Eco. 361 (30-9-2021 Online Discussion Quiz 1—Some Critical Development Questions 1)

Answer to question no 6
Joint family system:in countries like India and Pakistan, this system is still available. All family members live together, few work hard while others do nothing at all.
Literacy:the literacy rate is low in the underdeveloped countries. This is as a result of inadequate provision of educational opportunities to citizens. Skills and knowledge needed for production is lacking.
Political instability: frequent change of government in a country has served as an obstacle that reduces the rate of economic growth. For instance, Nigeria has abundance natural and human resources but due to frequent political, religious and tribal crises,corruption, labour unrest, misplaced priorities, human and capital flight,the country has remained stagnant.
Government policies: this contributes to economic development. Disparity between nations.where privatization is encouraged, the contribution of the citizens will increase and thus spur economic growth and development. Conversely, where it is abolished by government, it reduces citizens participation and negatively influence the economy.

ABAMUCHE AGATHA N.
EDUCATION ECONOMICS
2019/SD/37673
1. What is the real meaning of development and 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?
No 1. WHAT IS THE REAL MEANING OF DEVELOPMENT
The real meaning of Development is a process that creates growth, progress, positive change or the addition of physical, economic, environmental, social and demographic components. The purpose of development is a rise in the level and quality of life of the population, and the creation or expansion of local regional income and employment opportunities, without damaging the resources of the environment. Development is visible and useful, not necessarily immediately, and includes an aspect of quality change and the creation of conditions for a continuation of that change. Development is the process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem, and freedom. Development is a multidimensional process that involving changes in the social structures, the popular attitudes and national institutions, and the acceleration of economic growth. Besides that, economic development also means that have a stable population and an increased in the national income or gross domestic product. Every children receives education and lower unemployment rate means that every member in the economy has a job, and the every member of the populace is healthy.
However, development can be defined as bringing about social change that allows people to achieve their human potential. An important point to emphasize is that development is a political term: it has a range of meanings that depend on the context in which the term is used, and it may also be used to reflect and to justify a variety of different agendas held by different people or organizations. The idea of development articulated by the World Bank, for instance, is very different from that promoted by Greenpeace activists. This point has important implications for the task of understanding sustainable development, because much of the confusion about the meaning of the term ‘sustainable development’ arises because people hold very different ideas about the meaning of ‘development’ (Adams 2009). Another important point is that development is a process rather than an outcome: it is dynamic in that it involves a change from one state or condition to another. Ideally, such a change is a positive one – an improvement of some sort (for instance, an improvement in maternal health). Furthermore, development is often regarded as something that is done by one group (such as a development agency) to another (such as rural farmers in a developing country). Again, this demonstrates that development is a political process, because it raises questions about who has the power to do what to whom.
Mr. President, The first source of national and international economic growth is increasing the standard of living. The standard of living is measured by GDP per capita, quality of housing and food, medical care, educational opportunities, transportation, communications and others. The second source of national and international economic growth is increasing the quality of life. This includes the housing, food, education, clothing, transportation and employment opportunities as well as social infrastructure. The next source is economic development. Economic development occurs if there is a reduction in poverty, inequality and unemployment and this will increase the access to obtain improved food, health and rule of law. If the growth occurs with no improvement in living standard for the most of population, the economic development will not take place in development plan which include the targets and policies for reducing poverty, inequality and unemployment. If the long-term economic growth is to be realized for the sources of nation and international economic growth, then human capital, technological, social, and institutional changes must take. The structure of the Nigerian economy is typical of an underdeveloped country. Over half of the gross domestic product (GDP) is accounted for by the primary sector with agriculture continuing to play an important role. The oil and gas sector, in particular, continues to be a major driver of the economy, accounting for over 95 per cent of export earnings and about 85per cent of government revenue between 2011 and 2012. The sector contributed 14.8 and 13.8 per cent to GDP in 2011 and 2012, respectively. It also recorded an increase in reserves from 37.119 billion barrels (bbs) in 2012 from 36.042 bbs in 2011. In contrast, the industrial sector in Nigeria (comprising manufacturing, mining, and utilities) accounts for a tiny proportion of economic activity (6 per cent) while the manufacturing sector contributed only 4 per cent to GDP in 2011. This is despite policy efforts, over the last 50 years, and, in particular, more recently, that have attempted to facilitate the industrialization process. In this paper we explore the evolution of the industrial sector in Nigeria over the last 50 years. To set the context we begin by providing an overview of the policy framework for industrial development from the 1960s to the present day.
Industrialization is the process of building up a nation’s capacity to convert raw materials and other inputs to finished goods for other production or for final consumption. Although industrialization involves activities in craft, mining, processing, and manufacturing, greater emphasis is given to manufacturing for the purpose of this paper. Accordingly, industrial activities are reviewed in five phases: the pre- independence era (1943-1959), the post-colonial era (1960-1969), the era of oil-boom (1970-1979), the decade of the 1980s, and 1990 and beyond. Industrialization is widely believed to be a catalyst for rapid growth and development of any economy. As a process, it also presupposes the provision of appropriate institutions by the state. Several studies have discussed the fact that democratic political regime is a prerequisite for economic development.
Industrialization is a considered as a child of necessity in every nation’s economy for it accelerates the process of both Economic growth and Economic of development .The importance of the industrial Sector in the economic development cannot be over-emphasized. Thus, the fortune of every economy lies in it industrial sector which make it the HEATBEAT of economic development. It is usually argued that industrialization is capable of increasing the pace of economic growth and ensuring swift structural transformation of the economy. Paradoxically, most developing countries have failed to achieve industrial development despite several industrial policies and reforms. In Nigeria, the drive to transform her economy from non-industrialized state to an industrialized one has been the pre-occupation of successive administrations that has piloted the affairs of the nation since independence till date. Unfortunately, despite the abundant natural endowment (both human and non-human) of the country, efforts at creating a vibrant and sustainable real sector growth and development have proved abortive. Worst of all, over the years there has been a steady decline in the sectoral contribution of the industrial sector to national productivity and hence economic development has been disappointingly low while poverty level has increased tremendously.

