The footings Economic Growth and Economic Development are so closely interwoven in our economic construction that sometimes they are used synonymously with the each other. These two footings in general can besides associate to footings like economic public assistance, secular alteration, societal justness and economic sciences advancement. But to be precise Economic Development and Economic Growth can non be used inter changeably and they hold wholly different significances all together.
Broadly talking Economic Development has been defined by assorted economic experts at different times from assorted angles but there can be no specific satisfactory definition. Economic Development is a normative construct. A The definition of Economic Development as given by Michael Todaro is an addition in life criterions, betterment in self-esteem demands and freedom from subjugation every bit good as a greater pick. The most accurate method of mensurating Economic Development is theA Human Development Index. This was a step introduced by the United Nations which measures Economic Development by taking into history life anticipation, grownup literacy, entree to all three degrees of instruction, every bit good as people ‘s mean income which is a necessary status of their freedom of pick. Freedom of pick will guarantee greater handiness to resources as therefore would increase well-being and development would take topographic point. On the other manus Economic Growth is a much narrower construct than economic development. It is an addition in a state ‘s national end product which can be caused by an addition in the quality of resources, addition in the measure of resources & A ; betterments inA engineering. Thus Economic Growth does non embrace as wide a field as Economic Development. Economic Growth is measured utilizing Gross Domestic Product ( GDP ) of a state which is the market value of all the goods and services produced within the geometric district of a state within a given clip period. Achieving Economic growing does non ever guarantee accomplishing Economic Development. They both differ in assorted respects. Economic Development is a qualitative construct while Economic Growth is a quantitative construct. We try to set up this fact utilizing assorted illustrations.
First we compare the Gross Domestic Product ( GDP henceforth ) growing with that of the Human Development Index of the state. Presently India ‘s growing rate is around 8.5 % ( approx ) . Harmonizing to IMF studies India was rankedA hundred-and-fortieth by nominal GDPA in 2011 on a per capita income footing. India is considered to be one of the fastest turning economic systems of the universe which has witnessed 200 times per capita growing after independency. So on an mean India is among the fastest turning economic systems of the universe with a high GDP growing. Thus it proves that India is witnessing an above mean Economic Growth. But Economic Development has non witnessed such a drastic betterment. We measure Economic Development of India by analysing the Human Development Index ( HDI henceforth ) . Harmonizing to the HDI studies presented by United Nations Development Program ( UNDP ) India ranks 119 among 192 states. India ‘s HDI rank is on an norm with the South Asiatic norm. HDI ranking of India is non increasing at par with it economic growing. Even though the GDP growing is increasing quickly we can state that money is concentrated with a really little figure of people while most people in our state still live below the poorness line. Therefore due to inequality in income distribution we can state we have such a hapless Human Development consequences. India ‘s HDI rank has merely increased one notch in the last decennary. Thus we can sure lift in Economic Growth does non guarantee Economic Development. Thus we can state that they do non ever go manus in manus.
Second we can state that Economic Growth being a wholly quantitative construct. Growth suggests an addition in volume or measure of something. Economic Growth purely encompasses addition in the existent or per-capita gross income. On the other manus Economic Development is a purely qualitative construct. Development incorporates the diverse and wide aspirations of a ‘good life ‘ . In this sense we can mention the illustration that a individual who is really rich but is physically handicapped. Bing rich and being economically good off ensures him of holding a high Economic Growth. While he being physically disabled deprives him of basking a normal life and though he has economic stableness he does non hold handiness to resources. He does non hold the pick option though he can afford to. Thus Economic Growth is different from Economic Development as quantitative growing does non guarantee a qualitative good being every bit good.
It has ever been said that Economic Growth is associated with Developed states while Economic Development with that of developing or under-developed states. We stress on the barriers to development that these state might confront:
HUMAN RESOURCE – The quality of the population is an of import determiner of the economic advancement of the state. Alternatively of a big population it is better to hold a high quality, knowing and well-trained population which is netter off for the development of state. Largely in developing or under-developed states we see that there is deficiency of proper preparation and care of the working force. Thus they lack proper cognition and fail to get the modern proficient knowhow. In instance they fail to travel in gait with the developed states.
POPULATION GROWTH – Another of import feature of under-developed and developing states is that of population enlargement. A turning population ensures labour supply but a galloping population idiots economic advancement. It becomes nerve-racking for an economic system to feed, train and expression after the wellbeing of such a immense population. A population growing is therefore damaging to our development.
