Chapter One: Fundamentals Of Development

1. Meanings & Views Of Development

1.1. What is Development?

Development implies an overall positive change in the physical quality of life. This positive change
for the better encompasses economic as well as social aspects. Therefore, development not only
calls for economic but also the equitable distribution of the gains made from economic growth. In
other words, development implies growth with justice. It means an improvement in the quality of
life through better health, education, housing and overall material and social welfare.

Development in human society is a many-sided process. At the level of the individual, it implies
increased skill and capacity, greater freedom, creativity, self-discipline, responsibility and material
well-being. Some of these are virtually moral categories and are difficult to evaluate – depending as
they do on the age in which one lives, one’s class origins, and one’s personal code of what is right
and what is wrong. However, what is indisputable is that the achievement of any of those aspects of
personal development is very much tied in with the state of the society as a whole. From earliest
times, man found it convenient and necessary to come together in groups to hunt and for the sake of
survival. The relations which develop within any given social group are crucial to an understanding
of the society as a whole: Freedom, responsibility, skill, etc. have real meaning only in terms of the
relations of men in society.

The simplest definition of development by Chambers is ‘good change’.

 It may be impossible of achieving ‘good change’ without destroying something previously
held dear such that traditional values (disruption of established patterns of living)
 Development is the achievement of whatever is regarded as a general good for society at
large.
 Also development is ‘the idea of creating the conditions for ‘the realization of the
potential of human personality’ (Seers, 1969)
Development is not simply good change; it is highly an ambiguous concept. E.g.:
1. First, development generally implies an all-encompassing change, not just an
improvement in one aspect.
2. Development is not a one-off (happening only once) process of change, but a process
which builds on itself, where change is continuous and where improvements build on
previous improvements.
3. Development is a matter of changes occurring at the level of social change and of the
individual human being at on and the same time.
4. Development is not always seen positively…that previous ways of life may be swept
away, with the loss of positive as well as negative features. (Development may have
losers as well as winners)

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 According to Rogers and Shoemaker defined development as: “A type of social change in which
new ideas are introduced into a social system in order to produce higher per capita income and
levels of living through more modern production methods and improved social organization.
Development is modernization at the social systems level (1971). Todar and Smith (2003) stresses
that development involves both the quality and quantity of life. This means:

a. Quality of life refers to opportunities and availability of social, health and educational
concerns.
b. Quantity of life involves the amount of economic and political participation of the people.
This definition shifts the attention and aim of development away from an economic to a more
humanizing conceptualised one.

1.1.2. Various Perspectives of Development

I. Social Development- Social development may be conceived in terms of progressive social
integration.

 Society is fragmented into different warring groups

 Social discrimination against minority groups
 One section of society dominates another
 One social group has privileges while another has social disabilities, development cannot
take place in a smooth and harmonious manner.

Social homogenization is integral to development. Without it there cannot be unity and social
solidarity and without them no society can develop. That is why it has to be affirmed that
development is not only economic but also social and political development. Without one of the
three, the other two cannot survive.

II. Economical Development- The living quality or standard of life of the people have to
increase. Having a high per capita income or a growth in the Gross Domestic Product need not
mean necessarily a growth in the living standard of people.
III. Spiritual Development- The growth and development should be integral. Spiritual
development among people is a must for a peaceful nation. If peace does not prevail in a
country, however wealth that nation has no value.
IV. Human Development- The nation alone shouldn’t develop. The people should develop. This
human factor in development is very important.
V. Political Development- Political development could be assessed in terms of the stabilization
and consolidation of participatory political institutions.

Where such development takes place, the political authority is responsive to the people; and
conversely people have faith in the political authority and indeed have opportunities to participate in
the political process.

1.2. The basic elements of development?

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The basic elements of development are the following:
 Removal of inequality and poverty
 Increase in material welfare of the people
 Increase in social well-being (education, health, housing, etc)
 An equitable distribution of the gains of development among different groups of people
in a region or country
 An enhancement in technology and the capacity to produce a wider range of goods and
services in the economy leading to a better quality of life.
 Building institutional structures which permit participation in decision-making at all
levels, equalization of opportunities for development and removal of disparities.
Development is a value-laden and subjective concept with different definitions as given by different
professionals. Development means basically unfolding or opening-up something, which is latent
and with people it means opening up or unfolding their potential powers. It just refers to a change
that is desirable. But since what is desirable at a particular time, place and in a particular culture or
context may not be desirable at other places, or at other times in the same place and in the same
cultural setting, it is impossible to think of a universally acceptable definition of development.
However, at best one can define development in the given societal context as a set of desirable
societal objectives which society seeks to achieve.

For a long time, it was assumed that development depends primarily on economic growth and
would automatically occur if economic growth took place. This view of development has, however
been criticized on the ground that it ignores the distribution of the gains from growth, and also how
the growth has been achieved and at what costs. An increase in production in a country doesn’t
automatically mean that there has been better distribution of what has been produced. This has
meant that the question of distributive justice has assumed greater importance.

? Dear students, what is the difference between growth and development?

It is necessary to understand the difference between the concept of economic growth and
development. Economic growth means an increase in the value of all goods and services produced
in an economy. The sum total of all goods and services in an economy is termed as the Gross
Domestic Product (GDP). Growth is, therefore a sustained expansion in the productive capacity of
an economy leading to sustained rise in its GDP. Development, on the other hand is a sustained
improvement in material welfare, particularly for those who are poor and afflicted by poverty,
illiteracy and poor health conditions. Development is therefore, a qualitative concept involving a
qualitative improvement in the general standard of living in a country or economy.

1.3. DEVELOPMENT AS AN HISTORICAL PROCESS:

‘There are two distinct views of the historical development of capitalism and its relationship to
development as an historical process. The first emphasizes the internal dynamics of capitalist
economic growth as the engine of development but has room for intentional development, while the

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second sees a political struggle between the promotion of a self-regulating market society and its
regulation from outside. Let us consider each of these in turn in a little more derail.

a) The dynamics of capitalist growth: …self-regulating market, profit maximization,

reinvestment. Here market competition is seen as the main force towards economic progress.
Successful capitalists are able to enter a positively reinforcing cycle: Profit-accumulation-
reinvestment-growth-innovation-increased productivity-increased profits; and then can use
those increased profits to continue the cycle.
Adam Smith’s ‘hidden hand of the market’ converts individual interests into ‘the wealth of
nations’.

More recently it has been suggested (e.g. Fukuyama, 1995) that another crucial cultural factor is
a propensity to associate or social capital (the ability of people to work together for common
purposes in a groups and organizations). Thus without a combination of social capital and
individual profit motive the reinforcing cycle of reinvestment and increasing productivity will
not get going to create economic development.

Growth & development: … ‘Where as growth means more of the same type of output,
development implies more thoroughgoing changes, changes in the social and technical relations
of production. Thus the productive capacity of a society as a whole has to increase, rather than
just increasing productivity within its productive enterprises’. However, growth is almost
always achieved at the cost of inequity.

b) A struggle between pro-market and protectionist movements... ‘Polanyi interpreted the

history of the nineteenth century as a struggle between two movements: on the one hand, pro-
market forces; on the other, protectionism. It was not a question of the natural working of the
market against government, but two competing movements, representing capitalist and those
adversely affected by capitalism respectively, struggling for influence within government’.
Protectionists were quite successful up to the 1960s & 1970s, but in the early 1980s pro-market
interests have made headway. Many LDCs compete to attract investment from TNCs by making a
virtue of their tough anti-union legislation. (SAPs or Washington Consensus).

1.4. Economics and Development Studies

The study of economic development is one of the newest, most exciting, and most challenging
branches of the broader disciplines of economics and political economy. Although one could claim
that Adam Smith was the first “development economist” and that his Wealth of Nations, published
in 1776, was the first treatise on economic development, the systematic study of the problems and
processes of economic development in Africa, Asia, and Latin America has emerged only over the
past five decades or so. Although development economics often draws on relevant principles and
concepts from other branches of economics in either a standard or modified form, for the most part
it is a field of study that is rapidly evolving its own distinctive analytical and methodological
identity.

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Traditional economics is concerned primarily with the efficient, least-cost allocation of
scarce productive resources and with the optimal growth of these resources over time so
as to produce an ever-expanding range of goods and services. Traditional neoclassical
economics deals with an advanced capitalist world of perfect markets; consumer
sovereignty; automatic price adjustments; decisions made on the basis of marginal,
private-profit, and utility calculations;
and equilibrium outcomes in all product and resource markets. It assumes economic
“rationality” and a purely materialistic, individualistic, self-interested orientation toward
economic decision making.
Because of the heterogeneity of the developing world and the complexity of the
development process, development economics must be eclectic, attempting to combine
relevant concepts and theories from traditional economic analysis with new models and
broader multidisciplinary approaches derived from studying the historical and
contemporary development experience of Africa, Asia, and Latin America. Development
economics is a field on the crest of a breaking wave, with new theories and new data
constantly emerging. These theories and statistics sometimes confirm and sometimes
challenge traditional ways of viewing the world. The ultimate purpose of development
economics, however, remains unchanged: to help us understand developing economies in
order to help improve the material lives of the majority of the global population.

1.4.1. Economies as Social Systems: The Need to Go Beyond Simple Economics

• Social Systems
– Interdependent relationships between economic and non-economic factors
• Success or failure of development policy
– Importance of taking account of institutional and structural variables along with
more traditional economic variables
Economics and economic systems, especially in the developing world, must be viewed in a broader
perspective than that postulated by traditional economics. They must be analyzed within the context
of the overall social system of a country and, indeed, within an international, global context as well.
By “social system,” we mean the interdependent relationships between economic
and noneconomic factors. The latter include attitudes toward life, work, and authority; public and
private bureaucratic, legal, and administrative structures; patterns of kinship and religion; cultural
traditions; systems of land tenure; the authority and integrity of government agencies; the degree of
popular participation in development decisions and activities; and the flexibility
or rigidity of economic and social classes. Clearly, these factors vary widely from one region of the
world to another and from one culture and social setting to another. At the international level, we
must also consider the organization and rules of conduct of the global economy—how they were
formulated, who controls them, and who benefits most from them. This is especially true today with
the spread of market economies and the rapid globalization of trade, finance, corporate boundaries,
technology, intellectual property, and labor migration.

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Resolving problems to achieve development is a complicated task. Increasing national production,
raising levels of living, and promoting widespread employment opportunities are all as much a
function of the local history, expectations, values, incentives, attitudes and beliefs, and institutional
and power structure of both the domestic and the global society as they are the direct outcomes of
the manipulation of strategic economic variables such as savings, investment, product and factor
prices, and foreign-exchange rates.

1.5. Values and Objectives of Development

1.5.1. Core Values of Development

The core values of development After Goulet (1971) in Todaro and Smith (2006)

Values are desired conditions in a society (e.g. health, fame, long life, high income, etc). There are
at least three basic and practical guidelines for understanding the inner meaning of development.
These core values are , sustenance, self-esteem, and freedom-represent common goals sought by all
individuals and societies. They related to fundamental human needs that find their expression in
almost all societies and cultures at all times. Three basic components or core values serve as a
conceptual basis and practical guideline for understanding the inner meaning of development –
sustenance, self esteem, and freedom.

1. Sustenance: The ability to meet basic needs i.e. food, shelter, health, and protection.
Absolute underdevelopment exists where these are unavailable. A basic function of all
economic activity is to make these available to the people.
Without sustained and continuous economic progress at the individual as well as the societal
level, the realization of the human potential wouldn’t be possible. One clearly has to “have
enough in order to be more.” Raising per capita income, elimination of absolute poverty,
greater employment opportunities and lessening income inequalities therefore constitute the
necessary but not the sufficient conditions for development.
Without improving the levels of living (life sustenance) the prospect for development is non-
existent. The first priority of moving from a chronic state of underdevelopment to one of
development must be raising people’s level of living in terms of food, shelter, clothing,
footwear, education, health, employment and social services.
2. Self-Esteem: To be a person – a sense of worth and self respect, of not being used as a tool
by others for their own [Link] to the significance attached to material values in developed
countries, worthiness and esteem are now increasingly conferred on countries that possess
economic wealth and technological power i.e. Those that have developed. Development has
become an important and indispensable way of gaining esteem.
Nowadays the Third World seeks development in order to gain the esteem which is denied to
societies living in a state of disgraceful “underdevelopment.” Development is legitimized as a
goal because it is an important perhaps even an indispensable, way of gaining esteem.

3. Freedom from servitude- To be Able to Choose

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 Emancipation from alienating material conditions of life and from social servitude to nature,
ignorance, other people, misery, institutions, and dogmatic beliefs, especially that poverty is
predestination.
Freedom involves an expanded range of choices for societies......the advantage of economic
growth is not that wealth increases happiness, but that it increases the range of human
choice.

W. Arthur Lewis stressed the relationship between economic growth and freedom from servitude
when he concluded that “the advantage of economic growth is not that wealth increases happiness,
but that it increases the range of human choice.” Wealth can enable people to gain greater control
over nature and the physical environment (e.g. through the production of food, clothing and shelter)
than they would if they remained poor. It also gives them freedom to choose greater leisure, to have
more goods and services, or to deny the importance of this material wants and live a life of spiritual
contemplation. The concept of human freedom should also encompass various components of
political freedom including, but not limited to personal security, the rule of law, freedom of
expression, political participation, and equality of opportunity

1.5.2. Objectives of development

Todar and Smith (2003) identify three objectives of development as follows:

• To increase the availability and widen the distribution of basic life sustaining goods
such as food, shelter, health and protection.

