Economic development refers to the increase in the economic welfare of people through growth in productive scale and wealth of an economy. Governments aim for their countries to expand from developing economies to developed economies.
Developed countries are characterised by high GDP per capita, high life expectancy, high literacy rate, a stable or dwindling population growth, excellent infrastructure, high levels of foreign investments, excellent healthcare, high productivity, and a relatively large tertiary sector. Example: Japan
Under-developed economies or less-developed economies are characterised by very low GDP per capita, high population growth, poor infrastructure, healthcare and education, low literacy rates, low levels of foreign investments, poor productivity, and a relatively large primary sector.
Example: Somalia
Developing economies are countries that are becoming more developed through expansion of the industrial sector and fewer people suffering the extremes of poverty. They may attract high levels of foreign investments and will be undergoing major economic shifts towards the tertiary sector. However they may still have a low standard of living, owing to high population growth. Example: India
The reasons for low economic development
- Over-dependence on agriculture: farming is the most common work in less-developed economies. Most people work to feed themselves and their families and sell off any surplus. This means that there is little or no trade happening , which results in poor incomes, no economic growth or development.
- Domination of international trade by developed economies: the more wealthier developed economies have exploited poorer countries by buying up their natural resources at low prices and selling products made from them in international markets at higher prices. Rich countries also protect their industries by paying subsidies to domestic producers, increasing global supply, and in turn, lowering prices. Poor economies cannot compete with these very low prices, and they lose their jobs and incomes.
- Low levels of savings because of low incomes and widespread poverty.
- Lack of capital: low incomes in under-developed economies lead to a lack of savings that could be invested in industries.
- Poor investment in infrastructure: good infrastructure in transport, health and education is essential for growth and development.
- High population growth: rapidly expanding populations (due to high birth rates) in less-developed countries will reduce the real GDP/income per head.
- Wars and conflicts deplete resources: there is little scope for development when the country is a war zone.
- Corrupt and/or unstable governments: causes neglect of economy and citizens’ welfare
The opposites are true for developed economies.
Some development indicators that are used to measure how developed an economy are: GDP per capita, population living on less than $1 a day, life expectancy at birth, adult literacy rate, access to safe water supplies and sanitation, proportion of workers in different sectors of production etc.
Notes submitted by Lintha
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