Industrial Development in Economic Growth
1. Modernization of Industry:
Industrial development is necessary for modernization of agriculture. In India, agriculture is traditional and backward. The cost of production is high and productivity is low. We need tractors, threshers, pump sets and harvesters to modernize agriculture. To increase productivity, we need chemical fertilizers, pesticides and weedicides etc. These are all industrial products. Without industrial development, these goods cannot be produced. Agricultural products like jute, cotton, sugarcane etc. are raw materials. To prepare finished products like flex, textiles and sugar etc. we need industrialization. So industrial development is necessary for modernization of agriculture.
2. Development of Science and Technology:
Industrial development encourages the development of science and technology. The industrial enterprises conduct research and develop new products. Ethanol in the form of biofuel is an example of industrial development. Industry conducts research on its wastes and develops byproducts like biodiesel from Jatropha seeds. Due to industrialization, we have made progress in atomic science, satellite communication and missiles etc.
3. Capital Formation:
Acute deficiency of capital is the main problem of Indian economy. In agricultural sector, the surplus is small. Its mobilization is also very difficult. In large scale industries, the surplus is very high. By using external and internal economies, industry can get higher profit. These profits can be reinvested for expansion and development. So industrialization helps in capital formation.
4. Industrialization and Urbanization:
Urbanization succeeds industrialization. Industrialization in a particular region brings growth of transport and communication. Schools, colleges, technical institutions, banking and health facilities are established near industrial base. Rourkela was dense forest but now is ultra modern town in Orissa. Many ancillary units have been established after setting up of big industry.
5. Self-reliance in Defense Production:
To achieve self-reliance in defense production, industrialization is necessary. During war and emergency dependence on foreign countries for war weapons may prove fatal. Self-reliance in capital goods and industrial infra-structure is also necessary. Atomic explosion at Pokhran (Rajasthan) and Agni Missile are examples of industrial growth.
6. Importance in International Trade:
Industrialization plays an important role in the promotion of trade. The advanced nations gain in trade than countries who are industrially backward. The underdeveloped countries export primary products and import industrial products. Agricultural products command lower prices and their demand is generally elastic. While industrial products command higher values & their demand is inelastic. This causes trade gap. To meet the deficit in balance of payments we have to produce import substitute products or go for export promotion through industrial development.
7. Use of Natural Resources:
It is a common saying that India is a rich country inhabited by the poor. It implies that India is rich in natural resources but due to lack of capital and technology, these resources have not been tapped. Resources should be properly utilized to transform them into finished industrial products. The British people took India’s cheap raw-materials for producing industrial goods in their country. India was used as a market for their industrial products. So India fought with poverty and England gained during industrial revolution. Hence industrialization plays important role for proper utilisation of resources.
8. Alleviation of Poverty and Unemployment:
Poverty and unemployment can be eradicated quickly through rapid industrialisation. It has occurred in industrially advanced countries like Japan. The slow growth of industrial sector is responsible for widespread poverty and mass unemployment. So with fast growth of industrial sector, surplus labour from villages can be put into use in industry.
9. Main Sector of Economic Development:
Industry is viewed as leading sector to economic development. We can have economies of scale by applying advanced technology and division of labour and scientific management. So production and employment will increase rapidly. This will bring economic growth and capital formation.
10. Fast Growth of National and Per Capita Income:
Industrial development helps in the rapid growth of national and per capita income. The history of economic development of advanced countries shows that there is a close relation between the level of industrial development and the level of national and per capita income. For instance, the share of industrial sector to national income was 26% and the per capita income in year 2000 was 36,240 dollar in USA.
The share of agriculture in the same year was only 2%. In Japan, the share of industrial sector in her GDP was 36% and her per capita income was 36210 dollar. In India due to industrialization, the contribution of industrial sector to GDP has gone up to 28.5% in 2000-01 and per capita income has risen to Rs. 16,486 in 2000.
11. Sign of Higher Standard of Living and Social Change:
A country cannot produce goods and services of high quality in order to attain decent living standard without the progress of industrial sector.
2. What are economic institutions, and how do they shape problems of underdevelopment and prospects for successful development.
Economic institutions refers to two things: specific agencies or foundations, both government and private, devoted to collecting or studying economic data. Economic institution commissioned with the job of supplying a good or service that is important to the economy of a country. They structure incentives in human exchanges, whether political, social or economic. Nevertheless, some countries do undergo political transitions, reform their institutions, economic development. Economic institutions are responsible for organizing the production, exchange, distribution and consumption of goods and services. Importance 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.
Economic institutions are important because they influence the structure of economic incentives in society. Without property rights, individuals will not have the incentive to invest in physical or human capital or adopt more efficient technologies.
Economic institutions are the institutions that are responsible of providing the medium and long term-credit for the development of any underdeveloped country. It could be in form of grant or aids to support these under developed countries. This financial institutions are World bank, WTO,IMF, UNCTAD, UNCTAD. These institutions also help in solving issues among countries related to stabilizing the exchange rate. World Bank: The world Bank promotes long-term economic development and poverty reduction by providing technical and financial support to help countries reform certain sectors or implement specific projects such as building schools and healthy centres, providing water and electricity, fighting disease and protecting the environment.
W.T.O- World Trade Organisation : World Trade Organisation was formed as a global international organisation dealing with the rules of international trade among countries. They raise the standard of living of people, promoting full employment expanding production and trade and utilizing the world’s resources optimally. Ensuring that developing and less developed countries have better share of growth in the world trade. IMF- INTERNATIONAL MONETARY FUND :The IMF and the World Bank are Institutions in the United Nations system. They share the same goals of raising standard of living in their members country. The IMF promotes monetary, cooperation and provides policy advice and capacity development support to preserve global micro economics and financial stability and help countries build and maintain strong economies. UNCTAD- UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT: UNCTAD is the principal organ of United Nations General Assembly. It provides a forum where the developing countries can discuss the problems related to economic development. UNCTAD was created because the existing institutions such as IMF, World Bank were not concerned with the problem of developing countries. They formulated the policies related to areas of development, such as trade, finance, transport and technology. Eliminating the trade barriers that act as constraints for developing countries.
3. How can the extremes between rich and poor be so very great?
The gap between the rich and the poor is so very great because both are not operating at the same level of economic status. The rich has enough capital to invest in assets, while the poor lacks the basic necessities of life and therefore invest mostly on liabilities. Liabilities take money away from you while assets grow your net worth. It’s not that the rich don’t purchase liabilities, they do but they typically use passive income from their investments for that. So, it’s all about the mindset you have that determines your financial success.
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 poor invest in liabilities and the rich invest in assets. Liabilities take money away while assets grow net worth. Poor people think in the moment and look for easy fix like, playing lottery, Bet Naija and Try your luck etc. It’s not like the rich don’t buy liabilities, they do but at their passive income. In education, the poor often can’t access education due to cost the upper class (rich) always make financial education available to their children in form of insurance.
The poor may be poor and the rich may be rich because of their income-earning. The salary of public service workers cannot be compared to the politicians yet they are buying in the same market at the same price ad vice versa.
Therefore, the arising disparities of income and wealth are among the biggest global challenges in economic, social and political terms. Even the business-dominated World Economic Forum sees income disparity as a key risk in the next decade. Economic inequality affects many areas of life, including life expectancy, education opportunities and health. How did we get to such disparity?
Many factors explain the rise of income inequality. Some are economic, such as the role of technology in the globalizing economy; others are social, such as shifts in who people marry; and some relate mainly to the rising incomes of top earners. (Brain Keeley, 2015). It’s important, also, to realize that a whole range of factors – economic, social and the role of the state – are contributing to rising inequality. One of the most important of these is the impact of globalization, or the process through which the global economy has become more integrated through a complex series of “flows”, including technology and information, trade and investment. Just as it has in the past, technology is destroying old jobs and creating new ones. This is making high-skilled workers even more valuable and killing off the jobs of some middle and low-skilled workers. It’s also helping to shift the balance between labour vs. capital, delivering a larger share of income to the owners of capital, such as entrepreneurs, and a smaller share to the people who work for them.
Inequality has also been affected by changes in our societies, such as the growing tendency for people to marry people from very similar social and education backgrounds, and by changes in the workplace, such as the rise in part-time working and the decline in union membership. Through the taxes it collects and the benefits it pays out, the state plays a major role in reducing inequality. But the state’s role has been evolving, with a general trend towards policies that redistribute less. Other economic policies, such as a move to reduce regulation, have also probably helped to increase inequality.
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.
5. Which are the most influential theories of development, and are they compatible? Is underdevelopment an internally (domestically) or externally (internationally) induced phenomenon?
i. Theory of Modernization: According to the modernization theory, modern societies are more productive, children are better educated, and the needy receive more welfare. According to Smelser’s analysis, modern societies have the particular feature of structural differentiation, that is to say a clear definition of functions and political roles from national institution. Smelser argues that although structural differentiation has increased the function capacity of modern organizations, it has also created the problem of integration and of coordinating the activities of the various new institutions. The assumptions of the modernization theory of development basically are;
a. Modernization is a phased process
b. Modernization is a homogenizing process
c. Modernization is an Europeanization or Americanization process
d. Modernization is an irreversible process, once started modernization cannot be stop.
Modernization is a progressive process which in the long run is not only inevitable but desirable. According to Coleman, modernized political systems have a higher capacity to deal with the function of national identity, legitimacy, penetration, participation and distribution than tradition political systems.
Modernization is a lengthy process. It is an evolutionary change, not a revolutionary one. All these assumptions are derived from European and American evolutionary theory.
There is also another set of classical assumptions based more strictly on the functionalism – structuralism theory which emphasizes the interdependence of social institutions, the importance of structural variables at the cultural level, and the built in process of change through homeostasis equilibrium. These are ideas derived especially, from Parsons’ sociological theories.
These assumptions are as follows:
(a) Modernization is a systematic process (b) Modernization is a transformative process and (c) Modernization is an imminent process due to its systematic and transformation nature, which builds change into the social system.
One of the principle applications of the modernization theory has been the economic field related to public policy decisions.
From this perspective, it is very well known that the economic theory of modernization is based on the five stages of development from Rostow’s model. In summary, these five stages are tradition society, precondition for takeoff, the take off process, the drive to maturity, and high mass consumption society. According to this exposition, Rostow has found a possible solution for the promotion of third world modernization. If the problem facing third world countries resides in their lack of productive investments, then the solution lies in the provision of aid to these countries in the form of capital, technology and expertise.
ii. Theory of Dependency: The foundations of the theory of dependency emerged in the 1950’s from the research of the Economic Commission for Latin America and the Caribbean-ECLAC. The principal points of the Presbisch model are that in order to create conditions of development within a country, it is necessary.
a. To control the monetary exchange rate, placing more governmental emphasis on fiscal rather than monetary policy.
b. To create a platform of investments, giving a preferential role to national capital
c. To development national strategies according to the model of import substitution, protecting national production by establishing quotas and tariffs on external markets.
The theory of dependency combines elements from a neo-Marxist perspective with Keyne’s Economic Theory – the liberal economic ideas which emerged in the United States and Europe as a response to the depression years of the 1920s. From the Keynes’ economic approach, the theory of dependency embodies four main points;
(a) To develop an important internal effective demand in terms of domestic markets;
(b) To recognize that the industrial sector is crucial to achieving better levels of national development, especially due to the fact that this sector, in comparison with the agricultural sector, can contribute more valued-added to products
(c) To increase worker’s income as a means of generating more aggregate demand in national market conditions.
(d) To promote a more effective government role in order to reinforce national development conditions and to increase national standards of living.
So, one of the main current critiques of theory of dependency and the theory of modernization is that they both continue to base their assumptions and results on the nation-state.
iii. World System Theory: A central element from which the theory of world-system emerged was the different from that capitalism was taking around the world, especially since the decade of the 1960s. Starting in this decade, third world countries had new conditions in which to attempt to elevate their standard of living and improve social conditions. These new condition were related to the fact that the international financial and trade systems began to have a more flexible character, in which national government actions were having less and less influence. Basically these new international economic circumstances made it possible for a group of radical researchers led by Immanuel Wallenstein to conclude that there were new activities in the capitalist world-economy which could not be explained within the confines of the dependency perspective. These new features were characterized mainly by the following aspects;
1. East Asia (Japan, Taiwan, South Korea, Hong Kong and Singapore) continued to experience a remarkable rate of economic growth. It became more and more difficult to portray this East Asian economic miracle as “Manufacturing imperialism”.
2. There was a wide spread crisis among the socialist states which included the Sino-soviet split, the failure of the cultural revolution, economic stagnation in the socialist states, and gradual opening of the socialist states to capitalist investment. These crises signaled the decline of revolutionary Marxism.
3. There was a crises in North America Capitalism which included the Vietnam war, the Watergate war, the oil embargo of 1975, the combination of stagnation and inflation in the late 1970s, as well as the rising sentiment of protectionism, the unprecedented governmental deficit, and the widening of the trade gap in the 1980s, all signaling the demise of American hegemony in the capitalist world economy.
When the world-systems theory considers trade mechanisms, it distinguishes between the direct transactions, which are those who have a greater, more significant and immediate effect on a country; and those operations which are indirect trade transactions, such as future trade stipulations, and the speculations on transportation costs, combustibles prices, and forecasts on agricultural crops, when they depend on weather conditions to obtain their productivity and yield.
4. Theory of Globalization: This theory is similar to the world-system approach. However, one of the most important characteristics of the globalization position is its focus and emphasis on cultural aspects and their communication worldwide. Rather than the economic financial and political ties, globalization scholars argue that the main modern elements for development interpretation are the cultural links among nations. In this cultural communication, one of the most important factors is the increasing flexibility of technology to connect people around the world.
The main assumptions which can be extracted from the theory of globalization can be summarized in three principal points. First, cultural factors are the determinant aspect in every society. Second, it’s not important, under current world conditions to use the nation state as the unit of analysis, since global communications and international ties are making this category less useful. Thirdly, with more standardization in technological advances, more and more social sectors will be able to connect themselves with other groups around the world. This situation will involve the dominant and non-dominant groups from each nation.
On the other hand, 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-dependent.
6. What constraints most hold back accelerated growth, depending on local conditions?
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