• To raise levels of living in addition to higher incomes, the provision of more jobs,
better education, and greater attention to cultural and human values, all of which will
serve not only enhance material well-being but also to generate greater individual and
national self-esteem.

• To expand the range of economic and social choices available to individuals and nations
by freeing them from servitude and dependence, not only in relation to other people and
nation- states but also to the forces of ignorance and human misery.

1.6. The New Economic View of Development

 Traditional Economic Measures
– Gross National Income (GNI)
– Income per capita
– Utility of that income?
• The New Economic View of Development
-Leads to improvement in wellbeing, more broadly understood

In strictly economic terms, development has traditionally meant achieving sustained rates of growth
of income per capita to enable a nation to expand its output at a rate faster than the growth rate of

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its population. Levels and rates of growth of “real” per capita gross national income (GNI)
(monetary growth of GNI per capita minus the rate of inflation) are then used to measure the overall
economic well-being of a population—how much of real goods and services is available to the
average citizen for consumption and investment. Economic development in the past has also been
typically seen in terms of the planned alteration of the structure of production and employment so
that agriculture’s share of both declines and that of the manufacturing and service industries
increases. Development strategies have therefore usually focused on rapid industrialization, often at
the expense of agriculture and rural development. With few exceptions, such as in development
policy circles in the 1970s, development was until recently nearly always seen as an economic
phenomenon in which rapid gains in overall and per capita GNI growth would either “trickle down”
to the masses in the form of jobs and other economic opportunities
or create the necessary conditions for the wider distribution of the economic and social benefits of
growth. Problems of poverty, discrimination, unemployment, and income distribution were of
secondary importance to “getting the growth job done.” Indeed, the emphasis is often on increased
output, measured by gross domestic product (GDP).
In the 1950s and 1960s many developing countries reached their economic growth targets but the
standards of living for their people were not [Link] showed that something was very wrong
with the economic definition of development. In the 1970s, economic development came to be
defined in terms of the elimination or reduction of poverty, inequality and unemployment in the
context of a growing economy. ‘Redistribution from Growth’ became the common slogan.

A number of developing countries experienced relativelyhigh rates of growth of per capita income
during the 1960s and 1970s but showed little or no improvement or even an actual decline in
employment, equality, and the real incomes of the bottom 40% of their populations. By the earlier
growth definition, these countries were developing; by the newer poverty, equality, and
employment criteria, they were not. The situation in the 1980s and 1990s worsened further as GNI
growth rates turned negative for many developing countries, and governments, facing mounting
foreign-debt problems, were forced to cut back on their already limited social and economic
programs. Nor can we count on high rates of growth in the developed world to trickle down to the
poor in developing countries. Growth was rapid in much of the developing world in the 2000s,
while many wondered if it was fueled by the bubbles in the West and could be derailed by the
financial crisis and later aftershocks. But the phenomenon of development or the existence of a
chronic state of underdevelopment is not merely a question of economics or even one of
quantitative measurement of incomes, employment, and inequality. Underdevelopment
is a real fact of life for more than 3 billion people in the world—a state of mind as much as a state
of national poverty. As Denis Goulet has forcefully portrayed it:

Underdevelopment is shocking: the squalor, disease, unnecessary deaths, and hopelessness of it

all! . . . The most empathetic observer can speak objectively about underdevelopment only after
undergoing, personally or vicariously, the “shock of underdevelopment.” This unique culture shock

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comes to one as he is initiated to the emotions which prevail in the “culture of poverty.” The
reverse shock is felt by those living in destitution when a new self-understanding reveals to them
that their life is neither human nor inevitable. . . . The prevalent emotion of underdevelopment is a
sense of personal and societal impotence in the face of disease and death, of confusion and
ignorance as one gropes to understand change, of servility toward men whose decisions govern the
course of events, of hopelessness before hunger and natural catastrophe. Chronic poverty is a cruel
kind of hell, and one cannot understand how cruel that hell is merely by gazing upon poverty as an
object.
Thus, Development must therefore be conceived of as a multidimensional process involving major
changes in social structures, popular attitudes, and national institutions, as well as the acceleration
of economic growth, the reduction of inequality, and the eradication of poverty. Development, in its
essence, must represent the whole gamut of change by which an entire social system, tuned to the
diverse basic needs and evolving aspirations of individuals and social groups within that system,
moves away from a condition of life widely perceived as unsatisfactory toward a situation or
condition of life regarded as materially and spiritually better. No one has identified the human goals
of economic development as well as Amartya Sen, perhaps the leading thinker on the meaning of
development.
1.6.1. Amartya Sen’s “Capability” Approach

The view that income and wealth are not ends in themselves but instruments for other purposes
goes back at least as far as Aristotle. Amartya Sen, the 1998 Nobel laureate in economics, argues
that the “capability to function” is what really matters for status as a poor or nonpoor person. As
Sen put it, “Economic growth cannot be sensibly treated as an end in itself. Development has to be
more concerned with enhancing the lives we lead and the freedoms we enjoy.”
In effect, Sen argues that poverty cannot be properly measured by income or even by utility as
conventionally understood; what matters fundamentally is not the things a person has—or the
feelings these provide—but what a person is, or can be, and does, or can do. What matters for well-
being is not just the characteristics of commodities consumed, as in the utility approach, but what
use the consumer can and does make of commodities. For example, a book is of little value to an
illiterate person (except perhaps as cooking fuel or as a status symbol). Or as Sen noted, a person
with parasitic diseases will be less able to extract nourishment from a given quantity of food than
someone without parasites.
To make any sense of the concept of human well-being in general, and poverty in particular, we
need to think beyond the availability of commodities and consider their use: to address what Sen
calls functionings, that is, what a person does (or can do) with the commodities of given
characteristics that they come to possess or control. Freedom of choice, or control of one’s own life,
is itself a central aspect of most understandings of well-being.
As Sen explains: The concept of “functionings” . . . reflects the various things a person may value
doing or being. The valued functionings may vary from elementary ones, such as being adequately
nourished and being free from avoidable disease, to very complex activities or personal states, such
as being able to take part in the life of the community and having self-respect. In addition:

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  Amartya Sen, the 1998 Nobel laureate in Economics, argues that the ‘‘capability to
function’’ is what really matters for status as a poor or non-poor person.

 Economic growth cannot be treated as an end in itself.

 Sen argues that poverty cannot be properly measured by income or even by utility as
conventionally understood; what matters is not the things a person has – or the feelings
these provide – but what a person is, or can be, and does, or can do.

 To make sense of the concept of well-being, and poverty, we need to think beyond the
availability of commodities and consider their use: to address what Sen calls functionings,
that is, what a person does (or can do) with the commodities of given characteristics that
they come to possess or control.

 Sen identifies five sources of disparity between (measured) real incomes and actual
advantages

i. Personal heterogeneities e.g gender, disabilities, age etc.

ii. environmental diversities e.g heating and clothing requirements in the cold,
infectious diseases in the tropics
iii. Variations in social climate e.g. The prevalence of violence and crime
iv. Differences in relational perspectives. Required behaviors may vary between
communities. Ex. being poor in rich country can prevent good education.
v. Distribution within the family: Economics stats measure incomes received in a family
because it’s the basic unit of shared consumption but it may be distributed in unevenly.
Thus looking at even real income levels, or even the levels of consumption of specific
commodities, cannot suffice a measure of well-being.

The above factors mean that the commodity requirements of established patterns of behaviour may
vary between communities, depending on conventions and customs. For example, being relatively
poor in a rich community can prevent a person from achieving some elementary ‘functionings’
(such as taking part in the life of the community) even though her income, in absolute terms may be
much higher than the level of income at which members of poorer communities can function with
great ease and success.

Sen defines capabilities as ‘‘the freedom that a person has in terms of the choice of functionings,
given his personal features, and his command over commodities.’’ It is clear that income or
consumption however framed cannot in any adequate sense define well-being. Sen’s analysis is part
of what has given the United Nations’ Human Development Index which accounts for health,
education as well as income. Generally:

• Amartya Sen’s “Capability” Approach

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 – Functionings as an achievement
– Capabilities as freedoms enjoyed in terms of functionings
– Development and happiness
– Well being in terms of being well and having freedoms of choice
– “Beings and Doings”:
Some Important “Beings” and “Doings” in Capability to Function:
– Being able to live long
– Being well-nourished
– Being healthy
– Being literate
– Being well-clothed
– Being mobile
– Being able to take part in the life of the community
– Being happy – as a state of being - may be valued as a functioning
1.7. Measurement Of Development

There are various methods used to measure development. Each one has its merits and
demerits .These are some of the common ones:

 Gross Domestic Product (GDP)

 Gross National Product (GNP)

 Income per capita

 Human Development Index (HDI)

 Index for Sustainable Economic Welfare (ISEW)

 Genuine Progress Indicator (GPI)

 Gross National Happiness (GNH)

1.7.1. Scope of Development

Basically development is nothing but human development which involves social, political,
economic and environmental dimensions, It means development encompasses socially, politically,
economically, and environmentally sustainable development of the societies and the nation.
According to the classical definition given by the United Nations World Commission on
Environment and Development in 1987, development is sustainable if it "meets the needs of the
present without compromising the ability of future generations to meet their own needs." It is
usually understood that this "intergenerational equity" would be ilnpossible to achieve in the
absence of present-day social equity, if the economic activities of some groups of people continue
to jeopardize the wellbeing of people belonging to other groups or those living in other parts of the
world. Conversely, slow human development can put an end to fast economic growth. According to

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the Human Development Report 1996, "during 1960-1992 not a single country succeeded in
moving from lopsided development with slow human development and rapid growth to a virtuous
circle in which human development and growth can become mutually reinforcing." Since slower
human development has invariably been followed by slower economic growth, this growth pattern
was labeled a "dead end" .
1.7.2. Dimensions of Development
As the links between economic growth and social and environmental issues are better understood,
experts including economists tend to agree that this kind of growth is inevitably unsustainable - that
is, it cannot continue along the same lines for long.
 First, if environmental and sacial/human losses resulting from economic growth turn out to
be higher than economic benefits (additional incomes earned by the majority of the
population), the overall result for people's wellbeing becomes negative. Thus, such
economic growth becomes difficult [Link] politically.
 Second, economic growth itself inevitably depends on its natural and social/human
conditions.
To be sustainable, it must rely on a certain amount of natural resources and services provided by
nature, such as pollution absorption and resource regeneration. Moreover, economic growth must
be constantly nourished by the fruits of human development, such as higher qualified workers
capable of technological and managerial innovations along with opportunities for their efficient use:
more and better jobs, better conditions for new businesses to grow, and greater democracy at all
levels of decision-making .
However, governments have to make appropriate kinds of decisions on a regular basis. If such
decisions are to reflect the interests of the majority, they must be taken in the most democratic and
participatory way possible. But, even in this case, there is a high risk that long-term interests of our
children and grandchildren end up unaccounted for, because future generations cannot vote for
themselves. Thus, to ensure that future generations inherit the necessary conditions to provide for
their own welfare, our present-day values must be educated enough to reflect their interests as well.
The challenge is further complicated by the fact that in today's interdependent world many aspects
of sustainable development are in fact international or even global. On the one hand, many
decisions taken at the national or even local level actually have international consequences -
economic, social, environmental.
When these consequences are negative, the situation is sometimes referred to as "exporting un
sustainability." On the other hand, national policies are often inadequate to effectively deal with
many challenges of sustainability. Thus, international cooperation on the wide range of so-called
trans-boundary and global problems of sustainable development becomes indispensable. Arguably,
the most critical problem of sustainable development - in each country as well as globally - is
eradicating extreme poverty. That is because poverty is not only an evil in itself but also stands in
the way of achieving most other goals of development. Another, closely related, global problem is
establishing and preserving peace in all regions and all countries. War, as well as poverty, is
inherently destructive of all economic as well as social and environmental goals of development.