Health services – For a state which itself is endeavoring difficult to accomplish development, it becomes difficult to give all the installations to the pullulating 1000000s. Health conditions therefore remain below norm. These states are characterised by low life-expectancy, high decease rate, malnutrition and low maternal mortality rate. Thus the HDI of these states is below mean and is a hinderance to growing.
So Economic Growth and Economic development though are closely related, they ever do non travel manus in manus. There are certain basic differences in their construction. Besides largely under developed and developing states are the 1s who largely fail to demo a growing in both.
Anon. , n.d. WHAT IS DEVELOPMENT? . In: BEYOND ECONOMIC DEVELOPMENT. s.l. : s.n.
CYPHER, J. , . J. D. , 2004. MEASURING Economic GROWTH AND DEVELOPMENT. In: THE PROCESS OF ECONOMIC DEVELOPMENT. s.l. : ROUTLEDGE, pp. 1-8.
Khan, M. H. , 2007. Governance, Economic Growth AND DEVELOPMENT SINCE 1960S. ECONOMIC AND SOCIAL AFFAIRS, AUGUST, pp. 1-24.
Q2. Is development possible without province intercession? How has development theories looked at province function in economic development?
Answer: An economic system is defined as an institutional model by which competition among people for the usage of resources is coordinated. In world an economic system is defined as a combination of assorted economic organisations and concentrate on the relationship between market and province as the two major organisations that determine the features of the economic system. State is an establishment ( or organisation ) for monopolising legitimate coercive force. Using this coercive force province coordinates people ‘s activities harmonizing to a set regulations and ordinances. While Market is an establishment comprised of regulations for commanding voluntary minutess under the parametric quantity of monetary values. It is besides the functional organic structure that coordinates the production and ingestion of goods and services through voluntary minutess under the parametric quantity of monetary values. It is besides the functional organic structure that coordinates the production and ingestion of goods and services through voluntary minutess.
We can explicate the germinating function of the province over the last half century. The decennary following World War 2 and Great Depression in 1930s witnessed a great rush in province engagement. This was peculiarly outstanding in the less developed states that had late owned independency from foreign regulation and were bent on accomplishing rapid growing through the procedure of careful economic planning. It was believed that direct control of sectors by the province would ease macro direction. This was the beginning of the province intercession into the free market system. Since so it has been considered an indispensible portion for the development of an economic system due to the undermentioned grounds.
First the less developed or developing states need to turn at a fast gait in order to travel on with the fast changing universe. Thus the demand of the hr is the efficient allotment of resources. If this is left to the private enterprisers, whose exclusive motivation is profit maximization, resources will non be put to full usage. Inefficient resource usage can halter a states growing procedure. Efficient usage of resources will besides advance employment and advance efficient production procedure. Thus authorities intercession is requires for the efficient usage of resources and forestall the malpractices of the private enterprisers.
Second from if we look at societal public assistance, province intercession becomes really necessary. Private houses and enterprisers neglect the public assistance facet wholly and therefore it has largely lead to a failure. State being a organic structure for the people, of the people and by the people they ne’er neglect the public assistance facet and they rank the public assistance facet before their net income motivation. For the all unit of ammunition development of a province public assistance facet can non be neglected as public assistance of the people leads to betterment of human capital which is the most of import for production procedure.
Third if the whole power remainders with the private enterpriser there is frequently a opportunity of a capitalist province. Capitalism is based on private ownership and is based on wage-labour, competitory market and capital accretion. State does non take attention of any internal or external security of the state. It gives rise to inequality of wealth distribution as wealth gets concentrated with the rich capitalist category. It besides therefore promotes category struggles and differentiations. There is besides a fluctuation in employment. Thus socially capitalist economy is non acceptable. In such instances province intercession becomes highly necessary for the development of the state.
Therefore we see that the function of the province is indispensable. Development is impossible without intercession from the province. For the all unit of ammunition development and advancement of a province there is an pressing demand for the province to step in in the proceedings of the province. This does non intend that private entrepreneurship should be abolished. We are speaking of a right mix of the two or a Assorted Economy, where both have their Fieldss to work upon and together work toward the development of the province.