ASSIGNMENT ON DEVELOPMENT ECONOMICS

COURSE CODE: ECO 361

By

UGWU CHIZOBA OGOCHUKWU

REG. NO: 2019/SD/37698

QUESTION 1
Real Meaning of Development
The Society for International Development, Israel branch(SID-Israel) defined development as a process that creates growth, progress, positive change or the addition of physical, economic, environmental, social and demographic components. The purpose of development is to enhance the quality of life of the population, and to creat or expand local regional income and employment opportunities, without damaging the resources of the environment. Development is visible and useful. It may not be immediate, but it includes an aspect of quality change and the creation of conditions for a continuation of that change.
Lessons to learn from the developed countries
Going by the assertion of Ha-Joon Chang (2002), “the 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”. Most of today’s developed countries used tariff protection and subsidies to develop their industries. According to him, 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. Niek Koning supported this assertion when he said that 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.
Developed countries should radically change the conditions attached to bilateral and multilateral financial assistance to developing countries to suit their unique needs,, on the recognition that they have not been working, and that there can be no single recipe of ‘best practice’ policies that works for everyone.
Second, the WTO rules should be re-written so that the developing countries can more actively use tariffs and subsidies for industrial development.
Third, although, developing countries should be encouraged to improve on their institutions, a fixed set of today’s – Anglo-American institutions should not be imposed on all countries; especially when those were not what made them rich.
The Similarities or Differences between the contemporary developing countries and the developed countries on the eve of their development
Most of the developed countries today experienced what the developing, especially African countries are experiencing today. Ha-Joon Chan discussed some of these conditions:-
1. Tropical climate crippling economic growth by creating health burdens due to tropical diseases: Many of today’s rich countries used to have malaria and other tropical diseases, at least during the summer. Singapore, Southern Italy, Southern US, South Korea, and Japan have tropical weather. A number of rich countries in Scandinavia, Canada, and parts of the US are affected by more serious, frigid and arctic climates, which impose structural burdens of their own – machines seize up, fuel costs skyrocket, and transportation is blocked by snow and ice. Based on these conditions, Ha-Joon Chang argues that there is no any priori reason to believe that cold weather is better than hot weather for economic development. So blaming Africa’s under-development to climate is confusing the cause and the symptom he said.
2. Geography: landlockedness of many African countries has been very much emphasized. This should not be over-emphased. Switzerland is landlocked, while the Scandinavian countries used to be effectively landlocked for half of the year, until they developed the ice-breaking ships. 3. Resource curse: people talk of resource curse, but then countries like the US, Canada, Australia, which are much better endowed with natural resources than most of the African countries have developed much better? African countries look that way mainly because they produce little else, not because they have a lot of natural resources compared to other countries.
4. Ethnic divisions: Ethnic diversity is the norm elsewhere too. Many European countries have suffered from linguistic, religious, and ideological divides. Switzerland has four languages and two religions, and has experienced a number of mainly-religion-based civil wars. Finland had an infamous civil war of 1918 between the right and the left (after which the victorious right deprived the communists of their voting rights until 1944) as well as a significant Swedish-speaking minority. Taiwan has linguistic groups that verbally do not understand and even hate each other (the ‘mainlanders’ vs. the Taiwanese). The rich countries do not suffer from ethnic heterogeneity, not because they really have homogeneous populations but because they have succeeded in ‘nation-building’ – with a healthy dose of repression of minorities(Ha-Joon Chang, 2009).
5. Lack of human resources, especially the bureaucratic capabilities: until the late 1960s and the early 1970s, a decade after the start of her economic miracle in 1961, South Korea was still sending its bureaucrats to Pakistan and the Philippines to get extra training.
Therefore, the developed countries had similar, and some even more challenges at the eve of their development than the developing countries today. The only difference is their ability to provide solutions to the, and surmount their challenges.
QUESTION 2
Economic Institutions
Hodgson defined institutions as durable systems of established and embedded social rules and conventions that structure social interactions. Hodgson (2001 p.295).
Institutions has also been defined as repetitive patterns of interaction through which society undertakes certain functions. (King 1976)
Economic institutions can therefore be said to be durable systems of established rules and norms that structure economic interactions.,
Classifications and functions of economic institutions: they are as follows.
(i) Property rights: Establish rights; decide between competing claims; inform non-owners & police. Eg, Land tenure, Inheritance law, Intellectual property rights:
(ii) Reciprocracy: facilitates transactions, Establish rules of exchange, respect for contracts, Provide information, Reduce or re-allocate risk, Auditing & accounting conventions, Insurance companies, copyright.
(iii) Co-operation & Organisation: Allow Interactions within organisations Collective action & co-operation (in labour, price negotiation), Competition policy, Regulations on co-operatives, charities, civil associations, Auditing & accounting conventions, Employment regulations etc.
How do institutions affect economic growth and poverty reduction?
The functioning of institutions potentially affects three factors that help determine economic growth, thus:•
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,
Technical innovation: again, secure intellectual property rights are likely to promote private investment in research and development of innovations.
Economic organisation: 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.
QUESTION 3: Extreme between the rich and the poor
Oxfam, the international non-governmental organisation (NGO), estimates that 70 % of the world population live in countries where the gap between the rich and the poor has grown over the past 30 years (Katja, 2017). According to the report, Developing countries, emerging markets and industrial countries are equally affected. The rising disparities of income and wealth are among the biggest global challenges in economic, social and political terms. Even the business-dominated World Economic Forum sees income disparity as a key risk in the next decade. Economic inequality affects many areas of life, including life expectancy, education opportunities and health.
How did we get to such disparity?
Many factors explain the rise of income inequality. Some are economic, such as the role of technology in the globalising economy; others are social, such as shifts in who people marry; and some relate mainly to the rising incomes of top earners. (Brain Keeley, 2015). It’s important, also, to realise that a whole range of factors – economic, social and the role of the state – are contributing to rising inequality. One of the most important of these is the impact of globalisation, or the process through which the global economy has become more integrated through a complex series of “flows”, including technology and information, trade and investment. Just as it has in the past, technology is destroying old jobs and creating new ones. This is making high-skilled workers even more valuable and killing off the jobs of some middle and low-skilled workers. It’s also helping to shift the balance between labour vs. capital, delivering a larger share of income to the owners of capital, such as entrepreneurs, and a smaller share to the people who work for them.
Inequality has also been affected by changes in our societies, such as the growing tendency for people to marry people from very similar social and education backgrounds, and by changes in the workplace, such as the rise in part-time working and the decline in union membership. Through the taxes it collects and the benefits it pays out, the state plays a major role in reducing inequality. But the state’s role has been evolving, with a general trend towards policies that redistribute less. Other economic policies, such as a move to reduce regulation, have also probably helped to increase inequality.
QUESTION 4
Economic growth means an increase in real GDP – an increase in the value of national output, income and expenditure. Essentially the benefit of economic growth is higher living standards – higher real incomes and the ability to devote more resources to areas like health care and education.
Five Main Sources of Economic Development
1. Natural Resources 2. Labour/human resources 3. Capital
4. Knowledge/technology and Innovations 5. Social Infrastructure.
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.
Labour/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 devices and equipment, however, these capital goods can only be effectively used and maintained by skilled and trained workers.
Capital: capital is what allows risks to be taken and economic growth to accumulate. 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.(Diptimai Karmaka, 2004)
Knowledge/technological advancement: this has been a vital ingredient in the rapid economic growth. Knowledge means science and all its products, technology of all kinds. Knowledge also includes knowing how to manage large, complex organizations. Historically, a continuous stream of inventions and technological advances led to a vast improvement in the production possibilities of Europe, North America, and Japan.
Social Infrastructure: means the laws, property rights, financial practices, enforcement of contracts, culture friendly enterprise, the lack of stifling or corrupt bureaucracy, and the essential political stability that together allow markets, including financial markets, to function well.
The beneficiaries of economic growth and why?
Ideally, a balanced economic growth benefits all categories of the people – the rich, the poor and the government, thus:
Improved standard of living: Economic growth enables consumers to consume more goods and services and enjoy better standards of living. It reduces absolute levels of poverty and enables a rise in life expectancy.
Lower unemployment: With higher output and positive economic growth, firms tend to employ more workers creating more employments.
Lower government borrowing: Economic growth creates higher tax revenues, and there is less need to spend money on benefits such as unemployment benefit. Therefore economic growth helps to reduce government borrowing thereby reducing debt to GDP ratios.
Improved public services: Higher economic growth leads to higher tax revenues and this implies the government can spend more on public services, such as health care and education e.t.c. This can enable higher living standards, such as increased life expectancy, higher rates of literacy and a greater understanding of civic and political issues.
Investment: Economic growth encourages firms to invest, in order to meet future demand. Higher investment increases the scope for future economic growth
Increased research and development: High economic growth leads to increased profitability for firms, enabling more spending on research and development. This can lead to technological breakthroughs, such as improved medicine and greener technology. Also, sustained economic growth increases confidence and encourages firms to take risks and innovate.
Why some countries make rapid progress towards development while others remain poor
Countries which have advantages in the above sources of economic development and make judicious use of the opportunities provided by those sources are likely to progress rapidly towards economic development, while those which either do not have such opportunities or do not make adequate use of what they have have the more tendency of remaining poor.
QUESTION 5
Development theory is a collection of theories about how desirable change in society is best achieved. Such theories draw on a variety of social science disciplines and approaches. In this article, multiple theories are discussed, as are recent developments with regard to these theories. Depending on which theory that is being looked at, there are different explanations to the process of development and their inequalities.
The most influential theories of development
Modernization theory:
This theory is used to analyze the processes in which modernization in societies take place. 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.
Modernization is a homogenizing process, in this sense, we can say that modernization produces tendencies toward convergence among societies, for example, Levy (1967, p. 207) maintains that : “as time goes on, they and we will increasingly resemble one another because the patterns of modernization are such that the more highly modernized societies become, the more they resemble one another”. Therefore, Reyes(2001) opines that Modernization is a europeanization or americanization process. In addition, modernization is an irreversible process, once started modernization cannot be stopped. In other words, once third world countries come into contact with the West, they will not be able to resist the impetus toward modernization.
Dependency theory
Dependency theory states that not all societies progress through similar stages of development. Periphery states have unique features, structures and institutions of their own and are considered weaker with regards to the world market economy. Although dependency theory allows development with external links with the developed parts of the globe, this kind of development is considered to be “dependent development”, i.e., it does not have an internal domestic dynamic in the developing country and thus remains highly vulnerable to the economic vagaries of the world market. Dependency thinking states that resources flow from the ‘periphery’ of poor and underdeveloped states to a ‘core’ of wealthy countries, which leads to accumulation of wealth in the rich states at the expense of the poor states. Contrary to modernization theory, dependency theorists argue that underdeveloped countries remain economically vulnerable unless they reduce their connections to the world market(Ferrano 1966).