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1.7.3. Indicators of Development
Different countries have different priorities in their development policies. But, to compare their
development levels, it is essential to make up ones mind as to what really constitutes development
or what is supposed to be achieved and whether the same has been achieved. Indicators measuring
this achievement could then be used to judge countries' relative progress in development such as:
Increasing national wealth; Improving the well-being (nutrition, education, health and wealth) of
the majority of the population; Ensuring people's freedom; Increasing their social and economic
security.
But, indicators of only wealth, which reflect the quantity of resources available to a society, do not
provide sufficient information about the allocation and consumption of the resources - whether
equitable or not in terms of their distribution among different social groups; the shares of resources
used to provide free health and educational services to them; and the effects of production and
consumption on people's environment; and so on. Thus, it is no wonder that countries with similar
average incomes can differ substantially when it comes to people's quality of life; access to
education and health care, employment opportunities, availability of clean air and safe drinking
water, the threat of crime, and so on. There are mainly seven indicators of development. The7
development indicators are :
i) GDP (gross domestic product) per capita.
ii) Life expectancy.
iii) Number of doctors per 100,000 population.
iv) Percent of population that are undernourished.
v) Percent of population that have access to clean safe drinking water.
vi) Under 5 mortality rate.
vii) Adult literacy rate.
1.8. Human Development

In a broader sense the notion of human development incorporates all aspects of individuals' well-
being, from their health status to their economic and political freedom. According to the Human
Development Report 1996, published by the United Nations Development Program, "human
development is the end - economic growth a means." It is true that economic growth, by increasing
a nation's total wealth, also enhances its potential for reducing poverty and solving
other social problems. But, history offers a number of examples where economic growth was not
followed by similar progress in human development. Instead, growth was achieved at the cost of
greater inequality, higher unemployment, weakened democracy, loss of cultural identity, or
overconsumption of natural resources needed by future generations.
What then is human development? Is it something like "maximizing people's happiness? Here, we
can think of the different factors that usually make peoplefeel happy or unhappy. It is an established
fact that the average level of happiness in a country does not grow along with the increase in
average income, at least after a certain rather modest income level is achieved. At the same time, in
each country richer people usually reported slightly higher levels of happiness than poorer people,

13
and people in countries with more equal distribution of wealth appeared to be generally happier
than those in countries with rampant inequalities.
According to Ranis, et al. (2000) economic growth and human development is a two way
relationship. Moreover, the first chain consists of economic growth benefiting human development
with GNP. Specifically, GNP increases human development by expenditure from families,
government and organizations such as NGOs. With the rise in economic growth, families and
individuals are likely to increase expenditures with their heightened incomes, which in turn leads to
growth in human development. 'Further, with the increased consumption, health and education
grow, also contributing to economic growth. Concisely, the relationship between human
development and economic development can be explained in three ways. First, increase in average
income leads to improvement in health and nutrition (known as Capability Expansion through
Economic Growth). Second, it is believed that social outcomes can only be improved by reducing
income poverty (known as Capability expansion through Poverty Reduction). Lastly, social
outcomes can also be improved with essential services such as education, healthcare, and clean
drinking water (known as Capability Expansion through Social Services)

1.7. Millennium Development goals (MDGs)

– Eight goals adopted by the United Nations in 2000

• Eradicate extreme poverty and hunger
• Achieve universal primary education
• Promote gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, malaria, and other diseases
• Ensure environmental sustainability
• Develop a global partnership for development
1.9. Development and Happiness
Clearly, happiness is part of human well-being, and greater happiness may in itself expand an
individual’s capability to function. As Amartya Sen argued, “Utility in the sense of happiness may
well be included in the list of some important functionings relevant to a person’s well-being.”14 In
recent years, economists have explored the empirical relationship across countries and over time
between subjectively reported satisfaction and happiness and factors such as income. One of the
findings is that the average level of happiness or satisfaction increases with a country’s average
income. For example, roughly four times the percentage of people report that they are not happy or
satisfied in Tanzania, Bangladesh, India, and Azerbaijan as in the United States and Sweden. But
the relationship is seen only up to an average income of roughly $10,000 to $20,000 per capita, At
these levels, despite substantial variations across countries, if inequality is not extreme, a majority
of citizens are usually relatively well nourished, healthy, and educated. The “happiness science”
findings call into question the centrality of economic growth as an objective for high-income
countries. But they also reaffirm the importance of economic development in the developing world,

14
whether the objective is solely happiness or, more inclusively and persuasively, expanded human
capabilities. Not surprisingly, studies show that financial security is only one factor affecting
happiness. Richard Layard identifies seven factors that surveys show affect average national
happiness: family relationships, financial situation, work, community and friends, health, personal
freedom, and personal values.
In particular, aside from not being poor, the evidence says people are happier when they are not
unemployed, not divorced or separated, and have high trust of others in society, as well as enjoy
high government quality with democratic freedoms and have religious faith. The importance of
these factors may shed light on why the percentage of people reporting that they are not happy or
satisfied varies so widely among developing countries with similar incomes. For example, the
fraction not happy and satisfied on average is 41/2 times as great in Zimbabwe as in Indonesia,
despite somewhat higher incomes in Zimbabwe, and over 3 times as great in Turkey as in
Colombia, despite somewhat higher incomes in Turkey at the time of the study. Many opinion
leaders in developing nations hope that their societies can gain the benefits of development without
losing traditional strengths such as moral values, and trust in others—sometimes called social
capital.
Although the happiness and human development approaches share much in common, a key
difference between them is that while human development is first and foremost a conceptual
approach, subjective wellbeing is an empirical one. And so while an increase in human
development must be – by definition – desirable, it is not so simple to tell whether such increases
have happened. Instead human development is recognized as an open-ended concept which can be
measured only partially using indices like the HDI. It is an approach that uses multiple dimensions
and nonmonetary measures of wellbeing to assess development; stresses the importance of freedom
and opportunity; and recognizes that people convert their capabilities into wellbeing at different
rates.

1.10. Sustainable Development Goals

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in
2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into
the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call
for action by all countries - developed and developing - in a global partnership. They recognize that
ending poverty and other deprivations must go hand-in-hand with strategies that improve health and
education, reduce inequality, and spur economic growth – all while tackling climate change and
working to preserve our oceans and forests.
The sustainable development goals are a ‘to do list for the planet that will transform the world’.
( Ban Ki-Moon, Secretary-General of the United Nations )
What are the 17 SDGs?

1. No Poverty

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With a projected global poverty rate of 7% in 2030, the equivalent of 598,394,116 people, this UN
goal aims to end poverty of all kinds.

SDG Goal 1 objectives include but are not limited to: end extreme poverty (those living on 1.25
dollars per day), reduce half the population living in poverty, implement protection systems, ensure
equal rights to economic resources and basic services, reduce poverty-related vulnerability to
climate change-induced extreme weather events, mobilize resources in developing countries, and
create pro-poor and gender-sensitive policy frameworks by 2030.

The COVID-19 conflict set back poverty reduction progress.

2. Zero Hunger

As of 2020, 2.37 billion people are without food or unable to eat a healthy balanced diet, hence the
goal of zero hunger.

“Zero Hunger” sets out to end hunger, achieve food security, improve nutrition, and promote
sustainable agriculture. The global pandemic has only worsened global hunger, seeing as many as
161 million additional people will experience hunger as a result. Regarding women, 1/3 of those at
a reproductive age experience Anaemia due to nutritional deficiencies.

SDG Goal 2 objectives include but are not limited to: end hunger, end all forms of malnutrition,
double agricultural productivity and the income of small-scale food producers, bring resilience to
agricultural practices and found sustainable food production systems, and maintain genetic food
diversity.

3. Good Health and Well-Being

With a focus on increasing life expectancy and reducing common child and maternal diseases and
killers, this goal targets ensuring healthy lives and promoting well-being for all ages. The global
pandemic has only made health disparities more apparent, halting and even reducing life-
expectancy progress.

SDG Goal 3 objectives include but are not limited to: reduce maternal mortality, end preventable
newborn and child death, end multiple disease epidemics, reduce premature mortality, prevent and
treat substance abuse, halt traffic-related deaths and injuries, ensure universal health coverage and
access, reduce pollution and contamination deaths.

4. Quality Education

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This goal ensures inclusive and equitable quality education and promotes lifelong learning for all.
Sadly, COVID-19 reversed years of education gains, and many countries lack basic
school infrastructure.

SDG Goal 4 objectives include but are not limited to: ensure free and quality primary and
secondary education, give children access to early childhood development, ensure equal access for
men and women to afford higher education choices, increase skills in youth, ensure gender
equality, and promote sustainable development in education.

5. Gender Equality

SDG 5 targets to achieve gender equality and empower all women and girls. The percentage of
women who work in national parliaments, local governments, and in managerial positions is still
significantly less than that of men. Not to mention 1 in 3 women are subject to violence at least
once since the age of 15, and child marriage is still highly present.

SDG Goal 5 objectives include but are not limited to: end discrimination against women, eliminate
all forms of violence against women, eliminate harmful practices, value unpaid care and domestic
work, ensure equal opportunities for leadership, ensure access to feminine health care, and ensure
equal rights.

6. Clean Water and Sanitation

The availability and sustainable management of water and sanitation ensures safe water for
drinking, sanitation, and hygiene, yet 2.3 billion people live in water-stressed countries.

SDG Goal 6 objectives include but are not limited to: provide equal universal access to safe
drinking water, sanitation, and hygiene, reduce water pollution, increase water-use efficiency,
integrate water-resource management, and protect ecosystems dependent on water.

7. Affordable and Clean Energy

Almost 800 million people lack access to electricity and 1/3 of the population uses dangerous
cooking systems. This puts into perspective why this goal aims to ensure affordable, reliable,
sustainable, and modern energy.

SDG Goal 7 objectives include but are not limited to: increase renewable energy use, improve
energy use efficiency, enhance international cooperation regarding clean energy access, research,
and technology, and to upgrade technology in developing countries for sustainable energy
services.

8. Decent Work and Economic Growth

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Especially after the global pandemic, joblessness and unemployment is extremely prevalent,
making this goal of promoting sustained, inclusive, and sustainable economic growth and
productive employment and decent work ever more important.

SDG Goal 8 objectives include but are not limited to: sustain economic growth, increase economic
productivity, improve resource efficiency, achieve full and productive employment, increase
working youth population, end forced labor, protect labor rights, promote tourism, and grant
access to financial institution access for all.

9. Industry, Innovation, and Infrastructure

Resilient infrastructure, inclusive and sustainable industrialization, and innovation is the objective
of this sustainable development goal. Enhancing rural road connectivity, increasing
research and development investment, and manufacturing high tech products helps
stabilize infrastructure.

SDG Goal 9 objectives include but are not limited to: reliable infrastructure for all, sustainable
industrialization, increased access of small-scale industries and enterprises in developing
countries, rendering industries sustainable, and improving technology in all industries.

10. Reduced Inequalities

This sustainable development goal focuses on reducing inequalities within and among countries.
Income inequality, the refugee crises, and inequality indexes all show that certain areas and
countries are highly more beneficial to live in than others. Living standards between countries are
very unbalanced.

SDG Goal 10 objectives include but are not limited to: income growth for the bottom 40 percent of
the population at a higher than national average rate, social, economic, and political inclusion,
appropriate legislation policies to reduce inequality, wage and fiscal equality, better financial
market and institution regulation, legitimate institutions that represent developing countries in
global decisions, and safe migration.

11. Sustainable Cities and Communities

This goal promotes making cities and human settlements safer, resilient, and
sustainable through use of national urban policies, more access to public spaces, convenient public
transportation, and the reduction of slums.

SDG Goal 11 objectives include but are not limited to: safe and affordable housing for all, safe and
affordable transport for all, sustainable urbanization and human settlement planning, protect
cultures around the world, protecting the poor and vulnerable from death by natural disasters,

18
monitoring air quality and waste management to reduce negative city impact, and to provide green
public space.

12. Responsible Consumption and Production

Ensuring sustainable consumption and production patterns, as a goal, aims to reduce climate change
and negative environmental impacts.

SDG Goal 12 objectives include but are not limited to: implementing a 10-year framework program
for sustainable development and consumption, achieving sustainable management, having food
waste, managing chemicals and waste in an environmentally responsible way, reduce waste,
encourage company sustainable practices, sustainable public procurement practices, and providing
access to relevant sustainable development and harmony with nature information.

13. Climate Action

Climate action is a goal involving the fight against climate change and its impacts. Rising
greenhouse gas emissions, an average global temperature increase, and increased spending due to
climate change are all negative results of climate change.

SDG Goal 13 objectives include but are not limited to: being prepared for climate related disasters,
integrating climate policies into national policies, and raising climate awareness.

14. Life Below Water

The Life Below Water goal focuses on conserving and sustainably using our oceans, seas and
marine resources for sustainable development. We, as a population, rely heavily on our oceans for
food, tourism, recreational activities, and global trade. In fact, 3 billion people rely on the ocean for
their livelihood. However, our oceans are under severe threat. Over half of key marine biodiversity
areas are unprotected, and dead zones, zones lacking oxygen to support marine life, are rising. It is
thus imperative we protect our oceans better.

SDG Goal 14 objectives include but are not limited to: preventing marine pollution, protecting
marine and coastal ecosystems, minimizing ocean acidification through impact reduction,
protecting the fishing market, conserving marine and coastal areas, and overfishing control.

15. Life on Land

This goal overall promotes the health of land life. It includes protecting, restoring, and promoting
land ecosystems, managing forests sustainably. Combatting desertification and halting and
reversing land degradation and biodiversity loss. With many species under threat and ever-
increasing biodiversity loss, it is essential we take better care of land ecosystems.

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SDG Goal 15 objectives include but are not limited to: ensuring freshwater ecosystem health,
sustainable management of forests, ensuring mountain ecosystem health, preserving natural
habitats, shared benefits of genetic resource use, ending poaching and protected species trafficking,
and integrating biodiversity values into national planning.

16. Peace, Justice, and Strong Institutions

This goal involves reducing conflict, insecurity, and weak institutions by means of promoting peace
and inclusivity for sustainable development and justice for all.

