Economic Development - Essay Example

Economic Development Student’s Name Professor Course Date Statement of authorship I declare that the work below (economic development of Malawi) as turned in for the course Has been composed and completed by myself and indicates work done by me. I understand that failure in the acknowledgment of authors in my work will report plagiarism and failure to that it will have disciplinary consequences. With my signature, I declare the accuracy of these specifications. Name: Registration number: Date: Signature: Abstract The purpose of the report is to explain the evolution of the economic development observed in Malawi which is classified as a low-income country. The report gives the history of the developments in the economic development of Malawi. All the statistics on economic growth such as the change in per capita income, population and the qualitative statistics that characterize the level of development are also explained in the report. The report also analyses the reasons for Malawi to perform the way it has over the decades as a low income classified by the world bank. Introduction Economic development refers to the process of improving the living standards of people in a country through the provision of employment opportunities, support for the new ideas brought up and the creation of better quality of life. Economic development can also be defined based on the objectives it is trying to accomplish. These goals are based on improving the infrastructures, education systems and public safety of the population within the country. Malawi is ranked as 18th in the least developed countries in over 85% of its population are located in the rural areas. Malawi is a low-income country because it still relies on the old strategies that most states have forgone in developing the economy. Although the country gained independence, most of the economic activities have been based on agriculture which is termed as outdated methods. The country has tried to change the activities to Morden activities, but they have only improved with minimum percent. Executive summary Economic development leads to improvement of human’s living standards and the socio-cultural, political, historical and economic values usually provides information on our notion of economic development. Firstly, the socio-cultural values such as innovation, collectiveness, and materialism impact the economic development since a country aims at moving from the tradition living standards to the industrialized and business related life. Political values such as political stability provide information on how better governance in a country leads to proper management of the finance to be used in economic development. The economic values such as rate of employment and rate of economic growth provide information on the rate of economic development of a country. The higher the employment chances, the higher the rate of development in a country since employment will help raise the people’s living standards. Malawi is classified as a low-income by the world bank since it has recorded low national income over the years and has raised its revenue per capita by only 70%. The economic development of Malawi is reduced since the country has not been able to satisfy the economic statistics that characterize the development of countries. The various statistics that Malawi has failed to fulfill as development indicators include: Employment Since development aims at improving the living standards of people, most countries do so by providing jobs to the people. The employment statistics provides information on the rate of employment and unemployment for the country to be able to analyze the economic development. Malawi being a low-income country has no ability to employ the persons in the country. Unemployment ratio which is high in Malawi indicates the low economic development of the country. The higher the unemployment ratio, the higher the rate of low economic development in the country. The rate of employment in Malawi is lower compared to other countries say, Australia, and this has lead to weak economic development in the country. As more people are unemployed, the income becomes less while the population increases and this leads to low economic development. People tend to improve their living standards due to the income they earn from the employments offered to them and since there are weak job opportunities the income rate reduces. Human development index Human development index relies on three aspects that are used to rank countries in economic development levels. The three dimensions are statistics of life expectancy, education, and per-capita income. Life expectancy measures the health aspect and is calculated at the time of birth. The education issue is based on two which are the means of schooling and the average years of a child starting school. Lastly, per capita income of the country is ranked according to the purchasing power of the country. If the country has high purchasing power, the rate of development will rise. It also presents the living standards of people which are the aim of development. The human development index in Malawi is way down since the lifespan, the level of the education system and the purchasing power are cheap and not favorable in ranking Malawi among the best countries in economic development. The living standards of people in Malawi is poor as compared to other countries