World System Theory
This school recognizes that more attention is usually given to the individual development of each one discipline rather than to the interaction among the disciplines; and how these interactions affect in real terms the national conditions of a given society. The world-systems theory indicates that the main unit of analysis is the social system, which can be studied at the internal level of a country, and also from the external environment of a particular nation. In this last case the social system affects several nations and usually also an entire region.

Theory of GlobalizationThe theory of globalization has is similar to the world system theory, in that it focuses on the global mechanisms of greater integration with particular emphasis on the sphere of economic transactions. However, one of the most important characteristics of the globalization position is its focus and emphasis on cultural aspects and their communication worldwide. Rather than the economic, financial and political ties, globalization scholars argue that the main modern elements for development interpretation are the cultural links among nations, (Reye 2001). In this cultural communication, one of the most important factors is the increasing flexibility of technology to connect people around the world. through this process all nations both developed and underdeveloped are interacting much more frequently and easily, not only at the governmental level, but also within the citizenry.
Compatibility
Where as some of them can be compatible with few differences, some theories such as dependency is not compatible with Modernization theory. According to dependency theory, Instead of growing to measure up and resemble the developed society as stated by Modernization theory, the resources of the poor countries are rather sapped by the rich countries, there by maintaining the gap.
According to dependency theory, underdevelopment could be externally induced by the developed countries, which pretend to be helping the poor countries but indeed, through policies, keep them in underdevelopment.

QUESTION 6
The pace of development can be slowed down by various factors affecting the economy. Some of these constraints are caused by local conditions.These constraints include:
Imbalances: Not all sectors of an economy are capable of growth. Allocating more scarce resources to sectors where they are not much productive, or failure to allocate the resources to where they are most productive can retard development.
Population: development can be slowed down when there is too a high rate of population growth for the country’s current resources, or if the population is growing too slowly or declining as a result of war, famine, or disease. When there is imbalance in the ratio of birth rate to death rate, Over time if life expectancy rises, but the age distribution is not even, with an increasing number of dependents in the lower age range, the number of consumers relative to producers increases.
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, which includes, Debts, Crowding out, Absence of credit markets etc.
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.
Undeveloped Insurance 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.
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 etc. All these detare investors and contribute to slow pace of development.
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.
QUESTION 7
in an article posed by Global Volunteers on globalvolunteer.org, Michelle Bachelet, Under-Secretary-General and Executive Director of UN Women was quoted as saying “When women are empowered and can claim their rights and access to land, leadership, opportunities and choices, economies grow, food security is enhanced and prospects are improved for current and future generations.” this suggests how much women can contribute to the development of the society if they are given the opportunity.
The role of Women in Education
Research has shown that education can improve productivity, and widely raise the standard of living. It is mostly the mother in the family who most often urges children of both genders to attend – and ostay – in school. The role of women is at the front end of the chain of improvements, leading to the long-term capacity of both the family and the community.
The role of Women in the Workforce
Today, females constitute a considerable share of the global workforce. Women’s formal and informal labor can transform a community from a relatively autonomous society to a participant in the national economy. Despite significant obstacles, women’s small businesses in rural developing communities not only can be an extended family’s lifeline, but can form a networked economic foundation in future generations.
Aisha Abdi supports the above opinions on the roles of women when she said, “poverty decreases when more women and girls are educated. This is because with basic education, a woman is more likely to obtain a job and earn a higher wage since one percentage point increase in female education raises the average level of GDP by 0.37 percentage points”.
Women not only earn higher wages, women also benefit their families and communities as they are often more likely to spend money on things that support their children, the household and by implication the society. This then improves the chances of their family to achieve health and prosperity.