SDG Goal 16 objectives include but are not limited to: reduce violence and death rates, end all
forms of violence against children, promote law at national and international levels, reduce
financial crime, reduce corruption, develop transparent institutions, developing country
participation in global governance institutions, legal identity for all, and ensuring public access to
information and freedom rights.

17. Partnership for the Goals

This last goal aims to help realize strong partnership and global cooperation for the SDGs.

SDG Goal 17 objectives include but are not limited to: enhance developing country international
support, enhancing international cooperation, promote environmentally sound technologies, rule-
based and equitable multilateral trading system, increase developing country exports, enhance
global economic stability, and coherent sustainable development policy.

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 CHAPTER TWO

Dimensions of Development of Developing Countries

2. An Overview of the Diverse Structures of Developing Countries

2.1. Defining the Developing World
World Bank Scheme- ranks countries on GNP/capita. There is no established convention for the
designation of "developed" and "developing" countries or areas in the United Nations system. The way
different parts of the world are described tells us a great deal about who has the power to decide what
should be valued and what should be denigrated. (Willis Kate, 2005)

As Todaro and Smith put it ‗‗it is hazardous to try to generalize too much about the 160 member
countries of the United Nations (UN) that constitute the developing world. (2006:37) The most
common way to define the developing World is by per capita income, according to the World Bank.

In the World Bank‘s classification system, 210 economies with a population of at least 30,000 are
ranked by their levels of gross national income (GNI) per capita. These economies are then classified as
low-income countries (LICs), lower- middle-income countries (LMCs), upper-middle-income
countries (UMCs), high- income OECD countries, and other high-income countries. (Often, LMCs
and UMCs are informally grouped as the middle-income countries.)

The concept of a Third World emerged after world war II when a large number of countries ... gained
their independence from the colonial powers and became more important actors on the international
stage independent of the West and Union of Soviet Socialist Republics (USSR) founded in 1922 and
dissolved in 1991– a third block of power. First World – Western Europe, the USA, Canada, Japan,
New Zealand and Australia. Low-income countries are defined as having a per capita gross national
income in 2008 of $975 or less. Lower-middle-income countries have incomes between $976 and
$3,855; Upper-middle-income countries have incomes between $3,856 and $11,906; High-income
countries have incomes of $11,907 or more.

High-income countries that have one or two highly developed export sectors but in which significant
parts of the population remain relatively uneducated or in poor health for the country‘s income level
may be viewed as still developing (oil exporters such as Saudi Arabia and the United Arab Emirates).
Upper-income economies also include some tourism-dependent islands with lingering development
problems. Even a few of the high-income OECD member countries, notably Portugal and Greece, have

1
been viewed as developing countries at least until recently.

2.1.1. The Structure of Third World Economies

Any portrayal of the structural diversity of developing nations requires an examination of seven critical
components:
1) The size of the country (geographic area, population, and income)
2) Its historical and colonial background
3) Its endowments of physical and human resources
4) The relative importance of its public and private sectors
5) The nature of its industrial structure
6) Its degree of dependence on external economic and political forces
7) The distribution of power and the institutional and political structure within the nation
Let us briefly consider each component, focusing on some similarities and differences
among countries in Africa, Asia, and Latin America.
Size and Income Level
Obviously, the sheer physical size of a country, the size of its population, and its level of national
income per capita are important determinants of its economic potential and major factors differentiating
one Third World nation from another. Of the 145 developing countries that are full members of the
United Nations, 90 have fewer than 15 million people, 83 fewer than 5 million. Large and populated
nations like Brazil, India, Egypt, and Nigeria exist side by side with small countries like Paraguay,
Nepal, Jordan, and Chad. Large size usually presents advantages of diverse resource endowment, large
potential markets, and a lesser dependence on foreign sources of materials and products. But it also
creates problems of administrative control, national cohesion, and regional imbalances. There is no
necessary relationship between a country's size, its level of per capita national income, and the degree
of equality or inequality in its distribution of that income. Even excluding the wealthy OPEC .
Historical Background
Most African and Asian nations were at one time or another colonies of Western European countries,
primarily Britain and France but also Belgium, the Netherlands, Germany, Portugal, and Spain. The
economic structures of these nations, as well as their educational and social institutions, have typically
been modeled on those of their former colonial rulers. Countries like those in Africa that only recently
gained their independence are therefore likely to be more concerned with consolidating and evolving
their own national economic and political structures than with simply promoting rapid economic

2
development. Their policies (e.g., the rapid Africanization of former colonial-held civil service jobs)
may consequently reflect a greater interest in these immediate political issues. Perhaps more important,
the European colonial powers had a dramatic and long-lasting impact on the economies and political
and institutional structures of their African and Asian colonies by their introduction of three powerful
and tradition-shattering ideas: private property, personal taxation, and the requirement that taxes be
paid in money rather than in kind. As we will discover later, these ideas combined to erode the
autonomy of local communities and to expose their people to many new forms of potential exploitation.
In Latin America, a longer history of political independence plus a more shared colonial heritage
(Spanish and Portuguese) has meant that in spite of geographic and demographic diversity, the
countries possess relatively similar economic, social, and cultural institutions and face similar problems.
In Asia, different colonial heritages and the diverse cultural traditions of the indigenous peoples have
combined to create different institutional and social patterns in countries such as India (British), the
Philippines (Spanish and American), Vietnam (French), and Indonesia (Dutch).
Physical and Human Resources
A country's potential for economic growth is greatly influenced by its endowments of physical
resources (its land, minerals, and other raw materials) and human resources (both numbers of people
and their level of skills). The extreme case of favorable physical resource endowment is the Persian
Gulf oil states. At the other extreme are countries like Chad, Yemen, Haiti, and Bangladesh, where
endowments of raw materials and minerals and even fertile land are relatively minimal. In the realm of
human resource endowments, not only are sheer numbers of people and their skill levels important, but
so also are their cultural outlooks, attitudes toward work, and desire for self-improvement. Moreover,
the level of administrative skills will often determine the ability of the public sector to alter the
structure of production and the time it takes for such structural alteration to occur. This involves the
whole complex of interrelationships between culture, tradition, religion, and ethnic and tribal
fragmentation or cohesion. Thus the nature and character of a country's human resources are important
determinants of its economic structure and these clearly differ from one region to the next.
Relative Importance of the Public and Private Sectors
Most Third World countries have mixed economic systems, featuring both public and private
ownership and use of resources. The division between the two and their relative importance are mostly
a function of historical and political circumstances. Thus, in general, Latin American and Southeast
Asian nations have larger private sectors than South Asian and African nations. The degree of foreign
ownership in the private sector is another important variable to consider when differentiating among

3
LDCs. A large foreign-owned private sector usually creates economic and political opportunities as
well as problems not found in countries where foreign investors are less prevalent. Often countries like
those in Africa with severe shortages of skilled human resources have tended to put greater emphasis
on public-sector activities and state-run enterprises on the assumption that limited skilled manpower
can be best used by coordinating rather than fragmenting administrative and entrepreneurial activities.
The widespread economic failures and financial difficulties of many of these public concerns in
countries such as Ghana, Senegal, Kenya, and Tanzania raise questions, however, about the validity of
this assumption. As a result, these and other African nations have moved in recent years toward less
public and more private enterprise. Economic policies, such as those designed to promote more
employment, will naturally be different for countries with large public sectors and ones with sizable
private sectors. In economies dominated by the public sector, direct government investment projects
and large rural works programs will take precedence, whereas in private oriented economies, special
tax allowances designed to induce private businesses to employ more workers might be more common.
Although the problem of widespread unemployment may be similar, the solution can differ in countries
with significant differences in the relative importance of the public and private sectors.
Industrial Structure
The vast majority of developing countries are agrarian in economic, social, and cultural outlook.
Agriculture, both subsistence and commercial, is the principal economic activity in terms of the
occupational distribution of the labor force, if not in terms of proportionate contributions to the gross
national product. farming is not merely an occupation but a way of life for most people in Asia, Africa,
and Latin America. Nevertheless, there are great differences between the structure of agrarian systems
and patterns of land ownership in Latin America and Africa. Asian agrarian systems are somewhat
closer to those of Latin America in terms of patterns of land ownership, but the similarities are lessened
by substantial cultural differences. In spite of common problems, therefore. Third World development
strategies may vary from one country to the next, depending on the nature, structure, and degree of
interdependence among its primary, secondary, and tertiary industrial sectors. The primary sector
consists of agriculture, forestry, and fishing; the secondary, mostly of manufacturing; and the tertiary,
of commerce, finance, transport, and services.
External Dependence: Economic, Political, and Cultural
The degree to which a country is dependent on foreign economic, social, and political forces is related
to its size, resource endowment, and political history. For most Third World countries, this dependence
is substantial. In some cases, it touches almost every facet of life. Most small nations are highly

4
dependent on foreign trade with the developed world. Almost all small nations are dependent on the
importation of foreign and often inappropriate technologies of production. This fact alone exerts an
extraordinary influence on the character of the growth process in these dependent nations. But even
beyond the strictly economic manifestations of dependence in the form of the international transfer of
goods and technologies is the international transmission of institutions (most notably systems of
education and governance), values, patterns of consumption, and attitudes toward life, work, and self.
Later chapters show that this transmission phenomenon brings mixed blessings to most LDCs,
especially to those with the greatest potential for self-reliance. A country's ability to chart its own
economic and social destiny is significantly affected by its degree of dependence on these and other
external forces.
Political Structure, Power, and Interest Groups
In the final analysis, it is often not the correctness of economic policies alone that determines the
outcome of national approaches to critical development problems. The political structure and the vested
interests and allegiances of ruling elites (e.g., large landowners, urban industrialists, bankers, foreign
manufacturers, the military, trade unionists) will typically determine what strategies are possible and
where the main roadblocks to effective economic and social change may lie.
The constellation of interests and power among different segments of the populations of most
developing countries is itself the result of their economic, social, and political histories and is likely to
differ from one country to the next. Nevertheless—whatever the specific distribution of power among
the military, the industrialists, and the large landowners of Latin America; the politicians and high-level
civil servants in Africa; the oil sheiks and financial moguls of the Middle East; or the landlords,
moneylenders, and wealthy industrialists of Asia—most developing countries are ruled directly or
indirectly by small and powerful elites to a greater extent than the developed nations are.
2.1.1. Common Characteristics of Developing World: Diversity within
Commonality
There are important historical and economic commonalities among developing countries that have led
to their economic development problems being studied within a common analytical framework in
development economics. These widely shared problems are examined here in detail on an issue by-
issue basis. At the same time, however, it is important to bear in mind that there is a great deal of
diversity throughout the developing world, even within these areas of broad commonality. The wide
range of income, health, education and HDI indicators already reviewed is sometimes called a ―ladder
of development.‖

5
The foregoing discussion should have demonstrated why it is sometimes risky to generalize too much
about such a diverse set of nations as those in Africa, Asia, and Latin America. Nevertheless, common
economic features of developing countries permit us to view them in a broadly similar framework. We
will attempt to identify these similarities and provide illustrative data to demonstrate their importance.
For convenience, we can classify these common characteristics into six broad categories:
1. Lower levels of living and productivity
2. Lower levels of human capital (health, education, skills)
3. Higher Levels of Inequality and Absolute Poverty
4. Higher Population Growth Rates--Crude Birth rates
5. Lower Levels of Industrialization and Manufactured Exports
6. Adverse Geography----Resource endowments
7. Underdeveloped Financial and Other markets---Imperfect markets
&Incomplete information
8. Colonial Legacy and External Dependence

-Institutions

-Private property

-Personal taxation

-Taxes in cash rather than in kind

Low Levels of Living
In developing nations, general levels of living tend to be very low for the vast majority of people. This
is true not only in relation to their counterparts in rich nations but often also in relation to small elite
groups within their own societies. These low levels of living are manifested quantitatively and
qualitatively in the form of low incomes (poverty), inadequate housing, poor health, limited or no
education, high infant mortality, low life and work expectancy, and in many cases a general sense of
malaise and hopelessness. Let us look at some recent statistics comparing certain aspects of life in the
underdeveloped countries and in the more economically advanced nations. Although these statistics are
national aggregates, often have substantial errors of measurement, and in some cases are not strictly
comparable due to exchange rate variations, they do provide at least a summary indication of relative
levels of living in different nations
6
The low- and middle-income developing nations, with more than five-sixths (84%) of the world‘s
people, received slightly more than two-fifths (41%) of the world‘s income in [Link] leads to
low investment in education and health as well as plant and equipment and infrastructure, which in turn
leads to low productivity and economic stagnation. One common misperception is that low incomes
result from a country‘s being too small to be self-sufficient or too large to overcome economic inertia.
However, there is no necessary correlation between country size in population or area and economic
development (in part because each has different advantages and disadvantages that can offset each other)
The 12 most populous countries include representatives of all four categories: low-, lower-middle-,
upper-middle-, and high-income countries. The 12 least populous on the list include primarily lower-
middle and upper-middle-income countries, although the 12th least populous country, São Tomé and
Príncipe, has a per capita income of just $1,030. And four very small but high-income European
countries that are UN members (Andorra, Monaco, Liechtenstein, and San Marino) would appear on
the list if comparable World Bank income data were available.
Lower Levels of Human Capital
Human capital—health, education, and skills —is vital to economic growth and human development.
Globally, the poorest 20% of people receive just 1.5% of world income. The lowest 20% now roughly
corresponds to the approximately 1.4 billion people living in extreme poverty on less than $1.25 per
day at purchasing power parity. Bringing the incomes of those living on less than $1.25 per day up to
this minimal poverty line would require less than 2% of the incomes of the world‘s wealthiest 10%.

