., 2005, p. 138). The outcomes of institutions have effects which lie deep in the socio-economic fabric of societies. Banerjee and Duflo (2011) recount the finding by Abhijit and Lakshmi Iyer (2005) that in India the coexistence of two systems of land-revenue collection under the British colonization caused very different outcomes; under one system, the landlord was responsible for collecting taxes, and this strengthened his role, while under the other farmers themselves were responsible for the taxes. The regions where the second system was dominant, 150 years later (with the tax system long gone) exhibit higher agricultural yield, more schools and more hospitals, due to the development of more horizontal and cooperative social relationships among the inhabitants.

Institutions which are conducive to development ensure greater self-expression, allow the free flow of information and encourage the formation of associations and clubs. These form prosperous social relationships, which are conducive to greater economic interaction by increasing levels of trust and wider availability of information (Putnam, 1993). They allow greater sharing of resources through democratic institutions and the use of the state to reduce the risk attached to economic activity (Bardhan, 2006, p.5). The welfare state is an example of an institution which pools resources to limit the negative effects of business cycles on incomes and unemployment. Institutions conducive to development pool resources to provide the investments in education, health and infrastructure which lie at the basis of economic interaction and are necessary and complementary to private investment. Informal institutions lie at the basis of an economy. They include public agencies, trade unions, community structures and professional associations. They make up the fabric which determines the response to laws and government decisions. Most often they shape these outcomes themselves.

There is wide-ranging evidence that institutions matter a great deal in determining the level of economic development of a country. Cross-country analyses use indicators such as degree of protection of property rights, the rule of law, and civic liberties and find that they are strongly correlated to economic performance. This essay has described why institutions are so important for economic development and has provided evidence for the claims made. It has identified four broad channels through which the correlation can be explained. Institutions determine the costs of economic transactions: they spur development in the form of contracts and contract enforcement, common commercial codes, and increased availability of information, all of which reduce the costs of transactions, risk, and uncertainty. Institutions determine the degree of appropriability of return to investment: protection of property rights and the rule of law spur investment and thus increase incomes. Institutions also determine the scope for oppression and expropriation of resources by elites: unequal institutions which allow the dominance of powerful elites over economic exchange strongly limit development, as can be seen in the case of many ex-colonial countries. Lastly, institutions determine the degree to which the environment is conducive to cooperation and increased social capital; inclusive and participatory institutions increase the flow of information and the extent to which resources can be pooled to reduce risk and ensure sustained levels of wealth. This fits nicely with the finding of historical studies that high quality institutions today are rooted in greater equality, political competition and cooperative norms in the distant past. Institutions strongly affect the economic development of countries and act in society at all levels by determining the frameworks in which economic exchange occurs. They determine the volume of interactions available, the benefits from economic exchange and the form which they can take.

3) how can the extreme gap between the rich and poor be so very extreme?.

“The rising gap between rich and poor is not just bad for society it is bad for growth.” Discuss.

There is no doubt that the gap between the rich and the poor is widening in the world today at the present time as ‘share of the world’s wealth owned by the best-off 1% has increased from 44% in 2009 to 48% in 2014’ (The Guardian, 2015). Inequality is referred to as the unequal distribution of wealth and income amongst individuals and countries. Gini coefficient which is a number between 0 and 1 which is used to measure income inequality; where 0 represents perfect equality showing that everyone has the same income and 1 representing perfect inequality which shows that nobody gets the same amount of income. The rich are able to meet their needs

