Biggest Obstacle To Development Of Poorer Nations Poorer nations are the less developed nations. The nationsare suffering from high rates of unemployment, high poverty rates, imbalance of payments, very low GDP, poor infrastructure, huge budget deficit, over reliance on foreign aid and high mortally rate among other challenges. A mention of poorer nations, most, if not all of the above issues come into mind. The nations are facing various challenges preventing them from developing and moving from being poor nations. Some issues are local, within the control of the country while others internationally, beyond the control of the nations.
Among the major obstacles include population structure, poor trade policies, over dependence on imports, reliance on traditional agriculture as a source of income, politics and mismanagement of resources. Population structure is a limiting factor to the growth of the economies of developing countries. Education has always been the key to success; but not in developing nations1. The education system in developing nations is the hindrance to success. The education system in poorer nation is structured in a way that most of what is learned is a theory.
There is little room for practical and internship. Further, students are forced to study a wide range of subjects which include subjects not relevant to their career. Specialization in the education sector only occurs at the tertiary level, thus limiting the skills of the students. High population growth is a challenge to development. The rate of population growth is higher than the rate of capital acquisition so that the end result is a low ratio of population to capital. Therefore, the capital available for production is not enough to satisfy the demand of the population.
The health of the population also affects productivity. The health systems in poorer nations are poorly developed so that access to health care is not guaranteed. When the people do not receive health services, they are not able to utilize their maximum potential in production resulting in poor productivity. Poor trade policies is another reason for underdevelopment in poorer nations. The government in most cases controls trading activities in the market. The government control over prices is a major setback to trade.
When the price ceiling and floor of goods and services are set by the government, the suppliers and other traders are unwilling to trade in that market. The licensing authority is faced with bureaucracy and corruption. The best license getters thus access license for business operations while other traders are denied access to operating permits. The result of selective licensing is the formation of monopolies that exploit customers for their own good. The countries also experience high inequality of international trade2. The few wealthy individuals in the countries benefit from international trade at the expense of the poor.
Therefore the majority of the people remain poor in the country. According to the Keynesian theory, when few rich individuals accumulate too much wealth, demand falls relative to supply resulting in involuntary unemployment. The trade policies aimed at promoting local industry growth are exploited by authority giving rise to negative outcomes. Excessive trade control has seen is not healthy for the country as it discourages international trade through over use of tariffs and quarters. Reliance on subsistent farming has seen most of the labor being held up in the farms while their output is low.
If this labor was to be used in industries, it would have better output than in the firm. While the country engages in farming, other goods and services are imported from other countries leading to imbalance of trade due to lesser exports. Over dependence on imports lead to dumping by developed countries further aggravating the situation. The politics of the countries are contributing to the underdevelopment of poorer countries3. Political instability is a common phenomenon in developing countries characterized by civil war and insecurity.
Insecurity and war are major factors that prevent development. Civil wars lead to loss of lives and destruction of property. Development of infrastructure is also limited by politics as politicians put their best interest first before national interest. National development is politicized leading to delays in project executions. What can be done about the obstacles to the development of poorer nations? The structural change theory provides a solution to the obstacles of development of poorer nations. Structural change theory views change in the internal structure of the economy of developing nations as the primary mechanism for change.
The theory is specific to transition from agriculture to industrial manufacturing and services. A shift from agriculture to manufacturing will increase marginal output of labor unlike in subsistent farming where labour had no marginal output thus increase productivity of labor4. Farming, however should not be abandoned. Instead, modern farming method should be adopted such as mechanization to reduce cost and increase productivity. The Chinery’s pattern of development identifies changes that occur in the development process to be shift from agriculture to industry, accumulation of capital, change in consumer demand, growth of urban areas and industries and decline in family size and population.
For poorer countries to develop, the above changes have to be undertaken. To ensure reduction of population growth rate, the government needs to work on policies aimed at improving the population. Policies aimed at reducing population growth ought to be formulated and implemented to the letter. Sensitization of the population on family planning methods and the importance of family planning is the first step.
Provision of the family planning techniques to the people will ensure success of the project. Investing in the health sector to ensure better health care for all will improve performance at work by employees thus accumulating human capital. Human capital can only be acquired through the education system by ensuring well trained labor force with the necessary skills required in the market. The education system in the poorer nations also needs changing to enable the above development. A complete change of the system is necessary to help students acquire more skills.
A practical approach of education is necessary accompanied with specialization from a lower stage of education. Technical institutions ought to be increased and if need be skilled teachers from other countries be employed to help in the transfer of technology to poorer nations. Neo-classical counter revolution will see developing nations break away from international dependence. The neo colonial dependency theory places third world countries in unequal position making them dependent on developed nations due international capitalist system. The neo-classical has three theories that can be applied in poore nations to help them develop.
The theories are free market approach, market choices approach and market friendly approach. The free market approach argues that markets are efficient and if left alone, market prices will help dictate the most desireable economic activity. Therefore, government intervention in the market to control prices is not necessary. The public choice theory focus on politicians who are assumed to be self centered and only interested to maintain their position in government and earn extra income. To minimize inefficiencies in the developing nations, political leaders should have very little role to play in the development of the economy.
the market friendly approach theory recognizes presence of imperfections in developing markets. With the imperfections, there is need for government intervention through neutral and non-selective policies to increase efficiency. The intervention should be only when needed to correct the inefficiencies in the market. Interventions include trade liberalization and export promotion on place of import substitution5. Further, there is need for the government to break the vicious circle of poverty in these developing nation while fostering peace and stability in the country.
Poor people have no acess to finaces for investment thus it is the duty of the government to make fund available for the ppor to enable them invest. Provision of security is an all round affair that involves all aspect of trade including the security of operations, licenses, raw materials and markets. In so doing, an enabling environment for trade will be created leading to increased trade in the country. The Michael Kremer’s O-Ring Theory is also relevant to the development of poorer nations. Just like a circle, there are many players in the market that will ensure success of the market and a failure of one will fail the whole system.
Therefore specialization in the market is necessary to ensure success of trade. Bibliography Krugman, P. and Obstfeld M. 2006. International Economics: Theory and Policy - 9th Edition. Addison Wesley. Moschella M. and Weaver C. 2013. A handbook of global economic governance. Routledge. Muchie, Mammo, and Li Xing. 2006. Globalisation, inequalities and the commodification of life and well-being. London: Adonis & Abbey. Thirlwall, A. P., and Penélope Pacheco-López.
2008. Trade liberalisation and the poverty of nations. Cheltenham, UK: Edward Elgar. Todaro, Michael P. and Stephen C. Smith. 2012. Economic Development, Eleventh Edition. New York, NY: Addison-Wesley.