Compared with developed countries, much of the developing world has lagged in its average levels of
nutrition, health (as measured, for example, by life expectancy or undernourishment), and education
(measured by literacy). The under-5 mortalities is 17 times higher in low-income countries than in
high-income countries, although progress has been made since 1990. Moreover, there are strong
synergies (complementarities) between progress in health and education. Although health conditions in
East Asia are relatively good, sub-Saharan Africa continues to be plagued by problems of
malnourishment, malaria, tuberculosis, AIDS, and parasitic infections. Despite progress, South Asia
continues to have high levels of illiteracy, low schooling attainment, and undernourishment. Still, in
fields such as primary school completion, lowincome countries are also making great progress; for
example, enrollments in India are up from 68% in the early 1990s to a reported 94% by 2008.

Higher Levels of Inequality and Absolute Poverty

7
Globally, the poorest 20% of people receive just 1.5% of world income. The lowest 20% now roughly
corresponds to the approximately 1.4 billion people living in extreme poverty on less than $1.25 per
day at purchasing power parity. Bringing the incomes of those living on less than $1.25 per day up to
this minimal poverty line would require less than 2% of the incomes of the world‘s wealthiest
10%.Thus the scale of global inequality is immense. But the enormous gap in per capita incomes
between rich and poor nations is not the only manifestation of the huge global economic disparities. To
appreciate the breadth and depth of deprivation in developing countries, it is also necessary to look at
the gap between rich and poor within individual developing countries. Very high levels of inequality—
extremes in the relative incomes of higher- and lower-income citizens—are found in many
middleincome countries, partly because Latin American countries historically tend to be both middle-
income and highly unequal.
Several African countries, including Sierra Leone, Lesotho, and South Africa, also have among the
highest levels of inequality in the world. Inequality is particularly high in many resource-rich
developing countries, notably in the Middle East and sub-Saharan Africa. Indeed, in many of these
cases, inequality is substantially higher than in most developed countries (where inequality has in many
cases been rising). But inequality varies greatly among developing countries, with generally much
lower inequality in Asia. Consequently, we cannot confine our attention to averages; we must look
within nations at how income is distributed to ask who benefits from economic development and why.
Corresponding to their low average income levels, a large majority of the extreme poor live in the low-
income developing countries of sub-Saharan Africa and South Asia. Extreme poverty is due in part to
low human capital but also to social and political exclusion and other deprivations. Great progress has
already been made in reducing the fraction of the developing world‘s population living on less than
$1.25 per day and raising the incomes of those still below that level, but much remains to be done.

Absolute poverty is the situation of being unable or only barely able to meet the subsistence essentials
of food, clothing, shelter, and basic healthcare. Development economists use the concept of absolute
poverty to represent a specific minimum level of income needed to satisfy the basic physical needs of
food, clothing, and shelter in order to ensure continued survival. A problem, however, arises when one
recognizes that these minimum subsistence levels will vary from country to country and region to
region, reflecting different physiological as well as social and economic requirements. Economists have
therefore tended to make conservative estimates of world poverty in order to avoid unintended
exaggeration of the problem. The incidence of extreme poverty varies widely around the developing

8
world. The World Bank estimates that the share of the population living on less than $1.25 per day is
9.1% in East Asia and the Pacific, 8.6% in Latin America and the Caribbean, 1.5% in the Middle East
and North Africa, 31.7% in South Asia, and 41.1% in sub-Saharan Africa. The share of world
population living below this level had fallen encouragingly to an estimated 21% by 2006, but
indications are that the global economic crisis slowed poverty reduction and that in some countries,
poverty has actually increased.23 But as Figure 2.7 shows, the number living on less than $1.25 per day
has fallen from about 1.9 billion in 1981 to about 1.4 billion in 2005; this despite a more than 40%
increase in world population. Extreme poverty represents great human misery, and so redressing it is a
top priority of international development. Development economists have also increasingly focused on
ways in which poverty and inequality can lead to slower growth. That is, not only do poverty and
inequality result from distorted growth, but they can also cause it.
Higher Population Growth Rates
Global population has skyrocketed since the beginning of the industrial era, from just under 1 billion in
1800 to 1.65 billion in 1900 and to over 6 billion by 2000. The United Nations estimates that the ―day
of 7 billion‖ will occur in late 2011 or early 2012. Rapid population growth began in Europe and other
now developed countries. But in recent decades, most population growth has been centered in the
developing world. Compared with the developed countries, which often have birth rates near or even
below replacement (zero population growth) levels, the low-income developing countries have very
high birth rates. More than five-sixths of all the people in the world now live in developing countries.
From 1990 to 2008, population in the low-income countries grew at 2.2% per year, compared to 1.3%
in the middle-income countries (the high-income countries grew at 0.7% per year, reflecting both births
and immigration). In sub-Saharan Africa, the annual birth rate is 39 per 1,000—four times the rate in
high-income countries. A major implication of high birth rates is that the active labor force has to
support proportionally almost twice as many children as it does in richer countries.
By contrast, the proportion of people over the age of 65 is much greater in the developed nations. Both
older people and children are often referred to as an economic dependency burden in the sense that they
must be supported financially by the country‘s labor force (usually defined as citizens between the ages
of 15 and 64). In low-income countries, there are 66 children under 15 for each 100 working-age (15–
65) adults, while in middle-income countries, there are 41 and in high-income countries just 26. In
contrast, low-income countries have just 6 people over 65 per 100 working-age adults, compared with
10 in middle-income countries and 23 in high-income countries. Thus the total dependency ratio is 72
per 100 in low-income countries and 49 per 100 in high-income countries.25 But in rich countries,

9
older citizens are supported by their lifetime savings and by public and private pensions. In contrast, in
developing countries, public support for children is very limited. So dependency has a further
magnified impact in developing countries. We may conclude, therefore, that not only are developing
countries characterized by higher rates of population growth, but they must also contend with greater
dependency burdens than rich nations, though with a wide gulf between low- and middle-income
developing countries. The circumstances and conditions under which population growth becomes a
deterrent to economic development is a critical issue. Now a day the world populations has reached 8
billion.
Greater Social Fractionalization
Fractionalization Significant ethnic, linguistic, and other social divisions within a country. Low-income
countries often have ethnic, linguistic, and other forms of social divisions, sometimes known as
fractionalization. This is sometimes associated with civil strife and even violent conflict, which can
lead developing societies to divert considerable energies to working for political accommodations if not
national consolidation. It is one of a variety of governance challenges many developing nations face.
There is some evidence that many of the factors associated with poor economic growth performance in
sub-Saharan Africa, such as low schooling, political instability, underdeveloped financial systems, and
insufficient infrastructure, can be statistically explained by high ethnic fragmentation. The greater the
ethnic, linguistic, and religious diversity of a country, the more likely it is that there will be internal
strife and political instability. Some of the most successful development experiences—South Korea,
Taiwan, Singapore, and Hong Kong—have occurred in culturally homogeneous societies.
But today, more than 40% of the world‘s nations have more than five significant ethnic populations. In
most cases, one or more of these groups face serious problems of discrimination, social exclusion, or
other systematic disadvantages. Over half of the world‘s developing countries have experienced some
form of interethnic conflict. Ethnic and religious conflicts leading to widespread death and destruction
have taken place in countries as diverse as Afghanistan, Rwanda, Mozambique, Guatemala, Mexico,
Sri Lanka, Iraq, India, Kyrgyzstan, Azerbaijan, Somalia, Ethiopia, Liberia, Sierra Leone, Angola,
Myanmar, Sudan, the former Yugoslavia, Indonesia, and the Democratic Republic of Congo.
Ethnic and religious diversity need not necessarily lead to inequality, turmoil, or instability, and
unqualified statements about its impact cannot be made. There have been numerous instances of
successful economic and social integration of minority or indigenous ethnic populations in countries as
diverse as Malaysia and Mauritius. And in the United States, diversity is often cited as a source of
creativity and innovation. The broader point is that the ethnic and religious composition of a

10
developing nation and whether or not that diversity leads to conflict or cooperation can be important
determinants of the success or failure of development efforts.
Larger Rural Populations but Rapid Rural-to-Urban Migration
One of the hallmarks of economic development is a shift from agriculture to manufacturing and
services. In developing countries, a much higher share of the population lives in rural areas. Although
modernizing in many regions, rural areas are poorer and tend to suffer from missing markets, limited
information, and social stratification. A massive population shift is also under way as hundreds of
millions of people are moving from rural to urban areas, fueling rapid urbanization, with its own
attendant problems. The world as a whole has just crossed the 50% threshold: For the first time in
history, more people live in cities than in rural areas. But sub-Saharan Africa and most of Asia remain
predominantly rural.
Lower Levels of Industrialization and Manufactured Exports
One of the most widely used terminologies for the original Group of Seven (G7) countries and other
advanced economies such as smaller European countries and Australia is the ―industrial countries.‖
Industrialization is associated with high productivity and incomes and has been a hallmark of
modernization and national economic power. It is no accident that most developing-country
governments have made industrialization a high national priority, with a number of prominent success
stories in Asia. In developed countries, agriculture represents a very small share of employment and
output— about 1% in the United States and United Kingdom—although productivity is not
disproportionately low. And the share of employment in industry in these two countries, for example, is
actually smaller now than in some developing countries, particularly among women, as developed
countries switch to the service sector. An often suggested but controversial ―pattern of development‖ is
that the share of employment in industry begins to slowly decline (and the service sector continues to
expand) after developed-country status is reached. There is wide variation in activity by sector around
the developing world. However, in most African and Asian countries, agriculture still provides a
substantial share of employment, in some cases even a majority. In Latin America, the share of
agricultural employment is smaller but still substantial. Along with lower industrialization, developing
nations have tended to have a higher dependence on primary exports. Most developing countries have
diversified away from agricultural and mineral exports to some degree. The middle-income countries
are rapidly catching up with the developed world in the share of manufactured goods in their exports,
even if these goods are typically less advanced in their skill and technology content. However, the
lowincome countries, particularly those in Africa, remain highly dependent on a relatively small

11
number of agricultural and mineral exports. Africa will need to continue its efforts to diversify its
exports.
Adverse Geography
Many analysts argue that geography must play some role in problems of agriculture, public health, and
comparative underdevelopment more generally. Landlocked economies, common in Africa, often have
lower incomes than coastal economies. Developing countries are primarily tropical or subtropical, and
this has meant that they suffer more from tropical pests and parasites, endemic diseases such as malaria,
water resource constraints, and extremes of heat. A great concern going forward is that global warming
is projected to have its greatest negative impact on Africa and South Asia. The extreme case of
favorable physical resource endowment is the oil-rich Persian Gulf states. At the other extreme are
countries like Chad, Yemen, Haiti, and Bangladesh, where endowments of raw materials and minerals
and even fertile land are relatively minimal. However, as the case of the Democratic Republic of Congo
shows vividly, high mineral wealth is no guarantee of development success. Conflict over the profits
from these industries has often led to a focus on the distribution of wealth rather than its creation and to
social strife, undemocratic governance, high inequality, and even armed conflict, in what is called the
―curse of natural resources.‖ Clearly, geography is not destiny; high-income Singapore lies almost
directly on the equator, and parts of southern India have exhibited enormous economic dynamism in
recent years. However, the presence of common and often adverse geographic features in comparison
to temperate zone countries means it is beneficial to study tropical and subtropical developing countries
together for some purposes. Redoubled efforts are now under way to extend the benefits of the green
revolution and tropical disease control to sub-Saharan Africa.
Underdeveloped Markets
Imperfect markets and incomplete information are far more prevalent in developing countries, with the
result that domestic markets, notably but not only financial markets, have worked less efficiently. In
many developing countries, legal and institutional foundations for markets are extremely weak. Some
aspects of market underdevelopment are that they often lack:
(1) a legal system that enforces contracts and validates property rights;
(2) a stable and trustworthy currency;
(3) an infrastructure of roads and utilities that results in low transport and communication costs so
as to facilitate interregional trade;
(4) a well-developed and efficiently regulated system of banking and insurance, with broad access
and with formal credit markets that select projects and allocate loanable funds on the basis of