References
Abdi, A, 2019, Women are the key to economic development in third-world countries; https://www.kcl.ac.uk
Hodgson, G. M., 2001, How economics forgot history. London, Routledge.King,
Karmakar, D, 2004, Economic Growth of a Country: Four Main Sources; https://www.economicsdiscussion.net
Levy, M. 1967, Social Patterns and Problems of Modernization. (Englewood Cliffs, New Jersey.
Pollock A, J., 2019, Thoughts on the Source of International Economic Advantage https://www.rstreet.org/team/alex-j-pollock/
Reyes, G. E, 2001, “FOUR MAIN THEORIES OF DEVELOPMENT”: MUI Euro-Mediterranean University Institute, USA.
Roger, 1976, Farmers co-operatives in northern Nigeria, PhD thesis. Trebbi, 2002, ‘Institutions rule: the primacy of institutions over integration and geography in economic development’, IMF Working Paper, WP/02/189. Washington DC, International Monetary Fund.
Vincent Ferraro,1966, Dependency Theory: An Introduction,” Mount Holyoke College, Mtholyoke.edu. Retrieved 2021-10-15.
https://globalvolunteers.org/global-role-of-women

Name: Ugwubujoh, Esther Ndidi
Reg. No.: 2019/SD/37718
Department: Education/Economics
Course code: Eco 361
Course title: Development Economics

Answer to Question 1
Development is defined as the process of growth or new information or an event.
It is a process that creates growth, progress, positive change or the addition of physical, economic environmental, social and demographic components.
Development in economics means creation of wealth from which community benefits are realized. It is an investment in growing your economy and enhancing the prosperity and quality of life for all residents.
Answer to question 2
From the now developed world such progress as adapting to good policies which will enhance the progress of the developing countries. Policies like tariff protection, subsidies in development of industries and democracy etc.
The initial conditions of both countries that is the developed and the developing countries are different in that the developing countries spend more than twice on average than the developed countries spent in their time like some years back there was no good tax instruments and systems and society’s expectations from the government were much while in the developed countries economic development was brisk with infrastructure. Improvements financed by private capital. So the government low-income countries spent more on average in the 2000’s than today’s developed countries in their era. The development paradigms vary among the developing countries and the developed ones.
Answer to question 3
Economic institutions being referred to as 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 cross-counting empirical analysis in combination with micro level studies, provide strong support for the important of institutions in predicting the level of development of a 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 co-related to better economic performance over time so therefore, institutions support or shape economic development through these four broad channels;
Determining the costs of economic translations,
Determining the degree of apropriability of return to investment,
Determining the level for oppression and expropriatetion and determining the degree to which the environment is conducive to cooperation and increased social capital. A major cause of economic inequality with modern economies is the determination of wages be the capitalist market. Also there is disparities in the distribution of wealth and income and high rate of unemployment.
Answer to question 4
This is due to the following points:
Income inequality: These are revenue streams from wages, salaries etc. in many developed countries is welfare systems designed, earning little can make people worse off than sitting back on welfare, so they don’t strive.
Lack of trust in the system and those in power, such lack of trust can be as a result of trust from social and economic injustice, deprivation in childhood especially affection on strong influence.
The poor and also taxed in proportion to their wealth and assets because indirect taxes impacts most heavily on those who have to spend all of their income and the poor have no access to tax reduction used by the upper middle class and upper class.
Answer to question 5
The source of economic growth are; The human resources which refers to the labour inputs such as quantities of workers and also of the skills of the works force, that is to say that improvement in literacy, health and discipline of individuals in country has a role to play in its economic growth.
Another source is Natural Resources where natural resources is a classifical factor of production. The third source is capital formation, tangible capital formation has roles to play in economic growth as investment in automobiles, roads etc increases productivity. Another source of economic growth could be traced down to technological change and innovation technological advancement has played a role in the course of growth hence technology bring about changes in the processes of production or introduction of new products or services. The reason some countries make rapid progress while others remain poor could be traced down to the following:
Institutionalized corruption
Low quality education
Brain drain
In the case of countries with institution corruption and lack of role of law this system is purposely maintained by government because they get rich from such. They siphon public funds from corruption and also involve themselves in the market economy and then restrict competition for others through various forms. While low quality education posses the problem of lack of skill and technical progress on innovations and so on.
Answer to question 6
The most influential theories of development are:
Modernization
Dependency
World-systems and
Globalization
Modernization theory: State that the developed countries must admit the development processes of the modern countries. It fails to recognize the fact that one system cannot be adopted by a;; continues due to diverse historical and cultural background of the countries. A second feature of the mobilization perspective is the analytical framework. Authors assumes that third world countries are traditional and the Western countries are modern. In other to develop. Those poor nations need to adopt Western values.
Dependency theory: Pointed persistent increment in industrialization in the developed countries rather equally subject poor countries to underdevelopment as a result of the economic surplus of the poor countries being exploited by developed countries.
The world system theory: The main assumption of the world systems theory establish is that: There strong link between social sciences especially among sociology, economics and political disciplines. This theory recognizes that more attention is usually given to the individual development of each one of the discipline rather than the national conditions among them and how these interactions affect in real terms of each term of the national conditions of a given society.
Globalization: Theory of globalization focuses on the increasing flexibility of technology to connect people around the world. Through this process the nations interacting much more frequency and easily, not only on the governmental level, but also within the citizenry.

Name:EZEA ODINAKA FAITH
Reg No:2019/SD/37679
Assignment on ECO 361
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.
ANSWER

Many things can be learned like; security, low unemployment rate, effective use of technology, favourable and surplus balance of payments. I can also say that the initial conditions are similar, the only problem is our shallow mindset and attitude to work. So until we change our minds to and improve our attitude to work we won’t develop. Again we must have to try to bridge the gap between the rich and the poor for development to occur.
2. What are economic institution and how do they shape problems of under development and prospects for successful development?
ANSWER

Economic institution are those institutions set up in order to facilitate and manage economic activities of a country. They include; banks ( central banks, Microfinance banks, Mortgage banks), NAFDAC, SON.
Using NAFDAC as a case study they can shape problems of underdevelopment by supervising foods and drugs that are produced in the country. The reason for this is that development has to do with the well being of human and improving quality of all human lives. So when these harmful or expired drugs are produced , it tends to destroy the live of people.
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. Also they can contribute to the shaping by applying stablization policy tools that is ; fiscal policy and Monetary policy.
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. The Microfinance banks can help by lending out money to the poor which will help bridge the gap between rich and poor.
3.How can the extremes between rich and poor be so very great?
ANSWER
According to Amartyr sen,he said that the key facet of inequality is the growing division between the rich and the poor. He further said that as inequality increases, the standard of living is worse for those at the bottom of the economic ladder(poor). What can be the cause of this. The reasons for the extremes are;
*The rich when they get money or income,they tend to invest before spending but the poor already have a mapped out list of what to buy or get even before seeing the money, so they tend to spend before investing.
*Also politics and laws also see to the large gap. When policies are being made, most times it tends to favour the rich. Using data, phone,cement as an example. You will see that when cost of data rises, the poor tend to stop purchasing it. If cost of cement rises, how then will they build. And all this tend to push them into poverty and the rich are getting richer.
*Poor public facilities: The rich have access to education (quality) but the poor do not have access to education. One might say is education important? Yes it is. Education is intellectual wealth that can be transformed to physical wealth.
Also, 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 and who benefits from from such growth and why. Why do some countries make rapid progress towards development while others remain poor.
Answer
Sources:1. Natural resources (2). Technology (3). Trade (4.) Human capital (5). Innovation (6). Industrialization (7). Social and political structure.
Who benefits from such growth and why?
Developed countries and selfless nations benefits from such growth because they are after the interest and progress of the country they are in. They also benefits because they try to rub minds together to see how these resources can lead to the growth of their nation. Also I can say that the rich benefit from such because they have what is needed to Harness these sources of Economic growth. The rich here also includes those who have political powers. Using the Natural resources as one of the examples, it is the politicians and rich people who have access to it. The politicians will go outside and Build refineries and when they get the oil they go outside and refine them. And the question now is how then do Nigeria as a country experience economic growth and development.
Why do some countries make rapid progress towards development while others remain poor?.
Countries make progress because the make use of the different sources of economic growth while others remain on one. Those countries make effective use of both their Natural resource and engage in effective and fruitful trade and some try to build their social and political structure. Now using my country NIGERIA as a case study, they just base on just their Natural resource (oil) and corruption has so hindered the rapid progress of Nigeria towards development. Even the natural resource (oil) we use as a source has created the bedrock for politicians towards making money and they will never invest that money in our country NIGERIA. They have been so infected with greed that they are after their own self and maybe family members and they even forget their state at large talk more of the country at large. Still on this using ebonyi state as a sub case study. The governor is building flyovers and people are happy and they forget the fact that the construction company working there is his company and he is also borrowing money from countries and accumulating debt for the people of ebonyi state. Now If you check ebonyi state citizens are not living up to a good living standard. The agriculture sector of ebonyi is really depreciating. You can’t use that to compare Anambra state were the citizens are living well and the governor trying to create channels of trade by building an airport that will ease trade for onitsha traders. Now when all the state in Nigeria effectively use these sources at state levels you will see our country NIGERIA making rapid progress towards development.
Other factors may include:
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.
5.Which are the most influential theories of development, and are they compatible? Is underdevelopment an internally (domestically) or externally (internationally) induced phenomenon?
*Answer.
Modernization theory: is used to analyze the processes in which modernization in societies take place. 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 and ways in which primitive societies can make the transition to more advanced societies. Other scientists who have contributed to the development of modernization theory are: David Apter, who did research on the political system and history of democracy; Seymour Martin Lipset, who argued that economic development leads to social changes which tend to lead to democracy; David McClelland, who approached modernization from the psychological side with his motivations theory; and Talcott Parsons who used his pattern variables to compare backwardness to modernity. Linear stages of growth model The linear stages of growth model is an economic model which is heavily inspired by the Marshall Plan which was used to revitalize Europe’s economy after World War II. It assumes that economic growth can only be achieved by industrialization. Growth can be restricted by local institutions and social attitudes, especially if these aspects influence the savings rate and investments. The constraints impeding economic growth are thus considered by this model to be internal to society. According to the linear stages of growth model, a correctly designed massive injection of capital coupled with intervention by the public sector would ultimately lead to industrialization and economic development of a developing nation. The Rostow’s stages of growth model is the most well-known example of the linear stages of growth model. Walt W. Rostow identified five stages through which developing countries had to pass to reach an advanced economy status: Traditional society, Preconditions for take-off, Take-off, Drive to maturity, Age of high mass consumption. He argued that economic development could be led by certain strong sectors; this is in contrast to for instance Marxism which states that sectors should develop equally. According to Rostow’s model, a country needed to follow some rules of development to reach the take-off: The investment rate of a country needs to be increased to at least 10% of its GDP, One or two manufacturing sectors with a high rate of growth need to be established, An institutional, political and social framework has to exist or be created in order to promote the expansion of those sectors.