say, Australia and this leads to poor economic growth rate. The poor human development index is caused by the inability of Malawi to adopt new methods that result in improvement of people’s living standards. The weak purchasing power has led to poor economic development since the country is unable to purchase goods from other nations. Income per capita Income per capita is an indicator that measures the average income of each person in the country. Income per capita is used to gauge the quality of life and the living standards of people in a country. For a country to determine its income per capita, it must divide the national income by the population of the country. For a long time, the government of Malawi has recorded low income per capita with no high record. Malawi has a low percentage of revenue per capita of at least 70% compared to well-developed countries such as Australia which records 433% of income per capita. Malawi has low national income and high population which leads to a low income per capita. When the community divides the national income, it gives an unfortunate result which is the income per capita. The low income per capita of Malawi makes it difficult for the country to measure the average income of each person and also the living standards of the people. If the state is unable to gauge the rate of its economic development, then the country will not improve due to lack of accurate information. Comparison of Malawi and other countries Human Development Index In Malawi, the lifespan, education systems, and the purchasing power are at low levels compared to other countries say, Australia where the levels are high. The health systems in Malawi are of poor standards which lead to less lifespan of the people who provide labor in development projects. The poor education systems in Malawi do not produce individuals who are learned and who are unable to suggest new ideas that will help in development compared to other countries where the education systems are of high standards. Not to forget, the purchasing power of Malawi is less powerful than other countries in that the country is not able to purchase more goods from other countries that will help in development projects. The country mostly relies on credited products from other nations. employment The rate of employment is lower in Malawi as compared to other countries say, Australia, where more job opportunities are made available to the people. The highest number of population in Malawi are unemployed, and due to low income, the rate of development is low. The rate of growth in Australia is high since most people have high income which leads to the significant evolution of the country since most people improve their living standards with the income they gain. The level of employment enhances the conditions of life of people in Australia compared to the lives of people in Malawi which is dragged behind by fewer jobs. Income per capita Since in Malawi there is a low rate of employment, then the income per person is low. The low wages lead to a poor quality life of an individual which is used to measure the development rate. As compared to Malawi, other countries have a high income per capita since the greatest number of the population have jobs and hence high income per person. In countries where the income per person is high, and the population is manageable, then the income per capita will be high hence indicating high development rate. Malawi is then ranked as a country that is not able to develop at a faster rate due to reduced income per capita experienced in the country. Organization of the statistics Employment The table below indicates that most of the people are employed in the activities that are of low-income and as discussed above low income leads to low living standards of people in a country. The events that are supposed to bring development such as mining and construction have the lowest percentage of the workers working on them. Agricultural practices seem to have remained the primary activity in Malawi, and it leads to underdevelopment within Malawi as it has the highest percentage of labor. A table showing work distribution in various economic sectors within Malawi Economic activity General workers female male x 1,000 % x 1,000 % x 1,000 % Agriculture practices 5,250 82.6 2,730 89.5 2,520 76.4 Industrial mining 110 1.7 25 0.8 85 2.5 uses 12 0.2 2 0.1 10 0.3 Building construction 130 2.0 20 0.7 110 3.3 transportation 120 1.9 18 0.6 102 3.1 Trade practices 380 6.0 146 4.8 234 7.1 Businesses and finance 55 0.9 15 0.5 40 1.2 Estates 85 1.3 20 0.7 65 2.0 Education system 77 1.2 25 0.8 52 1.6 Health systems 28 0.4 13 0.4 15 0.5 Government 53 0.9 21 0.7 32 1.0 Community and social services 50 0.8 15 0.5 35 1.1 Human Development Index table Table showing Malawi Human Development Index trends Life expected at birth Schooling years expected The mean school years Income per capita (2005 PPP$) HDI value 1980 44.4 4.8 1.8 0,628 0.272 1985 46.1 4.6 2.1 0,617 0.283 1990 47.1 5.2 2.5 0,554 0.295 1995 46.7 7.5 2.7 0,602 0.322 2000 46 11 3 0,654 0.352 2005 49 9.7 3.4 0,640 0.363 2010 53.5 10.4 4.2 0,775 0.413 2011 54.2 10.4 4.2 0,763 0.415 2012 54.8 10.4 4.2 0,774 0.418 According to the data presented in the table above, each indicator under Human Development increases after each year but with a minimum increase in the next year data. When the Human Development Index is calculated using the data above, the