The orthodoxy of economic experts from Adam Smith and English Classical School to Neo-Classical School indicates that competition in a free market consequences in socially optimal allotment of resources. Adam Smith on the footing of his theory of ‘Invisible Hand ‘ recognized that mechanism of a free market would steer people towards the publicity of entire economic public assistance and maximise the wealth of states. Though these economic experts considered market to be all-powerful, but in world without province intercession it was non possible to accomplish all unit of ammunition development. The intervention with market mechanism was a necessary pre-requisite for a more rapid gait of development. While economic experts as Hume supported free trade against mercantilist limitations, yet found a demand for governmental intercession to continue national economic advantage. Bentham excessively wanted province intercession for to advance the development of the province. He stressed that the aim of the authorities should be to advance greatest possible felicity of the community governed. State intercession therefore was considered necessary for the development due to the undermentioned grounds:
Restrictions of the market mechanism – Market is non able to accomplish optimality in all economic activities. Market equilibrium many times may switch from equilibrium. In such instances authorities activities are needed to rectify this failure.
Lack of perfect competition – As there is deficiency of perfect information in the market so there are opportunities of market failure.
Need for societal justness – The market is the mechanism used to advance economic efficiency but non to better income distribution. Redistribution system, such as progressive income revenue enhancement and societal security are required to better economic public assistance in a society. So these all can be implemented merely by authorities intercession.
Development of Infrastructure – Many undertakings in developing states should be undertaken which are profitable to the society and promote development. As private investors ignore such undertakings because they yield no net incomes. Therefore province intercession becomes necessary. Investings for such undertakings are therefore undertaken by the province.
Therefore province intercession is necessary. Economists view this as an intercession into the infinite and autonomy of the people. They say that this reduces the freedom of pick of the people. But the above instances show that province intercession is an indispensable portion. It non merely regulates the market mechanism but besides moulds it in a manner to advance an all unit of ammunition development for the society.
Casey, T. ( 2004, APRIL TUESDAY ) . Retrieved NOVEMBER 13, 2012, from WWW.ROSE-HULMAN.EDU: hypertext transfer protocol: //www.rose-hulman.edu/~casey1/Comparative % 20Disadvantage.pdf
Leonard, P. ( n.d. ) . Restructure THE WELFARE STATE. Marxism Today, pp. 7-13.
Q6. A state decides to alter from an inward oriented development scheme to an outward oriented development scheme. What does this mean? Discuss the likely effects of alterations in this policy.
Answer: A state following inward oriented development scheme refers to the policy of Import Substitution. Import permutation is a policy which many states follow by raising assorted barriers to importing of foreign goods and replacing these for domestically produced goods. In Import Substitution ( IS henceforth ) is a scheme that appreciates the local production via authorities intercession to the whole economic system. When a state displacement from inward to outward oriented scheme, it means it opens up for trade with other states. It shifts from Import Substitution to Export Promotion. In an Export Promotion ( EP henceforth ) scheme, the external demand is the beginning of activity. The chief point of an EP scheme is to do production for international trade and hence to increase exports. Since the end is to export goods abroad, the authorities provides aid to those industries that have the potency for developing and viing in the universe market.
In 1950s and 1960s it was widely believed that states could make industrial bases merely by replacing domestic manufactured goods for imports. From the mid 60s onwards, there was another possible way to industrialisation via exports of manufactured goods chiefly to advanced states. Particularly the states, which have a immense internal market, had advantage of the IS scheme during 1960s but had to switch their schemes to EP scheme due to heave economic crisis. Alternatively of curtailing trade such policies by and large expand trade beyond market determined bounds. Therefore Outward oriented schemes play a major function in development of an economic system. Shift of a state from an inward to outward oriented scheme is accompanied by a batch many alterations. We discuss some of these alterations below.
States switching from an inward to outward oriented developmental scheme had to undergo a batch many structural alterations. First it was that of the alteration in the exchange rate. Exchange Rate is the rate at which one state exchanges its goods with that of another state. A flexible exchange government is the most of import necessity for holding openness in trade. It prevents the grasp of the local currency which worsens the trade balance of the state. This might b considered as an ill-effect of EP as addition in exports raises the foreign exchange influx. To avoid this there should be flexibleness of foreign exchange rate.
Second except this there is another of import policy alteration which is required in order to take the disagreement due to the displacement. It is the protection of the domestic industries particularly for those who produce replacements for the exported goods. Many of the domestic industries are non able to take a spring in the international market and therefore necessitate some sort of protection as they can non vie with the immense houses. For the houses bring forthing the same sort of good domestically the authorities must look at their involvement and guarantee some sort of protection. Harmonizing to the IS scheme internal industries must be protected by some subsidies. By the same analogy exporters must acquire some protection every bit good. However, this sort of a subsidy may do some farther budget shortage for the authorities.