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

*Answer.
* 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.
* 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.
*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.
*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.

NAME: EZEAGU LOVETH CHIESONU
REG NO: 2019/SD/37566
DEPARTMENT OF EDUCATION ECONOMICS
COURSE CODE: ECO 361
COURSE TITLE: ECONOMIC DEVELOPMENT

1. What is the real meaning of development and what can be learned from the historical record of economic progress in the now developed world? Are there initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization?
Economic Development is the creation of wealth from which community benefits are realized. It is more than a jobs program; it’s an investment in growing your economy and enhancing the prosperity and quality of life for all resident.

What can be learned from the historical record of economic progress in the now developed world are the following:
A. Governments can advance development even with low levels of government spending.
B. Governments of today’s low-income countries spent more on average than advanced economies did (in percent of GDP)
C. Today’s developing economies need to focus on building fiscal and market institutions before rising spending needs—and not after they materialize.
D. 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.

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: … 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.
Economic institutions are responsible for organizing the production, exchange, distribution and consumption of goods and services.
Importance 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.
Economic institutions are important because they influence the structure of economic incentives in society. Without property rights, individuals will not have the incentive to invest in physical or human capital or adopt more efficient technologies

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

Because the poor invest in liabilities while the rich invest in assets. Liabilities take money away from you while assets grow your net worth. That is why someone like Bill Gates, who has a majority of assets in Microsoft’s stock, continues to make money faster than he can give it away due to appreciation in the stock price.
Unfortunately, poor people don’t think like that. They think in the moment and look for easy fixes like playing the lottery. For example, I had a conversation with someone who ended up with money from inheritance when a parent passed away. They had the opportunity to purchase some real estate rental properties that could brought in a stream of monthly income. They passed on the opportunity because they were worried about the renovation that would need to be done. What this person did opt for was 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.
It’s all about the mindset you have that determines your financial success.

4. What are the sources of national and international 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.
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.
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.
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.
Why do some countries make rapid progress towards development why many other remain poor?
A. 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.
B. 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.
C. Environmental factors – some places experience environmental issues, which can prevent them from developing. Examples might be extreme flooding or desertification.
D. 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.
E. 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.
F. 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.
G.
5 Which are the most influential theories of development and are they compatible
Four main theories of development: modernization, dependency, world-systems, and globalization
Modernization theory is used to explain the process of modernization within societies. Modernization refers to a model of a progressive transition from a ‘pre-modern’ or ‘traditional’ to a ‘modern’ society. Modernization theory suggests that traditional societies will develop as they adopt more modern practices.

Dependency theory, an approach to understanding economic underdevelopment that emphasizes the putative constraints imposed by the global political and economic order. According to dependency theory, underdevelopment is mainly caused by the peripheral position of affected countries in the world economy.
World-systems theory (also known as world-systems analysis or the world-systems perspective) is a multidisciplinary approach to world history and social change which emphasizes the world-system (and not nation states) as the primary (but not exclusive) unit of social analysis.
“World-system” refers to the inter-regional and transnational division of labor, which divides the world into core countries, semi-periphery countries, and the periphery countries. Core countries focus on higher skill, capital-intensive production, and the rest of the world focuses on low-skill, labor-intensive production and extraction of raw materials.
. Globalization Theory is a theory of development that uses a global mechanism of greater integration with particular emphasis on the sphere of economic transactions. It is a US- and Europe-centric positive model of development whose feature is the spread of capitalism around the globe. The focus of Globalisation Theory is communications and international ties, with these ties directed at cultural and economic factors in communication systems. Globalisation Theory explains inequality by identifying cultural and economic factors in global connection.
They are not compatible.
6. What constraints most hold back accelerated growth, depending on local conditions
Development constraints
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:
1. Inefficiencies within the micro-economy.
2. Imbalances in the structure of the economy.
3. A rapidly growing or declining population.
4. Lack of financial capital.
5. Lack of human capital.
6. Poor governance and corruption.
7. Missing markets.
8. Over-exploitation of environmental capital.
9. Barriers to trade.
6b what is the real meaning of development
Development economics is a branch of economics that focuses on improving fiscal, economic, and social conditions in developing countries. Development economics considers factors such as health, education, working conditions, domestic and international policies, and market conditions with a focus on improving conditions in the world’s poorest countries.
Origin and importance of development in economics
These are the top six reasons why economic development plays a critical role in any region’s economy.
1. Job creation
Economic developers provide critical assistance and information to companies that create jobs in the economy. They help to connect new-to-market and existing companies with the resources and partners they need to expand.
2. Industry diversification
A core part of economic development works to diversify the economy, reducing a region’s vulnerability to a single industry.
3. Business retention and expansion
A large percentage of jobs in the Orlando economy are created by existing companies that are expanding their operations..
4. Economy fortification
Economic development helps to protect the local economy from economic downturns by attracting and expanding the region’s major employers.
5. Increased tax revenue
The increased presence of companies in the region translates to increased tax revenue for community projects and local infrastructure.
6. Improved quality of life
Better infrastructure and more jobs improve the economy of the region and raise the standard of living for its residents.

NAME: UGWUANYI CHIKA COSMAS
REG NO: 2019/SD/37538
DEPARTMENT: EDU/ECONOMICS
1. Development is a process that creates growth, progress, positive change or the addition of physical, economic, environmental, social and demographic components. The purpose of development is a rise in the level and quality of life of the population, and the creation or expansion of local regional income and employment opportunities, without damaging the resources of the environment. Development is visible and useful, not necessarily immediately, and includes an aspect of quality change and the creation of conditions for a continuation of that change.
The international agenda began to focus on development beginning in the second half of the twentieth century. An understanding developed that economic growth did not necessarily lead to a rise in the level and quality of life for populations all over the world; there was a need to place an emphasis on specific policies that would channel resources and enable social and economic mobility for various layers of the population.
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.
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?
How do they shape problems 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.
3. How can the extremes between rich and poor be so very great?
Because the poor invest in liabilities while the rich invest in assets. Liabilities take money away from you while assets grow your net worth. That why someone like Bill Gates, whose has a majority of assets in Microsoft’s stock, continues to make money faster than he can give it away due to appreciation in the stock price.
Unfortunately, poor people don’t think like that. They think in the moment and look for easy fixes like playing the lottery. Per example, had a conversation with someone who ended up with money from inheritance when a parent passed away. They had the opportunity to purchase some real estate rental properties that could brought in a stream of monthly income. They passed on the opportunity because they were worried about the renovation that would need to be done. What this person did opt for was 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.
It’s all about the mindset you have that determines your financial success.

