Economy And Society Example

Economy And Society Example Economy And Society â€" Essay Example > Economic development in less Developed CountriesTraditionally, economic development was being defined to mean the same thing as economic growth. In fact, it was regarded as the capacity of the economy to generate and maintain a growth rate in GDP of between 5% and 7%. This definition was invalidated by the LDC’s experience in the 1950’s and 1960’s where despite the impressive growth in GDP, the living conditions of people in these countries remained more or less the same whereas in some of these countries the living conditions worsened and poverty levels rose in the midst of high growth rates. In Uganda for example, poverty level rose by 4% in 2003 despite an economic growth rate of 3% in the same period, Oversees Development Institute (2004). It is in this regard that the modern economists provided a distinction between the two concepts. Economic development can therefore be defined as establishment of conditions necessary for realization of human personality, bringing abou t social equality, poverty reduction and improving access to amenities like health, education and employment opportunities. Unlike economic growth, economic development is not purely an economic phenomenon but a multi-dimension one incorporating both social and economic aspects of life6 Furthermore development can also be said to be an increase in people’s freedom of choice2. JUSTIFICATION OF THE STUDYThe study purposes to analyze economic development in LDCs because of the many concerns raised in these countries. This is also in line with the fact that ¾ of the world’s population live in these nations. Even then, such huge population only shares less than 20% of the global income whereas the wealthy nations shares more than 80% of the worlds income despite their low total population. As such, the planet earth may be viewed as having two worlds; one for the poor (who live in LDCs) and the other one for the rich. Moreover, food security is an important yardstick of measuring ec onomic development2. Despite the LDC’s capacity to produce surplus food, such capacity remains unutilized. Paradoxically, food imports accounts for more than 25% of the total imports by LDCs. In summary, all conditions precedent to economic development has not been fulfilled in these countries. It is therefore essential to understand the development condition in these countries so as to come up with amicable solutions. DIFFERENT PERSPECTIVES OF ECONOMIC DEVELOPMENTNEO-CLASSICAL APPROACHNeoclassical theorists like Robert Solow, the Nobel Prize winner in 1987 emphasizes on the importance of savings and formation of capital in bringing about economic development. In his famous model, ‘Solow Model’, Solow suggested that the reason why some countries flourish while others remain poor is the difference in their capital formation rate. In fact, the Solow equation provides an answer as to why LDCs continue to lag behind economically. According to him, the reason behind LDC’s under development is lack of the incentive to save. This can be validated by empirical evidence which shows that developed countries save more than 20% of their national income in capital formation whereas LDC’s only manage to save 5% of their income. Even then, the 5% is used for necessities thereby leaving only amount for capital formation. This in turn leads to low level of development. According to Solow therefore, capital formation is an important tool for economic development.