Education gives us as citizens the skills and knowledge needed for us to live a quality life in the present and future Although every single individual in this in the world should have the right to receive education, in some countries such as in less economically developed countries (LEDC), they do not receive education because it is not free and therefore some are not able to afford the education they need to have. For example, if we think about poor parents they are limited to what they can provide for their children, and one of the major things that they cannot provide for their children is a good education. This is because they are living with a low income and therefore, they lack the spending power to provide their children with the education that they need. As a result of their low income, they cannot buy the resources that their children need to get educated in schools. This leads to those children not gaining many skills and knowledge and tend to attain poor grades compared to those children whose parents have a high income. To support this, Education Week (2014) says ‘in recent decades, it has been largely through an increase in income-based segregation of neighbourhoods and schools that growing inequality of family income has affected the educational attainments of the nation’s children’. The lack of education such as the lack of knowledge and skills that poor children have is bad for society because it affect their roles as individuals in the society. Thus, it restricts them from getting involved and communicating with the people in the society as they may be seen as someone who is not fit for the society since they lack education. This also leads on to give the impression to some people in the society that those how do not have a good education is not equal to them which then results in the gap between the rich and the poor to rise. This is why the Also, as result of not

4) what are the sources of national and international economic growth?

Natural Factors.
More land and raw materials should lead to an outward shift of PPF and thus an increase in potential growth. Jeffrey Sachs in The End of Poverty calls this factor “Resource Boom” and gives an example on how government ability to control the breeding of black flies that spread African River Blindness can open up new farmland thus increasing the quantity of arable land in a country. However, quantity of natural factors such as land and raw materials like metals and oil could be small and even absent in some countries and the quantity cannot be easily increased. Fortunately, a country can still enjoy economic growth with modest natural resources provided it could obtain them efficiently from abroad; i.e. through trade. Singapore, Hong Kong and Japan have relatively little natural resources yet they have grown into developed economies. Land for example can be increased at a modest quantity by reclaiming it from the sea as in Singapore and Hong Kong. Oil reserves can be increased by active exploration and novel method of extraction. Instead of concentrating on the quantity, increase quality of the natural factors also help to shift the PPF outwards. A piece of land, for instance, can be rendered more productive (increased quality) by irrigation, improved farming technology and better planning of land usage.

Moreover, neoclassical and endogenous growth models suggest that human capitals and technology are probably more important as engines that propel growth.

Human Factor.
The quantity of labour is a factor that contribute to growth. Bigger the population, larger is the labour force and further out is the PPF. Larger population can also means more entrepreneurs and a larger market that can sustain more industries. A country can increase in labour force by increasing its population but in reality all except Singapore is interested in this approach. Labour force can also be increased through a immigration policy that attracts skilled workers. This policy is pursued in Australia and Canada. Singapore and Malaysia also host a large population of migrant workers from neighbouring countries using a foreign worker scheme. However, the quantity of labour alone is not enough to guarantee economic growth. Pakistan, Bangladesh and Nigeria have very big population but this “labour resource” alone does not necessary confer growth. What is more important is that quality of the labour force, the human capital. Human capital is the attributes of an individual that contribute productively to economic activities. Human capital could refer to educational attainments, training and skills, entrepreneurship, and creativity. Human capital can be improved through formal education for children, vocational training, retraining, life-long adult education programme, better nutrition that improve mental concentration, better sanitation that reduces illness and thus absenteeism from school and improved basic healthcare that reduces preventable diseases.

Social and cultural.

We may want to link this back to the Kuznet’s historical growth experience and Myrdal’s modernization ideals. Society that emphasize the importance of education and allows equal gender participation in economic activities could build more human capital and benefits its economy. Excluding women from education and economic activities effectively reduce the human capital by half. Protestantism (industrious work ethics) and Confucianism (respect for authority, industry, and emphasize the importance of education) have been attributed to the early phase of economic development in America, and the success stories in East Asia respectively.

Entrepreneurship.

As frogs seeks wells,
as birds a brimming lake,
so too wealth and allies
resort to a man with enterprise.
    Pancatantra (400 CE);Book2,111; highlight is mine.
The quote clearly illustrates the importance of entrepreneurship.

We want to think of this as the human resource which combines all the other resources [labor (L), capital (K), and technology (A)] to produce a product, makes non-routine decisions, innovates, and bears risks.

Education and training.

