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Topic: Economic Growth And Development
Lesson Objectives: At the end of the lesson, learners should be able to;
i. Define economic development
ii. Define economic growth
iii. Differentiate between economic growth and economic development
iv. State the alternative explanation of Economic development
v. Explain the term underdevelopment
vi. State the factors or characteristics of an underdeveloped economy or country
vii. State the problems affecting economic development in West Africa
viii. State the conditions necessary for rapid economic development
ix. Define economic planning
x. List the aims and objectives of economic planning
xi. List and explain the types of economic planning
xii. State the problems associated with economic planning in West Africa
xiii. Discuss Nigeria’s economic planning experience
Economic development may be defined as the process whereby the level of national production (that is national income) or per capita income increases over a period of time. The main purpose of economic development is to raise the standard of living and the general well-being of the people in an economy.
Economic growth may be defined as the process by which the productive capacity of an economy increases over a given period, leading to a rise in the level of the national income. When there is economic growth, it shows in the form of an increase in income level, an expression in the labour force, an increase in the total capital stock of the country and a higher volume of trade and consumption.
Differences Between Economic Growth And Economic Development
There is a greater emphasis on the increase in our and less emphasis on economic welfare in the case of economic growth whereas economic development lay more emphasis on improvements in the general welfare as a result more equitable distribution of the increased output of goods and services among individuals, while economic growth is mainly concerned with the growth of income, economic development reveals all aspects of economic activities and emphasizes a more even distribution of facilities between various areas.
In economic growth, there must be a meaningful increase in real income whereas in economic development, a measure of it can be achieved by a fairer distribution of existing goods and services even if there is no substantial increase in output.
Economic growth can take place under considerations of mass employment while economic development implies a reduction in the level of unemployment.
Alternative Explanation of Economic Development
Many theories have been put forward to explain why some nations are developed while others are underdeveloped. The main theories are as follows:
i. Sociological theory: This school of thought believes that economic growth and development is linked to certain characteristics of the people. It emphasized that countries may become underdeveloped due to some negative characteristics such as last of absenteeism, negative attitude to work, etc. A nation may be classified as being developed if it has positive characteristics mentioned above.
ii. Colonial background theory: This school of thought believes that nations become underdeveloped because they were at one time or the other colonized. While the colonial masters prosper leading to developed nations as a result of continued exploitation, the colonized nations become a poorer resulting in underdevelopment.
iii. Climatic development theory: This school of thought believes that climate has certain influence in the development of a nation. It emphasized that countries associated with temperate climate that are cool give rise to meaningful thinking resulting in developed nations while those associated with too cold or too hot climate generally lead to underdevelopment.
iv. Puritanical ethic theory: This theory was propounded by Weber, it believes that puritanical ethic is the brain behind the industrialised nations of the world. It emphasized that self-discipline, abstinence, thriftiness, etc, strengthened the incentive to work and save. The absence definitely lead in underdevelopment.
A nation is regarded as being underdeveloped or developing when it lack the human and material resources used in improving the quantity of human lives which lead to low levels of living. In other words, underdeveloped or developing nations refers to economies that have not reached a certain level of development and improvements.
Features or Characteristics of an Underdeveloped Economy or Country
Reasons why many African countries or economies referred to as underdeveloped or developing are due to the following characteristics.
i. Dependence on agriculture: Majority of the underdeveloped countries depends mainly on agriculture as a source of income. Agriculture in this case also constitutes the greatest employer of labour.
ii. High dependency on foreign nations: Most of these developing nations depend greatly on foreign countries for their survival.
iii. Low savings and investment: Labour receives low income and this reduces or leads to low savings and investments.
iv. Population explosion: Underdeveloped countries do witness high birth rate leading to population explosion.
v. Low per capita income: The per capita income in all underdeveloped economic is generally low.
vi. Low standard of living: The standard of living in these countries is generally low.
vii. Absence of medical facilities: Medical facilities are also grossly inadequate in underdeveloped countries.
viii. Inadequate infrastructural facilities: Infrastructural facilities like roads, water, electricity, etc are grossly inadequate.
ix. High rate of importation: Citizens in these countries have high appetite for imported products.
x. High level of unemployment: There is a high level of unemployment in many underdeveloped nations.
Problems of Economic Development in West Africa
Factors or obstacles which affect or hinder the economic development of West African nations include:
i. Low level of savings: The level of savings in developing economies is very low. This retards the level of economic development.
ii. Low level of investment: Low level of servings leads to low level of investments.
iii. Lack of adequate capital: Low capital base impedes economic development.
iv. Lack of skilled manpower: The Man development in developing countries is usually very low. This affects economic development
v. Lack of Industrialisation: Lack of industrialisation leads to low economic development of any nations.
vi. Lack of infrastructural facilities: Lack of or inadequate infrastructural facilities such as roads, water, electricity, etc leads to low economic development.
vii. Low level of technology: Majority of the developing nations have low level of technology, which implies economic development.
viii. High level of Illiteracy: Majority of the people in developing countries are illiterates, i.e they cannot read and write. This eventually leads to low economic development.
ix. Leadership problems: Majority of the leaders in developing countries do not direct well the human and natural resources of such countries and this leads to low economic development.
x. Inadequate development plan: Most of the developing countries do not have adequate development plan and this hinders economic development.