12
 relative economic profitability and enforce rules of repayment;
(5) substantial market information for consumers and producers about prices, quantities, and
qualities of products and resources as well as the creditworthiness of potential borrowers; and
(6) social norms that facilitate successful long-term business relationships.
These six factors, along with the existence of economies of scale in major sectors of the economy,
thin markets for many products due to limited demand and few sellers, widespread externalities
(costs or benefits that accrue to companies or individuals not doing the producing or consuming) in
production and consumption, and poorly regulated common property resources (e.g., fisheries,
grazing lands, water holes) mean that markets are often highly imperfect. Moreover, information is
limited and costly to obtain, thereby often causing goods, finances, and resources to be misallocated.
And we have come to understand that small externalities can interact in ways that add up to very
large distortions in an economy and present the real possibility of an underdevelopment trap. The
extent to which these imperfect markets and incomplete information systems justify a more active
role for government (which is also subject to similar problems of incomplete and imperfect
information) is an issue. But their existence remains a common characteristic of many developing
nations and an important contributing factor to their state of underdevelopment.
Lingering Colonial Impacts and Unequal International Relations
Colonial Legacy: Most developing countries were once colonies of Europe or otherwise
dominated by European or other foreign powers, and institutions created during the colonial period
often had pernicious effects on development that in many cases have persisted to the present day.
Despite important variations that proved consequential, colonial era institutions often favored
extractors of wealth rather than creators of wealth, harming development then and now. Both
domestically and internationally, developing countries have more often lacked institutions and
formal organizations of the type that have benefited the developed world: Domestically, on average,
property rights have been less secure, constraints on elites have been weak, and a smaller segment
of society has been able to gain access to and take advantage of economic [Link]
with governance and public administration as well as poorly performing markets, often stem from
poor institutions. Decolonization was one of the most important historical and geopolitical events
of the post–World War II era. More than 80 former European colonies have joined the United
Nations. But several decades after independence, the effects of the colonial era linger for many
developing nations, particularly the least developed ones. Colonial history matters not only or even
primarily because of stolen resources but also because the colonial powers determined whether the

13
legal and other institutions in their colonies would encourage investments by (and in) the broad
population or would instead facilitate exploitation of human and other resources for the benefit of
the colonizing elite and create or reinforce extreme inequality. Development-facilitating or
development inhibiting institutions tend to have a very long life span. For example, when the
colonial lands conquered were wealthier, there was more to steal. In these cases, colonial powers
favored extractive (or ―kleptocratic‖) institutions at the expense of ones that encouraged productive
effort. When settlers came in large numbers to live permanently, incomes ultimately were relatively
high, but the indigenous populations were largely annihilated by disease or conflict, and
descendants of those who survived were exploited and blocked from advancement. In a related
point of great importance, European colonization often created or reinforced differing degrees of
inequality, often correlated with ethnicity, which have also proved remarkably stable over the
centuries. In some respects, postcolonial elites in many developing countries largely took over the
exploitative role formerly played by the colonial powers. High inequality sometimes emerged as a
result of slavery in regions where comparative advantage in crops such as sugarcane could be
profitably produced on slave plantations. It also emerged where a large, settled indigenous
population could be coerced into labor. This history had long-term consequences, particularly in
Latin America. Where inequality was extreme, the result has been less movement toward
democratic institutions, less investment in public goods, and less widespread investment in human
capital (education, skills, and health).
These are among the ways in which extreme inequality is harmful to development and so is also an
important long-term determinant of comparative development. The European colonial powers also
had a dramatic and long-lasting impact on the economies and political and institutional structures of
their African and Asian colonies by their introduction of three powerful and traditionshattering
ideas: private property, personal taxation, and the requirement that taxes be paid in money rather
than in kind. These innovations were introduced in ways that facilitated elite rule rather than broad-
based opportunity. The worst impact of colonization was probably felt in Africa, especially if one
also considers the earlier slave trade. Whereas in former colonies such as India local people played
a role in colonial governance, in Africa most governance was administered by expatriates.
In Latin America, a longer history of political independence plus a more shared colonial heritage
(Spanish and Portuguese) has meant that in spite of geographic and demographic diversity, the
countries possess relatively similar economic, social, and cultural institutions and face similar
problems, albeit with particular hardships for indigenous peoples and descendants of slaves. Latin

14
American countries have long been middle-income but rarely advanced to high-income status—
reflecting a situation now known as the ―middle-income trap.‖ In Asia, different colonial heritages
and the diverse cultural traditions of the people have combined to create different institutional and
social patterns in countries such as India (British), the Philippines (Spanish and American),
Vietnam (French), Indonesia (Dutch), Korea (Japanese), and China (not formally colonized but
dominated by a variety of foreign powers). To a widely varying degree newly independent nations
continued to experience foreign domination by former colonial powers and the United States, and
in a number of countries by the Soviet Union, particularly during the Cold War period. The
diversity of colonial experiences is one of the important factors that help explain the wide spectrum
of development outcomes in today‘s world.
External Dependence: Relatedly, developing countries have also been less well organized and
influential in international relations, with sometimes adverse consequences for development. For
example, agreements within the World Trade Organization (WTO) and its predecessors concerning
matters such as agricultural subsidies in rich countries that harm developingcountry farmers and
one-sided regulation of intellectual property rights have often been relatively unfavorable to the
developing world . During debt crises in the 1980s and 1990s, the interests of international banks
often prevailed over those of desperately indebted nations. More generally, developing nations have
weaker bargaining positions than developed nations in international economic relations.
Developing nations often also voice great concern over various forms of cultural dependence, from
news and entertainment to business practices, lifestyles, and social values. The potential importance
of these concerns should not be underestimated, either in their direct effects on development in its
broader meanings or indirect impacts on the speed or character of national development.
Developing nations are also dependent on the developed world for environmental preservation, on
which hopes for sustainable development depend. Of greatest concern, global warming is projected
to harm developing regions more than developed ones; yet both accumulated and current
greenhouse gas emissions still originate predominantly in the high-income countries. Thus the
developing world endures what may be called environmental dependence, in which it must rely on
the developed world to cease aggravating the problem and to develop solutions, including
mitigation at home and assistance in developing countries.
2.2. Are Living Standards of Developing and Developed Nations Converging
Divergence: A tendency for per capita income (or output) to grow faster in higherincome countries
than in lower-income countries so that the income gap widens across countries over time (as was

15
seen in the two centuries after industrialization began).
Convergence :The tendency for per capita income (or output) to grow faster in lowerincome
countries than in higher-income countries so that lower-income countries are ―catching up‖ over
time. When countries are hypothesized to converge not in all cases but other things being equal
(particularly savings rates, labor force growth, and production technologies), then the term
conditional convergence is used.
At the dawn of the industrial era, average real living standards in the richest countries were no more
than three times as great as those of the poorest. Today, the ratio approaches 100 to 1. There is no
doubt that today‘s developed countries have enjoyed far higher rates of economic growth averaged
over two centuries than today‘s developing countries, a process known as divergence. But in
comparing development performance among developing nations and between developed and
developing countries, it is appropriate to consider whether, with strenuous economic development
efforts being made throughout the developing world, living standards of developing and developed
nations are exhibiting convergence. If the growth experience of developing and developed countries
were similar, there are two important reasons to expect that developing countries would be
―catching up‖ by growing faster on average than developed countries.
The first reason is due to technology transfer. Today‘s developing countries do not have to
―reinvent the wheel‖; for example, they do not have to use vacuum tubes before they can
use semiconductors. Even if royalties must be paid, it is cheaper to replicate technology than
to undertake original R&D, partly because one does not have to pay for mistakes and dead
ends along the way. This should enable developing countries to ―leapfrog‖ over some of the
earlier stages of technological development, moving immediately to highproductivity
techniques of production. As a result, they should be able to grow much faster than today‘s
developed countries are growing now or were able to grow in the past, when they had to
invent the technology as they went along and proceed step by step through the historical
stages of innovation. (This is known as an ―advantage of backwardness,‖ a term coined by
economic historian Alexander Gerschenkron.). In fact, if we confine our attention to cases
of successful development, the later a country begins its modern economic growth, the
shorter the time needed to double output per worker. For example, Britain doubled its output
per person in the first 60 years of its industrial development, and the United States did so in
45 years. South Korea once doubled per capita output in less than 12 years and China has
done so in less than nine.

16
The second reason to expect convergence if conditions are similar is based on factor
accumulation. Today‘s developed countries have high levels of physical and human capital;
in a production function analysis, this would explain their high levels of output per person.
But in traditional neoclassical analysis, the marginal product of capital and the profitability
of investments would be lower in developed countries where capital intensity is higher,
provided that the law of diminishing returns applies. That is, the impact of additional capital
on output would be expected to be smaller in a developed country that already has a lot of
capital in relation to the size of its workforce than in a developing country where capital is
scarce. As a result, we would expect higher investment rates in developing countries, either
through domestic sources or through attracting foreign investment. With higher investment
rates, capital would grow more quickly in developing countries until approximately equal
levels of capital and (other things being equal) output per worker were achieved. Given one
or both of these conditions, technology transfer and more rapid capital accumulation,
incomes would tend toward convergence in the long run as the faster-growing developing
countries would be catching up with the slower-growing developed countries. Even if
incomes did not eventually turn out to be identical, they would at least tend to be equalized
conditional on (i.e., after also taking account of any systematic differences in) key variables
such as population growth rates and savings rates. Given the huge differences in capital and
technology across countries, if growth conditions are similar, we should see tendencies for
convergence in the data. Whether there is now convergence in the world economy depends
on two levels of how the question is framed: whether across average country incomes or
across individuals (considering the world as if it were one country); and whether focusing
on relative gaps or absolute gaps.

17
 CHAPTER THREE
Underdevelopment
3.1 What is Underdevelopment?
Obviously, underdevelopment is not absence of development, because every people have developed
in one way or another and to a greater or lesser extent. World Development Report categorizes
economies on the basis of income in three categories viz. high income, middle income and low
income economies. Usually, high income countries are known as developed / advanced economies
while low income countries are known as underdeveloped economies. Developed or advanced
economies are also characterised by high standard of living, universal and quality education, better
health care facilities and high life expectancy.
Underdevelopment is low level of development characterized by low real per capita income, wide-
spread poverty, lower level of literacy, low life expectancy and underutilisation of resources etc. The
state in underdeveloped economy fails to provide acceptable levels of living to a large fraction of its
population, thus resulting into misery and material deprivations. We need to note here
that underdevelopment is a relative concept but it sustains absolute poverty.
Underdevelopment is a Relative Concept
The concept of underdevelopment is a relative one because it is the comparison of quality of life
between the economies that differentiates them in underdeveloped and developed.
Underdevelopment Sustains Absolute Poverty
Although, concept of underdevelopment is a relative concept but it sustains absolute poverty.
Absolute poverty refers to the state of poverty wherein the people fail to fulfil even their basic needs
in terms of food, clothing and shelter. In fact, they are a class of people who are always striving to
survive. Thus, underdevelopment and absolute poverty go together or underdevelopment sustains
absolute poverty.
Underdevelopment is low level of development characterized by low real per capita income, wide-
spread poverty, lower level of literacy, low life expectancy and underutilization of resources etc.
The state in underdeveloped economy fails to provide acceptable levels of living to a large fraction
of its population, thus resulting into misery and material deprivations.
At all times, therefore, one of the ideas behind underdevelopment is a comparative one. it is possible
to compare the economies of any two countries or sets of countries at any given period in time A
second and even more indispensable component of modern underdevelopment is that it expresses
a particular relationship of exploitation: namely, the exploitation of one country by another. All
of the countries named as ‘underdeveloped’ in the world are exploited by others; and the
underdevelopment with which the world is now preoccupied is a product of capitalist, imperialist
and colonialist exploitation. African and Asian societies were developing independently until they
were taken over directly or indirectly by the capitalist powers.

1
Underdevelopment refers to the low level of development characterized by low real per capita
income, widespread poverty, lower level of literacy, low life expectancy, and underutilization of
resources, etc. An underdeveloped economy fails to provide acceptable levels of living to a large
fraction of its population.