Other than these there are some more structural alterations which are needed. Among them pick of appropriate engineering is of quite relevancy. To vie in the international market it is really necessary to take the appropriate engineering which will suite the state ‘s techniques and will besides be up to the grade. Then comes human capital. With altering policy and upgradation of engineering it becomes really necessary to upgrade the human capital. There becomes an immediate demand to put in the human capital for increasing their proficient knowhow and accomplishments. There should besides be appropriate allotment of resources as it reduces the cost of production and to advance export it is really apparent that goods should be produced at cheaper rates. Proper allotment of resources is of import for any economic system and particularly for those which have late undergone structural alterations. For efficient allotment of resources what we need is efficient institutional control. Therefore be aftering for a proper establishment is besides required.
Therefore displacement of an economic system from inward to outward oriented developmental scheme is something associated with non merely alteration in its orientation but besides is accompanied by a batch of structural alterations and reforms. A state which undergoes such a drastic alteration is certain to undergo its effects. We try to enlist some of them below:
Encourages Competition – As the state opens up for free trade there evidently a rise in competition. There are houses viing to capture the foreign market. This in bend promotes invention in the good. Thereby it promotes economic efficiency.
Welfare aspect – As states trade, a batch of exchange of goods and services take topographic point. In bend this widens the picks of the goods a consumer can do. Trading exposes the consumers of a state to a greater assortment of goods and services. As we already know that human development and public assistance is measured by how much the pick factor of the consumer is widened.
Technical chances – When states open up for trade through EP, it permits states to take better advantage of the proficient chances available to them by taking the advantage of economic systems of graduated table and get the better ofing the indivisibilities of production.
Technological upgradation – When states open up for trade, along with exchange of goods and services there is besides an exchange of technological knowhow and modern innovations. This helps in the upgradation of the technological province of the state.
Difference in selling construction: A The handiness of the selling installations in different states may change widely. For illustration, an advertisement medium really effectual in one market may non be available or may be under developed in another market. Thus we can state that due to differences in selling construction the construction of one state might non suit into the construction of another state.
DifferentA Monetary Systems: A Each state has its ain pecuniary system. In instance ofA domestic selling thereA is onlyA one currency predominating in the state. The exchange value of each country’sA currency is different from that ofA the other.A The exchange rates between currencies fluctuate every day.A This will present jobs for the economic system and therefore might halter trade.
Outward orientation is non merely increasing the exports but besides opening all the goods and services to merchandise. Furthermore, structural alterations in capital motions must besides be made. In a universe like ours it is impossible for a state to accomplish autonomy and therefore in such a instance trading becomes indispensable. Achieving autonomy is about a myth today. So the lone manner available today for the subsistence of an economic system is outward orientation. When trade takes topographic point we see that there is an all unit of ammunition development taking topographic point. This is the lone manner of globalisation. Export growing rates are now placeholders for trade policy orientation. Positive relation between export growing rates and end product growing rates are used to set up high quality of outward oriented schemes in furthering economic growing.
CLARKE, D. B. , 1977. Make OUTWARD-ORIENTED DEVELOPING ECONOMIES INDUSTRIALIZE FASTER? . INTERNATIONAL ECONOMIC JOURNAL, 11 ( 3 ) , pp. 1-9.
YILMAZKUDAY, H. , n.d. Export PromotA±on V. Import SubstA±tutA±on. ECONOMIC AND POLITICAL WEEKLY, pp. 1-14.
Q6. What do we understand by neo-liberalism? Discuss its key characteristics.
Answer: Neo-liberalism is traditionally known as a political motion get downing in the sixtiess that lends traditional broad concerns for societal justness with an accent on economic growing. The term neo-liberalism was foremost coined by Alexander Rustow and Colloque Walter Lippmann. Neo-liberalism is thought of as the return and spread of a peculiar facet called of broad tradition, viz. economic liberalism. Economic liberalism fundamentally means that a province should abstain from step ining into the economic system and instead go forth the market on the persons and rims to modulate. The English Oxford Dictionary describes neo-liberalism as, “ a modified or revived signifier of traditional liberalism, ( particularly ) one based on belief in free market capitalist economy and rights of the person ” ( Oxford English Dictionary 1989a ) . In a layperson ‘s linguistic communication neo-liberalism is a system that stresses on monetary value mechanism as the exclusive power in commanding the market and in bend enhances the function of private sector.