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

1 Growth accounting
Policy tends to focus on growth in output per capita, because it is more closely related to social welfare objectives. Growth in output per capita can be broken down into growth in the employment rate and in output per worker (a measure of productivity).
2 Drivers of long run growth
There is a limit to how far the employment rate can be improved in the long term in developed countries, so long term growth is driven primarily by productivity. (“Productivity isn’t everything, but in the long run it is almost everything.” Paul Krugman). Over the longer term, growth will be determined primarily by the factors which determine productivity, and secondly those which improve labour participation.5 The drivers of productivity growth are factors which either improve the quality of outputs, or the efficiency with which inputs (such as capital, labour and materials) are transformed into outputs. The contribution of some of these factors to output growth can be captured by appropriate input measures, with everything else (eg unmeasured inputs and technological progress) allocated to a residual called Total Factor Productivity (TFP).
3 Direct inputs to production
The main production inputs are capital, labour, management services and materials.6 In the traditional Solow neoclassical growth model, a one-off increase in inputs to increase the scale of production only has an impact on per capita output growth in the short run, while technological progress (captured in TFP) makes a persistent contribution.7 However, in later endogenous growth models, investment (particularly in innovation) drives technological progress, so has an impact on growth in the long as well as short term.
4 Ancillary firm activities
Firms allocate resources to a range of activities (such as innovation, marketing, and specialisation) which do not form direct inputs into the production process, but ultimately affect the quality of outputs or the efficiency of input use. Innovation by firms exploiting scientific advances creates the technological progress which is the main driver of growth in the long run. Specialisation in products and processes (often involving greater trade) is an important route to increased productivity.
5 The business environment
There are a range of factors in the business environment (such as infrastructure, the efficiency of markets, market incentives, taxation and regulation) which affect the productivity of firms and the efficiency of the economy as a whole. Investment in infrastructure affects the costs to firms of accessing resources and markets, and market conditions affect firm incentives to invest, be enterprising and innovate
4B Why do some countries make rapid progress toward development while many others remain poor?
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.
5. Which are the most influential theories of development
1. Modernization Theory
2. Dependency Theory
3. Theory of World Systems
4. Globalization Theory
5b Is underdevelopment an internally (domestically) or externally (internationally) induced phenomenon?
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 systemic and path-dependent
6 What constraints most hold back accelerated growth, depending on local conditions?
1. (Political) institutions
Over the last few decades, several growth theories have placed institutions at the centre of the growth process, in particular democracy/political rights (Acemoglu et al. 2001, 2014; Gwartney et al. 1999; Papaioannou and Siourounis 2008; Persson and Tabellini 2006; Rodrik and Wacziarg 2005). Moreover, the growth (acceleration) literature has looked at the impact of (the end of) conflict situations, both civil- and external (Paul Collier and Hoeffler 2004a, 2004b; Hausmann et al. 2005; Hoeffler 2012; Hoeffler et al. 2010). We therefore include the Freedom House Index as a standard measure of democratic institutions, and data on conflicts from the Correlates of War project (Sarkees and Wayman 2010).
2. Economic policy
A view particularly cherished by multilateral organisations is that economic policy is paramount in determining a country’s growth trajectory (P. Collier and Dollar 2001; Easterly 2005). Unsurprisingly, practically all papers looking for the determinants of take-offs include indicators of economic reform or policy. We build on Mussa and Savastano (1999), who explain how the IMF’s approach for countries in need of a boost out of recessionary situations is a combination of macroeconomic stabilisation, often in the form of demand-restraining measures, and structural reforms. In most cases, this is combined with exchange rate devaluations, to jump-start the economy. For the purpose of our SDF exercise, we will focus on inflation reduction (as in Bruno and Easterly 1998) and effective exchange rate devaluations (from Darvas 2012), on the demand side. On the supply side, we make use of the comprehensive structural reforms database recently developed by Giuliano et al (2013), which covers trade-, product market-, agriculture-, and capital account- liberalisation, together with financial and banking sector reform.

Answer To Number One
• Development is a process that creates growth, progress, positive change or the addition of physical, economic, environmental, social and demographic components.
• 1st August 2002, the historical fact is that, today’s developed countries did not develop on the basis of the policies and the institutions that they now. 20th February 2019 governments can advance development even with low levels of government spending. Today’s low-income countries spend more.
• 20th February 2019: from 1850 until the early 1900s, customs duties and excises provided the bulk of government revenues, while the personal income tax.

Answer to Number Two
• 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.
• Institutions determine the costs of economic transactions: they spur development in the form of contracts and contract.
• Protection of property rights, effective law enforcement and efficient bureaucracies, together with a broad range of norms.

Answer to Number Three
Because the poor invest in liabilities while the rich invest in assets. Liabilities take money always from you while assets grow your net worth. That is why someone like Bill Gates, whose has a majority of assets in microsoft’s stock, continues to make money faster than he can give it away due to appreciation in the stock price.
Unfortunately, poor people don’t think like that. They think in the moment and look for easy fixes like playing the lottery. Per example, had a couversation with someone who ended up with money from in heritance when a parent passed away. They had the opportunity to parchase some real estate rental properties that could brought in a stream of monthly income. They passed on the opportunity because they were worried about the renovation that would need to be done. What this person did opt for was to go on a few vocations 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. It’s all about the mindset you have that determines your financial success.

Answer to Number Four
The sources are:
1. Human resources
2. Natural resources
3. Capital formation
Human resources: Is the set of people who make up the workforce of an org, bus sectors, industry or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms include manpower, labour, personnel, associates or simply people
Natural resources: Are those resources that occur within the environment in their original & natural form, undisturbed humanity. From forests to mountains to minerals to coastal shores and wetlands, each of these natural resources has its own importance.
Capital formation: Is part of country’s current output and imports which is not consumed or exported during the accounting period, but is set aside as an addition to its stock capital goods.
Differences in the economic growth rate of nations often come down to differences in inputs (factors of production) and differences in TRP the productivity of labour and capital resources. Higher productivity promotes faster economic growth, and faster growth allows a nation to escape poverty.

Answer to Number Five
The most influential theories of development are:
a. Modernization
b. Dependency
c. World-system
d. Globalization
Modernization theory is used to explain the process of modernization within societies. Modernization refers to a model of a progressive transition from a pre-modern’ or “traditional” to a ‘modern’ society. Modernization theory suggest that traditional societies will develop as they adopt more modern practices.
Dependency theory is of the notion that resources flow from a “periphery” of poor and underdeveloped states to a “core” or wealthy states, enriching the latter at the expenses of the former.
World-system theory to a multidisciplinary approach to world history and social change which emphasizes the world-system and not nation.
May 18, 2013 Globalization is commonly used as a shorthand way of describing the spread and connectedness of production, communication.
Underdevelopment Is viewed as an externally induced process which perpetuated by a small but powerful domestic elite who form an alliance with the international capitalist system. The ‘development of underdevelopment’ is therefore systemic and path-dependent.

Answer to Number Six
Joint family system: In many countries like India and Pakistan this system is still available. All the members of the family live together. Few of them work hard while the others do nothing except quarreling with one another. So due to this reason national product reduces.
Literacy: The literacy rate is very low in the underdeveloped countries. It reduces the rate of economic growth in Indian and Pakistan.