We should think of education as an investment in Human capital that enables the development of skills, enlarges the capacity to gather knowledge and information, and improves the utilization of knowledge and/or information to increase productivity.

College Diploma then can be regarded as having the capacity to learn new tasks and gather knowledge. An individual who has a good track record in learning can be seen as a resourceful and potentially productive worker with good ability to learn new skills.

We should recognize that tertiary education (colleges and universities) confers the highest expected private returns (the returns could be increasing exponentially) with respect to private costs. However, primary education (which includes attainment of literacy, arithmetic skills, and elementary vocational skills) yields the highest social returns with respect to social costs.

Education provides the economy with potentially resourceful and productive workers.

Education also provides an opportunity to an individual to expand his/her range of economic and social choices, thus better human development.

Moreover, studies have shown that educating women could improve child health, increase children performance in formal education, expand the range of economic and social choices, generate higher income, and lower fertility.

Also see notes on Education and development below.

Physical Capital.
Physical capitals include factories, machineries, shops, malls, offices and motor vehicles. Cetera Paribus, higher savings rate can help to finance more physical capital investment. As the Harrod-Domar Growth Model suggests a higher savings rate means higher economic growth rate. This productive investment would help move the PPF outward, thus economic growth. Higher savings rate can also be used to finance education and training. This helps to form human capital and to improve technical skills that contributes to more productive labour force. However, the rate of investment may be so fast that a gap is developed between savings rate and investment rate. This gap can be bridged by borrowing from foreign commercial banks, World Bank, foreign countries, or by Foreign Direct Investment (FDI). The biggest FDI recipient in the world is China. Many east and south east asian economies who used to enjoy healthy FDI inflows in the 1980s are now competing with China as FDI destination to maintain economic growth. Of course, in an economy with very low savings rate there may not be enough savings to finance investment. In this case, NGOs like Oxfam and multilateral institutions like the World Bank could come in to “jumpstart” the economy. “In 2002 the World Bank provided $19.5 billion to developing countries and worked in more than 100 developing economies, bringing finance and/or technical expertise toward helping them reduce poverty.” However, this jump starting may not always provide sustainable results or even effective. Besides private savings, FDI and borrowing from abroad, the quantity of physical capital can be increased by government investment policy and private domestic investment. Equally important is the quality of physical capital which can be improved by Research and Development, access to foreign technology and know-how, and improved vocational training.

In the Structural Change Model, the capital-labour ratio is fixed. When capital-labour ratio is fixed, an increased in physical capital is required to support an increase in labour. For instance, in an agrarian economy, each farmer works with a spade. When the number of farmers increase from 10 to 15 then there will be five more new spades (physical capital) being employed in the economy. Such an increase in capital is called Capital Widening and contributes to larger output but not necessary improved productivity. Capital Deepening occurs when there is an increase in physical capital to each worker in the economy. Returning to our previous example of farmers with spades. Capital Deepening occurs when our initial 10 farmers get to use spade, fertilizers, hoe, tractors and gloves or 15 farmers with spade, fertilizers and tractors. Capital deepening is likely to improve labour productivity and total output in an economy.

Technological Factor

(a) Appropriate technology. One organization that aims to promote appropriate technology to improve rural welfare is Practical Action previously known as The Intermediate Technology Development Group (ITDG)

Name: Ezeorah Mariagoretti Ukamaka
Reg Number: 2018/244494
Dept: Education Economics
Level: 300l
QUESTIONS:
Critically discuss and analyse these questions as a potential Special Adviser to Mr. President of Poverty Alleviation and Economic Development.
1. What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.
3. How can the extremes between rich and poor be so very great?
4. What are the sources of national and international economic growth? Why do some countries make rapid progress toward development while many others remain poor?
ANSWERS:

INTRODUCTION
1. One of the sharpest divides between developed and developing economies is that in the former, middle class status is the norm, with a reasonable standard of living enjoyed by the bulk of the population, while in the latter, an estimated 3 billion people, around half of all inhabitants in the developing world, remain poor, living on less than US$2 per person per day (measured at purchasing power parity).1Underpinning this divide is a more than five-fold gap in labour productivity levels.
Lesson 1: Governments can advance development even with low levels of government spending.
Today’s low-income countries spend more than twice on average than today’s advanced economies spent more than a century ago. To be sure, this difference reflects the lack of the tax instruments and systems we have today. From 1850 until the early 1900s, customs duties and excises provided the bulk of government revenues, while the personal income tax and VAT were not introduced in countries until later. Moreover, society’s expectations from the government were much different then.
And here lies the lesson for today’s developing economies: While working on strengthening domestic taxation and raising more revenues to finance public goods, the priority needs to be on improving the business environment to attract private capital—mobilizing private finance for development.
Lesson 2: Today’s developing economies need to focus on building fiscal and market institutions before rising spending needs—and not after they materialize. Government spending in the Advanced 14 increased substantially since 1960 as they reevaluated the role of government amid rapid industrialization and globalization and new taxes became commonplace (Figure 2). The shift from agrarian to industrial to post-industrial economies required different worker skills. Economic disruptions reshaped governments in the past, as is happening now with the changing world of work, leading to a large expansion of social insurance and protection spending.
Lesson 3: Government spending by today’s developing economies is likely to increase, but there is a choice to make to the extent of redistribution and government services. Government spending among the advanced economies has increased, but so has its variability. Before 1913, spending among the advanced economies ranged from less than 2 percent of GDP in Japan to 13 percent in Italy, or a span of 11 percentage points. Today, the span of spending among the advanced economies is 39 percentage points: from 17.3 percent in Hong Kong to 56.4 percent in France.
Development paradigms vary among today’s advanced and developing countries. Robust growth can happen with a smaller or a larger government, in general. Too large of a redistribution, however, may create substantial disincentives to work and invest, or lead to tensions between formal and informal workers, employees of large companies or state-owned enterprises and small private firms. This danger now is clearer than ever: The changing world of work is clashing with persistent informality in developing countries and social protection systems that cover only part of the population.
Lesson 4: Government spending has been countercyclical since World War II in almost all advanced economies, even with the sustained trend of spending increases. Countercyclical fiscal policy is a must for today’s developing countries, especially for those with abundant natural resources. However, there is overwhelming evidence that fiscal policy has been consistently pro-cyclical in developing countries, resulting in profound macroeconomic imbalances, unproductive debt build-ups, and ongoing instability.