Conditions Necessary for Rapid Economic Development
Conditions necessary for rapid economic development or solutions to problems of underdevelopment or measures government can adopt for rapid economic development include the reversal of the problems of economic development. These include:
i. Encouragement of savings: People and firms should be encouraged to save provided there is an improvement in their income. Good savings leads to investments. Expenditure in consumption should be reduced.
ii. Encouragement of investment: Individuals and firms should be encouraged to invest in the economy. Capital or fund, tax holiday, provision of some infrastructural facilities, etc, can encourage investment.
iii. Provision of capital: Banks should be encouraged to provide capital or fund for individuals and firms to enable them embark on productive ventures.
iv. Training of manpower: Manpower should be trained periodically to ensure efficient and productive output for rapid economic development.
v. Promotion of industrialisation: Effort should be made to promote rapid industrialisation as this forms the bedrock for any economic development.
vi. Provision of infrastructural facilities: The provision of these facilities such as good roads, pipe borne water, electricity, etc can promote the rapid economic development of any nation.
vii. Technological development: The level of technology should be developed in order to increase economic development.
viii. Export promotion: Exports should be encouraged and promoted in order to generate more earnings thereby encouraging economic development.
ix. Good development plan: There should be good development plans and their execution will promote economic development.
x. Diversification of the economy: This will assist a country from depending on a particular sector of the economy hence economic development is promoted.
Elements of Development Planning
Economic planning may be defined as government’s conscious formulation of economic policies for the allocation of resources to all sectors of the economy over a period of time. This brings about sustained growth in the economy.
Aims and Objectives of Economic Planning
i. To increase the level of employment: A good economic plan will ensure the increase in the level of employment in the economy.
ii. To develop efficient technology: A good economic plan can probably a better and efficient technology.
iii. To increase the real income of citizens: The real income of the citizens can easily be increased through a good economic planning.
iv. Equitable allocation of resources: Development plan is aimed at equal allocation of the country’s resources to all sectors of the economy.
v. Diversification of the economy: Through good development planning, Nigeria’s economy will be diversified to many sectors.
vi. To achieve economic self-sufficiency: Through good development planning, Nigeria’s agricultural and industrial productivity will increase thereby helping the country to attain the height of self-sufficiency.
vii. To ensure economic growth: Development planning offers the essential mechanism for overcoming some obstacles to economic development.
viii. To ensure joint business participation: A good development planning will increase the participation of citizens in the ownership and management of productive enterprises.
Types of Economic Planning
There are different types of economic planning and they are;
i. Financial economic planning: This type of economic planning involves the distribution of national income to various sectors of the economy.
ii. Strategic planning: This is the type of planning which is directed to meet certain objective in the economy.
iii. Comprehensive economic planning: This is the type of planning aimed at setting some targets to cover all major aspects of the national economy.
iv. Partial economic planning: This is the type of planning targeted at specific segment of the national economy, e.g plans to boost agricultural production.
v. Controlled economic planning: This is also known as authoritarian planning common with socialist economic system in which government formulates and executes plans for the economy.
Ways of Financing Economic Development in Nigeria
i. Internal borrowing, e.g from banks.
ii. Aids and grants from international economic organisations.
iii. Loans from international financial institutions, e.g IMF, World Bank, etc.
iv. Government savings and reserve
v. Debt conversion
vi. Through budget surplus
vii. Revenue generated from investments.
viii. Privatisation and commercialisation of government-owned business enterprises.
Problems Associated with Economic Planning in West Africa
Planning facing development planners or associated with economic planning in West Africa include:
i. Political instability: Political instability or frequent changes in government often leads to change in plans.
ii. Inadequate capital: Inadequate capital makes economic planning difficult to achieve.
iii. Misplacement of priorities: Resources are sometimes diverted to investments that yield no economic benefit to the people.
iv. Inadequate skilled personnel: Inadequate skilled labour and experts make plan implementation difficult.
v. Rapid population growth: The emergence of rapid population growth destabilises planning.
vi. Reliance on foreign aid: Over-reliance on foreign aid and adherence to their conditionalities lead to plan failures.
vii. Corruption and nepotism: Economic planning is affected by corruption and nepotism. Planned decision may be influenced by selfish and parochial considerations.
viii. Poor implementation plans: Unexpected sudden increases in the cost of projects compared to original estimates affect planning.
Nigerian Planning Experience
Development plan is a document that contains the policy framework and programme for the development of a country within a specific period of time. The plan sets national objectives and priorities in development and outline the programmes and projects that will achieve such.
Economic planning has been recognised by the government as an instrument of economic development. It has come to be accepted as an essential and pivotal means guiding and accelerating economic growth within the framework of the economy by improving the functioning of the market, removing all the obstacles to development, which will result in the Improvement of the standard of living of the people.
Nigeria has had several development plans since 1962. They are as follows;
i. The first national development plan (1962-1968): The first national development plan of 1962-1968 envisaged a total investment of nearly #2.4 billion and half of this amount was to come from external sources.
ii. The second national development plan (1970-1974): The second national development plan of 1970-1974 envisaged a total investment of #2.0 billion by the government. This amount was later revised to #3.27 billion.
iii. The third national development plan (1975-1980): The third national development plan of 1975-1980 initially envisaged a total investment of #10.7 billion but this was later revised in 1976 to #43.3 billion.
iv. The fourth national development plan (1981-1985): The fourth national development plan of 1981-1985 envisaged a total investment of #82.0 billion. Of this amount, #70.5 billion went to the public sector while #11.5 billion was allocated to the private sector of the Nigerian economy.
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Take a quick test for this lesson
i. Define what growth
Ii. Distinguish between economic growth and economic development
iii. Discuss the alternative explanations of economic development
iv. Define underdevelopment
v. List and explain the types of economic planning
vi. What is a development plan?
vii. Discuss the various ways of financing economic development in Nigeria.
viii. Give reasons for development planning in Nigeria
Questions answered correctly? Kudos!
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