Generally, the main causes of underdevelopment of an economy include:

1. poverty; 6. high dependence on agriculture;
2. child marriage; 7. economic inequality;
3. illiteracy; 8. lack of structural, institutional, and
4. high population growth rate; technical change.
5. corruption;

It is enough to note that the National Income is a measurement of the total wealth of the country,
while the per capita income is a figure obtained by dividing the National Income by the number of
inhabitants in order to get an idea of the ‘average’ wealth of each inhabitant. This ‘average’ can be
misleading where there are great extremes of wealth.
In considering the question of development away from the state of underdevelopment, it is of
supreme importance to realize that such a process demands the removal of the gross inequalities of
land distribution, property holding and income, which are camouflaged behind national income
figures. At one stage in history, advance was made at the cost of entrenching privileged groups, In
our times, development has to mean advance which liquidates present privileged groups with their
corresponding unprivileged groups. Nevertheless, the per capita income is a useful statistic for
comparing one country with another; and the developed countries all have per capita incomes several
times higher than any one of the recently independent African nations.
Developed economies have certain characteristics which contrast with underdeveloped ones. The
developed countries are all industrialized. That is to say, the greater part of their working population
is engaged in industry rather than agriculture, and most of their wealth comes out of mines,
factories, etc. They have a high output of labour per man in industry because of their advanced
technology and skills. This is well known, but it is also striking that the developed countries have a
much more advanced agriculture than the rest of the world. Their agriculture has already become an
industry, and the agricultural part of the economy produces more although it is small. The countries
of Africa, Asia and Latin America are called agricultural countries because they rely on agriculture
and have little or no industry: but their agriculture is unscientific and the yields are far less than
those of the developed countries. In several of the largest underdeveloped nations, there was
stagnation and fall in agricultural output in and after 1966. In Africa, the output of food per person
has been falling in recent years. Because the developed countries have a stronger industrial and

2
agricultural economy than the rest of the world, they produce far more goods than the poor nations-
in the category of necessities as well as luxuries.
Furthermore, one also has to judge the protein content of the food; and many parts of Africa suffer
from ‘protein famine’ – which means that even when calories are available from starchy foods,
little protein is to he found. Persons in developed capitalist and Socialist countries consume twice as
much protein food as those in underdeveloped countries. Such differences help to make it clear which
countries are ‘developed’ and which are ‘underdeveloped’.
The social services provided by a country are of importance equal to that of its material production
in bringing about human well-being and happiness. It is universally accepted that the state has the
responsibility to establish schools and hospitals, but whether these are provided by the government
or by private agencies, their numbers can be established in relation to the size of the population. The
extent to which basic goods and social services are available in a country can also be measured
indirectly by looking at the life expectancy, the frequency of deaths among children, the amount
of malnutrition, the occurrence of diseases which would be prevented by inoculation and public
health services, and the proportion of illiterates. In all these respects, the comparison between the
developed and underdeveloped countries shows huge and even frightening differences. For every
1,000 children who are born alive in Cameroon, 100 never live to see their first birthday, and out of
every 1,000 African children born alive in rural Sierra Leone, 160 die before reaching one year. Yet
the comparable figures for the U.K. and Holland are only 12 and 18, respectively. Besides many
more African children die before they reach the age of five. Lack of doctors is a major drawback.
while the countries of Africa have a woefully insufficient number of highly qualified personnel. The
figures on doctors just given confirm this, and the same problem exists with engineers, technicians,
agriculturalists and even administrators and lawyers in some places. Middle level skills in fields such
as welding are also lacking. To make matters worse, there is at present a ‘brain drain’ from Africa,
Asia and Latin America towards North America and Western Europe. This is to say, professionals,
technicians, high-level administrators and skilled workers emigrate from their homes, and the small
number of skilled people available to the underdeveloped world are further depleted by the lure of
better pay and opportunities in the developed world.
For economic development it is not enough to produce more goods and services. The country has to
produce more of those goods and services which in turn will give rise spontaneously to future growth
in the economy. For example, the food-producing sector must be flourishing so that workers would
be healthy, and agriculture on the whole must be efficient so that the profits (or savings) from
agriculture would stimulate industry. Heavy industry, such as the steel industry and the production
of electrical power, must be present so that one is capable of making machinery for other types of
industry and for agriculture. Lack of heavy industry, inadequate production of food, unscientific
agriculture – those, are all characteristics of the underdeveloped economies.
In a way, underdevelopment is a paradox. Many parts of the world that are naturally rich are actually
poor and parts that are not so well off in wealth of soil and sub-soil are enjoying the highest standards
of living. When the capitalists from the developed parts of the world try to explain this paradox, they
often make it sound as though there is something ‘God-given’ about the situation. One bourgeois

3
 economist, in a book on development, accepted that the comparative statistics of the world today
show a gap that is much larger than it was before. By his own admission, the gap between the
developed and the underdeveloped countries has increased by at least 15 to 20 times over the last
150 years. However, the bourgeois economist in question does not give a historical explanation, nor
does he consider that there is a relationship of exploitation which allowed capitalist parasites to grow
fat and impoverished the dependencies. An even bigger problem is that the people of Africa and
other parts of the colonised world have gone through a cultural and psychological crisis and have
accepted at least partially the European version of things. That means that the African himself has
doubts about his capacity to transform and develop his natural environment. With such doubts, he
even challenges those of his brothers who say that Africa can and will develop through the efforts
of its own people. If we can determine when underdevelopment came about, it would dismiss the
lingering suspicion that it is racially or otherwise predetermined and that we can do little about it.
When the ‘experts’ from capitalist countries do not give a racist explanation, they nevertheless
confuse the issue by giving as causes of underdevelopment the things which really are consequences.
For example, they would argue that Africa is in a state of backwardness as a result of lacking skilled
personnel to develop. It is true that because of lack of engineers Africa cannot on its own build more
roads, bridges and hydroelectric stations. But that is not a cause of underdevelopment, except in the
sense that causes and effects come together and reinforce each other. The fact of the matter is that
the most profound reasons for the economic backwardness of a given African nation are not to be
found outside that nation. All that we can find inside are the symptoms of underdevelopment and the
secondary factors that make for poverty. Mistaken interpretations of the causes of underdevelopment
usually stem either from prejudiced thinking or from the error of believing that one can learn the
answers by looking inside the underdeveloped economy. The true explanation lies in seeking out the
relationship between Africa and certain developed countries and in recognising that it is a
relationship of exploitation. Man has always exploited his natural environment in order to make a
living.
Since underdevelopment deals with the comparative economics of nations, it is the last kind of
exploitation that is of greatest interest here – i.e. the exploitation of nation by nation. One of the
common means by which one nation exploits another and one that is relevant to Africa’s external
relations is exploitation through trade. When the terms of trade are set by one country in a manner
entirely advantageous to itself, then the trade is usually detrimental to the trading partner. To be
specific, one can take the export of agricultural produce from Africa and the import of manufactured
goods into Africa from Europe, North America and Japan. The big nations establish the price of the
agricultural products and subject these prices to frequent reductions. At the same time the price of
manufactured goods is also set by them, along with the freight rates necessary for trade in the ships
of those nations. The minerals of Africa also fall into the same category as agricultural produce as
far as pricing is concerned. The whole import/export relationship between Africa and its trading
partners is one of unequal exchange and of exploitation
3.2 . African Developed Before the Coming of the Europeans up to the 15th Century

4
 Africa today is underdeveloped in relation to Western Europe and a few other parts of the world; and
that the present position has been arrived at, not by the separate evolution of Africa on the one hand
and Europe on the other, but exploitation. As is well known, Africa has had prolonged and extensive
contact with Europe, and one has to bear in mind that contact between different societies changes
their respective rates of development. To set the record straight, four operations are required:
(a) Reconstruction of the nature of development in Africa before the coming of Europeans.
(b) Reconstruction of the nature of development which took place in Europe before expansion
abroad.
(c) Analysis of Africa’s contribution to Europe’s present ‘developed’ state.
(d) Analysis of Europe’s contribution to Africa’s present ‘underdeveloped’ state
3.3 . Africa’s Contribution to European Capitalist Development — the Pre-Colonial Period
Western Europe and Africa had a relationship which ensured the transfer of wealth from Africa to
Europe. The transfer was possible only after trade became truly international; and that takes one back
to the late 15th century when Africa and Europe were drawn into common relations for the first time
— along with Asia and the Americas. The developed and underdeveloped parts of the present
capitalist section of the world have been in continuous contact four and a half centuries. The
contention here is that over that period Africa helped to develop Western Europe in the same
proportion as Western Europe helped to underdevelop Africa.
What was called international trade was nothing but the extension overseas of European interests.
The strategy behind international trade and the production that supported it was firmly in European
hands, and specifically, in the hands of the seagoing nations from the North Sea to the Mediterranean.
They owned and directed the great majority of the world’s sea-going vessels, and they controlled the
financing of the trade between four continents. Europe had a monopoly of knowledge about the
international exchange system seen as a whole, for Western Europe was the only sector capable of
viewing the system as a whole Europeans used the superiority of their ships and cannon to gain
control of al] the world’s waterways, starting with the western Mediterranean and the Atlantic coast
of North Africa.
European countries who decided on the role to be played by the African economy; and on the other
hand, Africa formed an extension to the European capitalist market. As far as foreign trade was
concerned, Africa was dependent on what Europeans were prepared to buy and sell. Europe
exported to Africa goods which were already being produced and used in Europe itself — Dutch
linen, Spanish iron, English pewter, Portuguese wines, French brandy, Venetian glass beads, German
muskets, etc. Europeans were also able to unload on the African continent goods which had become
unsaleable in Europe. Africans did not participate in its making, and in many instances African
people were simply the victims, for the law recognised them only as transportable merchandise. If
the African slave was thrown overboard at sea, the only legal problem that arose was whether or not
the slave-ship could claim compensation from the insurers! Above all, European decision-making
power was exercised in selecting what Africa should export — in accordance with European. needs.

5
 Europe allocated to Africa the role of supplier of human captives to be used as slaves in various parts
of the world. Africa’s at that time. European society was leaving feudalism and was moving towards
capitalism; African society was then entering a phase comparable to feudalism. The fact that Europe
was the first part of the world to move from feudalism towards capitalism gave Europeans a head
start over humanity elsewhere in the scientific understanding of the universe, the making of tools
and the efficient organisation of labour. European technical superiority did not apply to all aspects
of production, but the advantage which they possessed in a few key areas proved decisive.
Literacy, organizational experience, and the capacity to produce on an ever-expanding scale also
counted in the European favour. European manufactures in the early years of trade with Africa were
often of poor quality, but they were of new varieties and were found attractive. It is often said for the
colonial period that vertical political divisions in Africa made conquest easy. Any European trader
could arrive on the coast of West Africa and exploit the political differences which he found there.
Although class divisions were not pronounced in African society, they too contributed to the case
with which Europe imposed itself commercially on large parts of the African continent. In those
societies with ruling groups, the association with Europeans was easily established; and afterwards
Europe hardened the existing internal class divisions and created new ones. In effect, particular
aspects of African society became weaknesses when Europeans arrived as representatives of a
different phase of development.
Africans — played a crucial role in meeting the need for coin in the expanding capitalist money
economy of Western Europe, while African gold was also significant in that respect Asia ever since
the 15th century. Throughout the 17th and 18th centuries, and for most of the 19th century, the
exploitation of Africa and African labour continued to be a source for the accumulation of capital
to be re-invested in Western Europe. The African contribution to European capitalist growth
extended over such vital sectors as shipping, insurance, the formation companies, capitalist
agriculture, technology and the manufacture of machinery.
Commerce deriving from Africa helped a great deal to strengthen transnational links within the
Western European economy, bearing in mind that American produce was the consequence of African
labour. Occasionally, it is mistakenly held that Europeans enslaved Africans for racist reasons.
European planters and miners enslaved Africans for economic reasons, so that their labour power
could be exploited. Indeed, it would have been impossible to open up the New World and to use it
as a constant generator of wealth, had it not been for African labour. There were no other alternatives:
the American (Indian) population was virtually wiped out and Europe’s population was too small
for settlement overseas at that time. Then, having become utterly dependent on African labour,
Europeans at home and abroad found it necessary to rationalise that exploitation in racist terms as
well. Oppression follows logically from exploitation, so as to guarantee the latter. Oppression of
African people on purely racial grounds accompanied, strengthened and became indistinguishable
from oppression for economic reason
3.4 Europe and the Roots of African Underdevelopment — to 1885
3.4.1. The European Slave Trade as a Basic Factor in African Underdevelopment

6
To discuss trade between Africans and Europeans in the four centuries before colonial rule is virtually
to discuss slave trade. Strictly speaking, the African only became a slave when he reached a society
where he worked as a slave. Before that, he was first a free man and then a captive. Nevertheless, it is
acceptable to talk about the trade in slaves to refer to the shipment of captives from Africa to various
other parts of the world where they were to live and work as the property of Europeans. Therefore, let
it be clear that when Europeans shipped Africans to European buyers it was the ‘European Slave trade’
from Africa. The massive loss to the African labour force was made more critical because it was
composed of able-bodied young men and young women.
African economic activity was affected both directly and indirectly by population loss. The contention
that European slave trade was an underdeveloping factor for the continent as a whole must be upheld,
because it does not follow that an African district which did not trade with Europe was entirely free from
whatever influences were exerted by Europe. European trade goods percolated into the deepest interior,
and (more significantly) the orientation of large areas of the continent towards human exports that other
positive inter-actions were thereby ruled out.
3.4.2. Technological Stagnation and Distortion of the African Economy in the Pre-
Colonial Epoch
It has already been indicated that in the 15th century European technology was not totally superior to
that of other parts of the world. There were certain specific features which were highly advantageous to
Europe-such as shipping and (to a lesser extent) guns. Europeans trading to Africa had to make use of
Asian and African consumer goods, showing that their system of production was not absolutely superior.
It is particularly striking that in the early centuries of trade, Europeans relied heavily on Indian cloths
for resale in Africa, and they also purchased cloths on several parts of the West African coast for resale
elsewhere. Yet, by the time that Africa entered the colonial era, it was concentrating almost entirely on
the export of raw cotton and the import of manufactured cotton cloth. This remarkable reversal is tied
to technological advance in Europe and to stagnation of technology in Africa owing to the very trade
with Europe.
Up to the 16th century, that was the general pattern in Africa, Asia and Europe: with Asian cloth makers
being the most skilled in the world. African demand for cloth was increasing rapidly in the 15th, 16th
and 17th centuries, so that there was a market for all cloth produced locally as well as room for imports
from Europe and Asia. But, directed by an acquisitive capitalist class, European industry increased its
capacity to produce on a large scale by harnessing the energy of wind, water and coal. European cloth
industry was able to copy fashionable Indian and African patterns, and eventually to replace them.
Therefore, there was what can be called ‘technological arrest’ or stagnation, and in some instances
actual regression, since people forgot even the simple technique of their forefathers. The abandonment
of traditional iron smelting in most parts of Africa is probably the most important instance of
technological regression . Development means a capacity for self-sustaining growth. It means that an
economy must register advances which in turn will promote further progress. The loss of industry and
skill in Africa was extremely small, if we measure it from the viewpoint of modern scientific
achievements or even by standards of England in the late 18th century. However, it must be borne in
mind that to be held back at one stage means that it is impossible to go on to a further stage.