results indicate that Malawi has improved with only 70% over and over the years. Income per capita table Malawi GDP Last Previous Highest Lowest Unit Annual Growth Rate 2.90 5.70 16.70 -10.00 percent GDP 6.40 6.06 8.00 0.16 USD Billion Gross Fixed Capital Formation 175607.92 170922.54 213674.00 28646.10 MWK Million income per capita 493.66 495.05 495.05 240.76 USD income per capita PPP 1111.65 1114.77 1114.77 716.41 USD GDP Constant Prices 1094492.00 1032107.00 1094492.00 617531.00 MWK Million The above calculations are obtained by dividing the country’s annual income by the total population of the country. In the data above, all the inflations have been adjusted before the final data is presented. The data above vary and leads to low income per capita of Malawi which accumulates to 4% only of the total world average. Demonstration of capacity utilization Capacity utilization refers to the ability of a country to use all the productive equipment it owns. For instance, if Malawi could provide employment to the people living in the rural areas, then the rate of living standards would increase due to increased national income per person. Malawi as a country can utilize the resources it owns to improve the development of the country. For the country to be able to employ its resources, it should rely on the capacity principles such as a country’s standard of living depends on its ability to produce goods and services to the people and other nations. Reasons why Malawi has performed as a low-income economy country For over 20 years Malawi has not improved the development rate as per the information given by the world bank. Malawi has been unable to improve its growth rate due to the same reasons stated over and over again. These reasons deprive Malawi the chance to be ranked among the top income economy countries by the world bank. These reasons are: Low purchasing power Malawi being a small country in size, it has a low purchasing power. Malawi lacks the ability to purchase more advanced goods, and services from developed countries, and this lowers the developing rate of the country. The goods and services from developed countries could help Malawi improve its development power. Malawi could implement services such as new ideas and technology and enhance the development in the country. The lower the purchasing power, the less the products if development Malawi owns and therefore reduced development in Malawi is noted. Lack of employment Most of Malawi population live in the rural, and this makes it difficult for them to get employed in urban areas. The highest number of people are not engaged in jobs, and this makes their living standards weak which differ with the aim of development. Lack of employment means lack of income for the people of Malawi. Weak health systems The lives of most Malawi people are based in the rural areas where the hygiene is not that pleasing. Malawi has failed to provide sound and better health systems, and this has reduced the lifespan of people in Malawi. When the health is not favorable, then the life span tends to reduce due to high date rates. If the life expectancy which improves the human development index decreases, then the chances of Malawi being ranked as top income country reduces compared to other nations where Recommendation Malawi is recommended to improve the health conditions among the rural areas so as to increase the lifespan of people. The increase in life expectancy leads to improvement of human development index which increases the chances of a country to be ranked among the top. Malawi is also recommended to engage in modern practices such as mining, manufacturing, education rather than relying on the traditional methods which are outdated and do not lead to development. It is recommended that Malawi employs more people in the country so as to increase the rate of income per person which will aid in improving the income per capita of the country. conclusion Is it right to term Malawi as a low-income country by the world bank? According to the information above, it is right to name Malawi as a low-income country. For over 20 years Malawi has been trying to improve its development but has not succeeded as expected by the world bank. The development indicators such as human development index and income per capita income have proven that Malawi indeed is a low-income country. These indicators are poor in Malawi and hence poor development. Malawi is not able to improve its development status as compared to other countries which are in a position to enhance their development. For instance, Malawi’s income per capita is low due to lack of employment compared to top countries say, Australia, where the job is available to the population hence increase in income per capita. Bibliography Hirschman, A.O., 1988. The strategy of economic development (Vol. 44). Boulder, CO: Westview Press. Brummett, R.E. and Williams, M.J., 2000. The evolution of aquaculture in African rural and economic development. Ecological Economics, 33(2), pp.193-203. Hicks, N. and Streeten, P., 1979. Indicators of development: the search for a basic needs yardstick. World Development, 7(6), pp.567-580. Mensch, B.S. and Lloyd, C.B., 1998. Gender differences in the schooling experiences of adolescents in low-income countries: The case of Kenya. Studies in family planning, pp.167-184. Ranis, G., Stewart, F. and Ramirez, A., 2000. 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