2.Economic institutions of the country are decided by the political institutions (Acemoglu & Robinson 2012). They include INCLUSIVE ECONOMIC INSTITUTION And EXTRACTIVE ECONOMIC INSTITUTION.
As Acemoglu (2010) describes, the role of the economic institutions involves
1. Protecting of property rights
2. Managing the entry barriers
3. Availability of contracts for private sector
The economic system in a democratic country like the United States or Australia is different from the economic institutions in a country with a dictatorship like North Korea. Therefore, the role of the economic institutions varies from country to country. The Economic institutions which resulted from a political system have a collective decision-making process which encourage the economic development and its can be considered as good economic institutions. In the developed countries like United States, entrepreneurs enjoy all the benefits from the good economic institutions (Acemoglu & Robinson 2012) including ensuring their property right, supportive policies for market entry, competitive based contracts for the private sector. The entrepreneurs from an underdeveloped country like Mexico which does not have the good economic institutions face many difficulties when they grow their businesses (Acemoglu & Robinson 2012). They struggle with property insecurity, barriers for market entry and biased contract offering. The good economic institutions provide people a conducive environment for saving, learning, inventing and investing (Acemoglu & Robinson 2012). Further, a country with good economic institutions experiences the financial system stability, low-interest rate and low inflation rate, consistent macroeconomic policies. This increases the investor confidence and as a result, higher investment, lower unemployment, higher income and advancement in socio-economic indicators can be reached. Further, the efficient allocation of resources can be observed in a country which has good economic institutions (Acemoglu, Johnson & Robinson 2004). Based on the way it contributes to the economic development, there are two types of economic institutions such as Inclusive and Extractive (Acemoglu & Robinson 2012).
INCLUSIVE ECONOMIC INSTITUTION
Inclusive economic institutions encourage all people to participate in economic activities by providing their production factors to the market or investing in business activities (Acemoglu & Robinson 2012). Individuals can supply their land or labour in an efficient manner and they will receive the rent or the salaries as rewards. Entrepreneurs can invest in the market and generate entrepreneurial profits. People will invest in Research and Development and generate novelties to the society. Protecting private properties, maintaining the law and order, and providing public service to encourage the private sector are essential parts of inclusive economic institutions (Acemoglu & Robinson 2012). The countries like the United States and South Korea practice the inclusive economic institutions and as a result of that, increase in productivity and higher economic prosperity have been obtained (Acemoglu & Robinson 2012).
EXTRACTIVE ECONOMIC INSTITUTION
Extractive economic institutions are opposite to the inclusive economic institutions. As Acemoglu and Robinson (2012) describes, North Korea or Colonial Latin America practice extractive economic institutions. Both regions do not protect property rights of the majority of individuals and businesses are limited to the small segment of a society. An unbiased legal system cannot be seen in both countries. Majority of people in these countries suffer due to social injustice. Insecurity of private property causes the low-investment and finally it will lead for declining or stagnating the economic growth. The economic institutions of these countries do not focus the economic prosperity of the general public (Acemoglu & Robinson 2012).

3. How can the extremes between the rich and the poor be so very great?
Economic inequality (also known as the gap between rich and poor) consists of disparities in the distribution of wealth and income. Economic inequality (also known as the gap between rich and poor, income inequality, wealth disparity, or wealth and income differences) consists of disparities in the distribution of wealth (accumulated assets) and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of equity: equality of outcome and equality of opportunity.
1.Inequality in wages and salaries;The income gap between highly skilled workers and low-skilled or no-skills workers;
2.Wealth concentration in the hands of a few individuals or institutions;
3.Labor markets;
4.Globalization;
5.Technological changes;
6.Policy reforms;
7.Taxes;
8.Education;
9.Computerization and growing technology etc.
A major cause of economic inequality within modern economies is the determination of wages by the capitalist market. In the capitalist market, the wages for jobs are set by supply and demand. If there are many workers willing to do a job for a great amount of time, there is a high supply of labor for that job. If few people need that job done, there is low demand for that type of labor. When there is high supply and low demand for a job, it results in a low wage. Conversely, if there is low supply and high demand (as with particular highly skilled jobs), it will result in a high wage. The gap in wages produces inequality between different types of workers. Many governments are fueling this inequality crisis. They are massively under taxing corporations and wealthy individuals, yet underfunding vital public services like healthcare and education. These policies hit the poor hardest. The human costs are devastating, with women and girls suffering the most. Despite their huge contribution to our societies through unpaid care work, they are among those who benefit the least from today’s economic systems.
4. Why are the sources of national and international economic growth? Why do some countries make rapid progress towards development while many others remain poor?
Sources of national and international economic growth are:
1. Natural factor: the quality and/or quantity of land or raw materials.
2.Human factor: the quality and/or quantity of human resources/capital.
3.Physical capital and technological factors: the quality and/or quantity of physical capital.
4.Institutional factors such as
a.finance and banking system
b.education system
c.healthcare
d.infrastructure
e.political stability.
B. To develop is to grow, which many economists and policy-makers have taken to mean economic growth. Yet development is not confined to economic growth. Development is no longer the preserve of economists and the subject itself has enjoyed rapid evolution to become the subject of interdisciplinary scholarship drawing on politics, sociology, psychology, history, geography, anthropology, medicine and many other disciplines.Throughout history, some economies have expanded faster than others. Some differences can be traced to such inherent factors as climate and geography.