ECO 361 ASSIGNMENT
NAME: OGAH CHIDIKE ODAKA
DEPARTMENT: ECONOMICS/EDUCATION (1/4)
ANSWERS
NO. 1
To arrive at the real meaning of development, answers must be provided to what is happening to poverty, unemployment and inequality?
The real meaning of development is the process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem and freedom. It is a multidimensional process that involves changes in the social structure, the popular attitudes and national institutions, and the acceleration of economic growth.
Besides that, economic development also means that the country should have a stable population and an increased in the National income or Gross Domestic Product (GDP). Every citizen receives quality education and decreased unemployment rate means that every member in the economy has a job, and that every member of the populace is healthy. The mortality rate is low, life expectancy is high and incidence of economic and political instability is reduced to a barest minimum.
Furthermore, if one cast a look at the now developed countries, one will know that there are a lot to be learned from the now developed nations like Britain and USA. Though, these developed countries suggested good economic policies and institutions, such as liberalization of trade and investment and strong patent law for the developing countries, history has it that what they used was tariff protection and subsidies.
To sum it up, the initial conditions of the developed nation is similar to what the developing countries faced now, but what should be done is by allowing the developing countries the freedom to choose policies and institutions that are more suitable to their conditions, the developing countries will be able to develop faster.
NO. 2
Before we discuss on how economic institutions shapes problems of underdevelopment, let us first distinguish the term from economic institution.
Underdevelopment refers to low level of economic productivity, technological sophistication, low level of development characterized by low real per capita income and wide spread poverty. In other hand, economic institutions is thought of as an organization whether public or private that engage in the collection and research of economic data or that provides a service or product deemed economically central to a nation’s economy. Examples of economic institution are National Economic Bureaus, Central Bank, Tax Collection Agencies or University Departments dedicated to economic research. These institutions are also considered fundamental structures or organizations in the society that are inherited to the economic system or culture, such as the banking systems, investment markets or even a custom such as providing citizens weekly allowance.
Therefore, an accurate portrayed of economic institutions is constitutional in nature and defines how an economy is allowed to develop and function to achieve sustainability and growth. They functions to determining and safeguarding transactions, and allowing the economic participants to organize and co-operated. For example, banking systems evolved to help facilitate transactions and to provide capital to spur growth and create new wealth.
In the words of North (1990), institutions are the rules of the game in a society, the humanly advised constraints that shape human interaction. The structure incentives in human exchange, whether political, social or economic. They apply monetary and fiscal policies to control inflation and stabilize the economy. Despite the efforts at shaping underdevelopment by economic institutions, many others are still poor due to; non implementation of economic policies, lack of sophisticated technology, negative attitude to work and corruption.
NO. 3
The gap between the rich and the poor is so very great because both are not operating at the same level of economic status. The rich has enough capital to invest in assets, while the poor lacks the basic necessities of life and therefore invest mostly on liabilities. Liabilities take money away from you while assets grow your net worth.
It’s not that the rich don’t purchase liabilities, they do but they typically use passive income from their investments for that. So, it’s all about the mindset you have that determines your financial success.
NO. 4
Below are the sources of both domestic and international economic growth.
1. Human Resources: These are body of workers with specialized skills and knowledge for manipulating machines and equipment in order to produce goods and services.
Labour inputs consist of quantities of workers and the skill of the work force.
The quality of labour input such as skills, knowledge, and discipline of the labour force is the most important element in economic growth. A country might buy the most modern telecommunication 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 disciplines, and most recently the ability to use computers, add greatly to the productivity of labour.
2. Natural Resources: These are natural endowment of a particular nation which includes land, oils and gas, forests, water and mineral resources. Some high-income countries like Canada, Norway and United States have increased their economy through this source.
However, many argued that, the possession of natural resources is not necessary for economic success in the modern world. Hong Kong, Japan and New York City prospers primarily on its high-density service industries.
3. Capital Formation: The most dramatic stories in economic history often involve the accumulation of capital. Recall that tangible capital includes structures like roads and power plants, equipment like trucks and computers, and stocks of inventories. Railways and highways are the medium through which Europe and America brought commerce to the 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.
4. Technology Change and Innovation: In addition to the three classical factors discussed above, technological advances lead to a vast improvement in the production possibilities of Europe, North America and Japan.
Technological change denotes changes in the processes of production or innovation of new products or services. Process inventions that have greatly increased productivity were the steam engine, the generation of electricity, the international-combustion engine, the side-body jet, the photocopier machine and the fax machine. Fundamental product inventions include the telephone, the radio, the airplane etc.
Meanwhile, when economic growth is achieved in a country, the citizens, the nation and other countries of the world also benefit from it as it will increase living standard, increase the National Income and favourable balance of trade.
Finally, many countries make rapid progress towards development because of availability of technical know-how, technological inventions and innovation, and the transformation of an economy based on agriculture to one based on industry. While others remain poor as a result of lack of technical know-how, wrong development policy framework and overreliance on the importation of foreign consumer goods. i.e. dependency syndrome.
NO. 5
The most influential theories of development are;
i. Theory of Modernization: According to the modernization theory, modern societies are more productive, children are better educated, and the needy receive more welfare. According to Smelser’s analysis, modern societies have the particular feature of structural differentiation, that is to say a clear definition of functions and political roles from national institution. Smelser argues that although structural differentiation has increased the function capacity of modern organizations, it has also created the problem of integration and of coordinating the activities of the various new institutions.
The assumptions of the modernization theory of development basically are;
a. Modernization is a phased process
b. Modernization is a homogenizing process
c. Modernization is an Europeanization or Americanization process
d. Modernization is an irreversible process, once started modernization cannot be stop.
Modernization is a progressive process which in the long run is not only inevitable but desirable. According to Coleman, modernized political systems have a higher capacity to deal with the function of national identity, legitimacy, penetration, participation and distribution than tradition political systems.
Modernization is a lengthy process. It is an evolutionary change, not a revolutionary one. All these assumptions are derived from European and American evolutionary theory.
There is also another set of classical assumptions based more strictly on the functionalism – structuralism theory which emphasizes the interdependence of social institutions, the importance of structural variables at the cultural level, and the built in process of change through homeostasis equilibrium. These are ideas derived especially, from Parsons’ sociological theories.
These assumptions are as follows:
(a) Modernization is a systematic process (b) Modernization is a transformative process and (c) Modernization is an imminent process due to its systematic and transformation nature, which builds change into the social system.
One of the principle applications of the modernization theory has been the economic field related to public policy decisions.
From this perspective, it is very well known that the economic theory of modernization is based on the five stages of development from Rostow’s model. In summary, these five stages are tradition society, precondition for takeoff, the take off process, the drive to maturity, and high mass consumption society. According to this exposition, Rostow has found a possible solution for the promotion of third world modernization. If the problem facing third world countries resides in their lack of productive investments, then the solution lies in the provision of aid to these countries in the form of capital, technology and expertise.
ii. Theory of Dependency: The foundations of the theory of dependency emerged in the 1950’s from the research of the Economic Commission for Latin America and the Caribbean-ECLAC. The principal points of the Presbisch model are that in order to create conditions of development within a country, it is necessary.
a. To control the monetary exchange rate, placing more governmental emphasis on fiscal rather than monetary policy.
b. To create a platform of investments, giving a preferential role to national capital
c. To development national strategies according to the model of import substitution, protecting national production by establishing quotas and tariffs on external markets.
The theory of dependency combines elements from a neo-Marxist perspective with Keyne’s Economic Theory – the liberal economic ideas which emerged in the United States and Europe as a response to the depression years of the 1920s. From the Keynes’ economic approach, the theory of dependency embodies four main points;
(a) To develop an important internal effective demand in terms of domestic markets;
(b) To recognize that the industrial sector is crucial to achieving better levels of national development, especially due to the fact that this sector, in comparison with the agricultural sector, can contribute more valued-added to products
(c) To increase worker’s income as a means of generating more aggregate demand in national market conditions.
(d) To promote a more effective government role in order to reinforce national development conditions and to increase national standards of living.
So, one of the main current critiques of theory of dependency and the theory of modernization is that they both continue to base their assumptions and results on the nation-state.
iii. World System Theory: A central element from which the theory of world-system emerged was the different from that capitalism was taking around the world, especially since the decade of the 1960s. Starting in this decade, third world countries had new conditions in which to attempt to elevate their standard of living and improve social conditions. These new condition were related to the fact that the international financial and trade systems began to have a more flexible character, in which national government actions were having less and less influence. Basically these new international economic circumstances made it possible for a group of radical researchers led by Immanuel Wallenstein to conclude that there were new activities in the capitalist world-economy which could not be explained within the confines of the dependency perspective. These new features were characterized mainly by the following aspects;
1. East Asia (Japan, Taiwan, South Korea, Hong Kong and Singapore) continued to experience a remarkable rate of economic growth. It became more and more difficult to portray this East Asian economic miracle as “Manufacturing imperialism”.
2. There was a wide spread crisis among the socialist states which included the Sino-soviet split, the failure of the cultural revolution, economic stagnation in the socialist states, and gradual opening of the socialist states to capitalist investment. These crises signaled the decline of revolutionary Marxism.
3. There was a crises in North America Capitalism which included the Vietnam war, the Watergate war, the oil embargo of 1975, the combination of stagnation and inflation in the late 1970s, as well as the rising sentiment of protectionism, the unprecedented governmental deficit, and the widening of the trade gap in the 1980s, all signaling the demise of American hegemony in the capitalist world economy.
When the world-systems theory considers trade mechanisms, it distinguishes between the direct transactions, which are those who have a greater, more significant and immediate effect on a country; and those operations which are indirect trade transactions, such as future trade stipulations, and the speculations on transportation costs, combustibles prices, and forecasts on agricultural crops, when they depend on weather conditions to obtain their productivity and yield.
4. Theory of Globalization: This theory is similar to the world-system approach. However, one of the most important characteristics of the globalization position is its focus and emphasis on cultural aspects and their communication worldwide. Rather than the economic financial and political ties, globalization scholars argue that the main modern elements for development interpretation are the cultural links among nations. In this cultural communication, one of the most important factors is the increasing flexibility of technology to connect people around the world.
The main assumptions which can be extracted from the theory of globalization can be summarized in three principal points. First, cultural factors are the determinant aspect in every society. Second, it’s not important, under current world conditions to use the nation state as the unit of analysis, since global communications and international ties are making this category less useful. Thirdly, with more standardization in technological advances, more and more social sectors will be able to connect themselves with other groups around the world. This situation will involve the dominant and non-dominant groups from each nation.
On the other hand, 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-dependent.
NO: 6
The following are the major social obstacles in the way of accelerated growth:
1. Joint Family System: In many countries like India and Pakistan this system is still available. All the members of the family live together. Few of them work hard while others do nothing, except quarreling with one another. So due to this reason national product reduces.
2. Literacy: The literacy rate is very low in the underdeveloped countries. This is as a result of inadequate provision of educational opportunities to the citizen. Skills and knowledge need for production is lacking. These serves as a threat to accelerated in some local condition like Pakistan.
3. Political instability: Frequent change of government in a country has served as an obstacle that reduces the rate of economic growth. For instance, Nigeria is a country with abundant natural and human resources, but due to frequent political crises, religious and tribal crises, corruption at high pedigree, labour unrest, misplacement of priorities, capital and human capital flight to mention but few, the country has remained stagnant.