Early on 15 and 17th boulder claies early nineteenth century we saw the rise of mercantile system and it was at its extremum when state provinces were formed in Europe. These were ruled by powerful province with powerful blue bloods where there were these rich categories of blue bloods having land and belongings. The hapless multitudes of Europe were treated as slaves and their conditions deteriorated. Trade was given importance and these freshly formed provinces engaged themselves in trade and even in war to roll up more and more wealth in signifiers of gold and this were assumed to be the key for development and prosperity. The impulse and greed for wealth and power lead to the colonisation of assorted states in Asia and Africa. After the innovation of steam engine which resulted in heavy industrialisation new thoughts started to germinate. The thought of liberalism though it did n’t intend merely economic liberalism but it believed in freedom to single like freedom from absolutism, freedom of having belongings etc. Classical liberalism is frequently associated with the belief that the province ought to be minimum, which means that practically everything except armed forces, jurisprudence enforcement and other non-excludable goods ought to be left to the free traffics of its citizens, and the organisations they freely choose to set up and take portion in. Liberalism at one point of clip was an influential political political orientation, but with ephemeral clip it has bit by bit lost its significance. Neo-liberalism in short can be referred to as the resurgence of the deceasing liberalism. It was Adam Smith who came up with the thought of “ Invisible Hand ” which referred to the free operation of the market without any market intercession. It meant minimum province intercession and all the powers related to market operation and others rested with the elect group. Neo-liberalism can be thought of as an wholly new paradigm for economic theory and policy-making and it is the political orientation behind the most recent phase in the development of capitalist society. At the same clip it counted for a resurgence of the economic theories of Smith and his rational inheritor in the 19th century. Neo-liberalism can besides be of two types –
First comes Classical Neo-liberalism which stems from classical liberalism and was concerned with the eroding of autonomy in those times in Europe which formed the footing of neo-liberalism. Second comes Economic Neo-liberalism stems out from the rift between classical liberalism and economic liberalism and it concentrated on the personal domain and the belongings rights of the people.
We try and discuss some of the cardinal characteristics of neo-liberalism:
To get down off with we mention the nucleus characteristic of neo-liberalism – free market mechanism with least province intercession. Harmonizing to economic experts, to guarantee maximal wellbeing of the people it is necessary that the power remainder with the people as good. Neo-liberalism stressed on the fact that all determinations sing production, means of production and those related to human capital should rest with a certain elect group of people. There should be minimum function of the province in the economic system. David Harvey therefore defines neo-liberalism as, “ Neoliberalism is in the first case a theory of political economic patterns that proposes that human wellbeing can outdo be advanced by emancipating single entrepreneurial freedoms and accomplishments within an institutional model characterized by strong private belongings rights, free markets and free trade… .. State intercessions in markets ( one time created ) must be kept to a bare lower limit… . ”
Neo-liberalism prioritized ownership of private belongings. It was thought that right to private belongings would guarantee single freedom and therefore would take to welfare of the person. It was thought that the province should non keep any belongings nor should it suggest to interfere with determinations associating to market. All belongings and determination doing power rested with the persons. But largely it was seen that he power rested with the rich merchandiser category who owned the factors of production. The hapless were all the same ignored and lived under distressing conditions.
Neo-liberalism could besides include a position on moral virtuousness: the good and virtuous individual is one who is able to entree the relevant markets and who actively takes portion in the operation of the market. He or she is willing to accept the hazards associated with take parting in free markets, and to accommodate to rapid alterations originating from such engagement ( Friedman 1980 ) . Persons are besides seen as being entirely responsible for the effects of the picks and determinations they freely make associating to production in the market. Cases of inequality and glowering societal unfairness are morally acceptable, at least to the grade in which they could be seen as the consequence of freely made determinations ( Nozick 1974 ; Hayek 1976 ) .
Some claim that neo-liberalism is a signifier regulation of a state by and for the benefit of big corporations. It has frequently been referred to as corpotocracy. Since big corporationsA tend to carry through all the conditions of a affluent entity they do so at the cost of societal and economic sciences public assistance of the hapless category of provincials. This gave rise to a turning disparity among the rich category of merchandisers and the hapless category of
provincials. Thus the rich continued to turn richer and the hapless continued to go poorer.
Therefore above mentioned are some of the cardinal characteristics of Neo-liberalism. Neo-liberalism was a sort of revolution in our history which has changed the system and proceedings of the universe. Neo-liberalism can non be defines with a individual definition. Attempts have been made over a great period of clip to specify neo-liberalism in the context of political orientation, economic theory, development theory, or economic reform policy. But still till day of the month we can non happen a suited definition to it. We can merely name it a radical motion brought approximately for the public assistance of the hapless multitudes and to liberate them from the intercession of the province.