7
The basic reason is that the very nature of Afro-European trade was highly unfavourable to the
movement of positive ideas and techniques from the European capitalist system to the African pre-
capitalist (communal, feudal, and pre-feudal) system of production. The only non-European society that
borrowed effectively from Europe and became capitalist is that of Japan. Japan was already a highly
developed feudal society progressing towards its own capitalist forms in the 19th century. Its people
were neither enslaved nor colonised by Europe, and its foreign trade relations were quite advantageous.
For instance, Japanese textile manufacturers had the stimulus of their own growing internal market and
some abroad in Asia and Europe.
Trade with Africa actually helped Europe to weld together more closely the different national
economies, but in Africa there was disruption and disintegration at the local level. At the same time,
each local economy ceased to be directed exclusively or even primarily towards the satisfaction of the
wants of its inhabitants; and (whether or not the particular Africans recognised it) their economic effort
served external interests and made them dependent on those external forces based in western Europe. In
this way, the African economy taken as a whole was diverted away from its previous line of development
and became distorted. It has now become common knowledge that one of the principal reasons why
genuine industrialisation cannot easily be realised in Africa today is that the market for manufactured
goods in any single African country is too small, and there is no integration of the markets across large
areas of Africa. The kind of relationship which Africa has had with Europe from the very beginning, has
worked in a direction opposite to integration of local economies. Certain interterritorial links established
on the continent were broken down after the 15th century because of European trade. Several examples
arose on the West African coast down to Angola, because in those parts European trade was most
voluminous, and the surviving written record is also more extensive.
3.4.3. Continuing Politico-Military Developments in Africa, — 1500 to 1885.
Modern African nationalist historians correctly stress that Africa had a meaningful past long before the
coming of Europeans. They also stress that Africans made their own history long after coming into
contact with Europe, and indeed right up to the period of colonisation. That African centred approach
to the continent’s past is quite compatible with one which equally emphasises the transformatory role
of external forces, such as overseas trade in slaves, gold, ivory, etc. The reconciliation of the two
approaches is facilitated by bearing in mind the following three factors:
a) The external (and mainly European) impact up to 1885 was very uneven in geographical terms,
with the coasts being obviously more exposed.
b) (b) Commerce with Europeans affected different aspects of African life in varying degrees, with
the political, military and ideological apparatus being virtually untouched.
c) Dynamic features of independent African evolution and development (as illustrated in chapter 2)
continued to operate after 1500
Military conquest of Africa awaited the years of the imperialist Scramble. In pre-colonial centuries
of contact with Europe, African armies were in existence, with all the socio-political implications
which attach to an armed sector in society. As before, religion continued to act as an element of the
superstructure, which was crucial in the development of the state. So long as there is political power,
so long as people can be mobilised to use weapons, and so long as society has the opportunity to

8
define its own ideology, culture, etc., then the people of that society have some control over their
own destinies, in spite of constraints such as those imposed as the African continent slipped into
orbit as a satellite of capitalist Europe.
Politico-military development in Africa from 1500 to 1885 meant that African social collectives
had become more capable of defending the interests of their members, as opposed to the interests of
people outside the given community. It also meant that the individual in a politically mature and
militarily strong state would be free from external threat of physical removal. He would have more
opportunities to apply his own skill in fields as diversified as minstrelry and bronze-working, under
the protection of the state. He could also use his creativity and inventiveness to refine the religion of
his people, or to work out a more manageable constitution, or to contribute to new techniques of war,
or to advance agriculture and trade. Of course, it is also true that the benefits of all such contributions
went mainly to a small section of African society, both within and without the zone of slaving; for,
as communalism receded, the principle of egalitarian distribution was disregarded.
Areas of Africa that were most advanced by the 15th century generally maintained their standards,
with few exceptions such as Kongo. In North Africa and Ethiopia, for example, feudal structures
remained intact, though there was a noticeable lack of continued growth. In the Western Sudan, the
Hausa states were heirs to the political and commercial tradition of the great empires after the fall of
Songhai in the 17th century; and early in the 19th century there arose the Islamic Caliphate of Sokoto
with its centre in Hausaland. The Sokoto empire was one of the largest political units ever established
on the African continent, and it suffered from many internal schisms through lack of adequate
mechanisms for integrating so vast a territory.
The truth is that a developing Africa went into slave trading and European commercial relations as
into a gale-force wind, which shipwrecked a few societies, set many others off course, and generally
slowed down the rate of advance. However (pursuing the metaphor further) it must be noted that
African captains were still making decisions before 1885, though already forces were at work which
caused European capitalists to insist on, and succeed in taking over, command.
3.4.4. The Coming of Imperialism and Colonialism
Africa in the late 19th century could still be described as part communal and part feudal, although
Western Europe had moved completely from feudalism to capitalism. The European economy
was producing far more goods by making use of their own resources and labour, as well as the
resources and labour of the rest of the world. There were many qualitative changes in the
European economy, which accompanied and made possible the increase in the quantity of goods.
For example, machines and factories rather than and provided the main source of wealth; and
labour had long since ceased to be organised on a restricted family basis. The peasantry had been
brutally destroyed and the labour of men, women and children was ruthlessly exploited. It was
that gap which provided both the necessity and the opportunity for Europe to move into the
imperialist epoch, and to colonise and further underdevelop Africa. The growing technological
and economic gap between Western Europe and Africa was part of the trend within capitalism to
concentrate or polarise wealth and poverty at two opposite extremes. Inside of Western Europe

9
itself, some nations grew rich at the expense of others. Britain, France and Germany were the
most prosperous nations.
That penetration of foreign capitalism on a world-wide scale from the late 19th century onwards
is what we call ‘imperialism’. Imperialism meant capitalist expansion. It meant that European
(and North American and Japanese) capitalists were forced by the internal logic of their
competitive system to seek abroad in less developed countries opportunities to control raw
material supplies, to find markets, and to find profitable fields of investment. The centuries of
trade with Africa contributed greatly to that state of affairs where European capitalists were faced
with the necessity to expand in a big way outside of their national economies. There were certain
areas of Africa in which European investment was meant to get immediate super-profits. The
mines of South Africa, the loans to North African governments, and the building of the Suez
Canal were in that category. The Suez Canal also ensured the greater profitability of European
investment in and trade with India. However, Africa’s greatest value to Europe at the beginning
of the imperialist era was as a source of raw materials such as palm products, groundnuts, cotton
and rubber. The need for those materials arose out of Europe’s expanded economic capacity, its
new and larger machines and its increasing wage-earning population in towns. All of those things
had developed over the previous four centuries; and again it needs to be repeated that one of the
important factors in that process was the unequal trade with Africa. Imperialism is essentially an
economic phenomena, and it does not necessarily lead to direct political control or colonisation.
However, Africa was the victim of colonisation. In the period of the notorious Scramble for
Africa’, Europeans made a grab for whatever they thought spelt profits in Africa, and they even
consciously acquired many areas not for immediate exploitation but with an eye to the future.

Africans everywhere fought against alien political rule, and had to be subdued by superior force.
But a sizeable minority did insist that their trade connections with Europe should remain
unbroken, for that was a measure of the extent to which they were already dependent on Europe.
The most dramatic illustration of that dependence was the determination with which some
Africans fought the end of the European slave trade. For most European capitalist states, the
enslavement of Africans had served its purpose by the middle of the 19th century; but for those
Africans who dealt in captives the abrupt termination of the trade at any given point was a crisis
of the greatest magnitude. In many areas, major social changes had taken place to bring the
particular regions effectively into the service of the European slave trade — one of the most
significant being the rise of ‘domestic slavery’ and various forms of class and caste subjugation.
African rulers and traders who found their social existence threatened by the earliest legal edicts
such as the 1807 British Act against the trade in slaves found ways of making contact with
Europeans who still wanted slaves. In sub-Saharan Africa and especially in West Africa, the
export of slaves declined most rapidly where Europeans were prepared to buy other commodities.
As soon as inhabitants of any region found that they had a product which Europeans were
accepting in place of the former slave trade, those inhabitants put tremendous effort into
organising the alternatives: namely, ivory, rubber, palm products, groundnuts, etc. Once more,
those efforts demonstrated the determination of a small but decisive proportion of Africans. It

10
was a determination based on the desire to obtain European trade goods, many of which had
ceased to be mere curiosities or luxuries, and were regarded instead as necessities. The first four
centuries of Afro/European trade in a very real sense represent the roots of African
underdevelopment. Colonialism flourished rapidly from a European viewpoint, because several
of its features were already rooted in Africa in the preceding period. One of the most decisive
features of the colonial system was the presence of Africans serving as economic, political and
cultural agents of the European colonialists. Those agents or ‘compradors’ were already serving
European interests in the pre-colonial period.
The impact of trade with Europe had reduced many African rulers to the status of middlemen for
European trade; it had raised ordinary Africans to that same middleman commercial role; and it
had created a new trading group of mixed blood-the children of European or Arab fathers. Those
types can all be referred to as ‘compradors’, and they played a key role in extending European
activity from the coast into the hinterland, as soon as Europeans thought of taking over political
power. One outstanding example of the above is the way that the French colonialists used
Africans and mulattoes on the Senegalese coast as agents for the spread of French control for
thousands of miles into areas now covered by Senegal, Mali, Chad, Upper Volta and Niger. Those
particular blacks and mulattoes were living in the trading ports of Gorée, Dakar, St. Louis and
Rufisque; and they had had long-standing links with Atlantic trade. Africans conducting trade on
behalf of Europeans were not merely commercial agents, but also cultural agents, since inevitably
they were heavily influenced by European thought and values. The search for European education
began in Africa before the colonial period. Coastal rulers and traders recognised the necessity to
penetrate more deeply into the way of life of the white man who came across the sea. The mulatto
sons of white traders and the sons of African rulers were the ones who made the greatest effort
to learn the white ways. This helped them to conduct business more effectively. One Sierra Leone
ruler in the 18th century explained that he wished ‘to learn book to be rogue as good as white
man'; and there were many others who saw the practical advantages of literacy. However, the
educational process also meant imbibing values which led to further African subjugation.
When European capitalism took the form of imperialism and started to subjugate Africa
politically, the normal political conflicts of the precapitalist African situation were transformed
into weakness which allowed the Europeans to set up their colonial domination. Altogether, it is
very clear that to understand the coming of colonialism into Africa, one has to consider the
previous historical evolution of both Africa and Europe and in particular one has to consider
ways in which their trade contacts influence the two continents mutually, so that what was called
‘pre-colonial’ trade proved to be a preparatory stage for the era of colonial rule. It is widely
accepted that Africa was colonised because of its weakness. The concept of weakness should be
understood to embrace military weakness and inadequate economic capacity, as well as certain
political weaknesses namely, the incompleteness of the establishment of nation states which left
the continent divided and the low level of consciousness concerning the world at large which had
already been transformed into a single system by the expansion of capitalist relations.

11
 Economic policies were adopted by Europeans who destroyed the colonies, rather than help
them. Africa was damaged economically, politically, and culturally. Africa’s traditional lifestyles
and culture were destroyed. The Europeans had no interest in traditional African culture and had
no concern for the Africans. European colonial powers did not plan to industrialize or modernize
Africa. Africans were used to solely produce raw materials, export them to Europe, and then re -export
them Africa as final products, sold at high prices. Africans could not afford to pay for these products.
There were several negatives of colonialism for the Africans like resource depletion, labor exploitation,
unfair taxation, lack of industrialization, dependence on cash crop economy, prohibition of trade, the
breaking up of traditional African society and values, lack of political development, and ethnic rivals
inside countries.
3.5. Africa’s Contribution to the Capitalist Development of Europe – the Colonial Period
3.5.1. Expatriation of African Surplus under Colonialism
(a) Capital and African wage labour
(b) European Trading Companies versus the African Peasan
(c) Shipping and Banking Service
(d) The Colonial Administration as Economic Exploiter In addition to private companies, the
colonial state also engaged directly in the economic exploitation and impoverishment of Africa.
The equivalent of the colonial office in each colonising country worked hand in hand with their
governors in Africa to carry out a number of functions; the principal ones being as follows: (a)
To protect national interests against competition from other capitalists. (b) To arbitrate the
conflicts between their own capitalists. (c) To guarantee optimum conditions under which private
companies could exploit Africans
3.5.2. The Strengthening of the Technological and Military Aspects of Capitalism

a. A Preliminary Examination of the Non-monetary Benefits of Colonialism to Europe

At the beginning of the colonial period, science and technology as applied to production already had a
firm base inside Europe – a situation which was itself connected to overseas trade, as previously
explained. Europe then was entering the age of electricity, of advanced ferrous and non-ferrous
metallurgy, and of the proliferation of manufactured chemicals. All of these were carried to great heights
during the colonial period. Electrical devices were raised to the qualitatively new level of electronics,
incorporating miniaturisation of equipment, fantastic progress in telecommunications, and the creation
of computers. Chemical industries were producing a wide range of synthetic substitutes for raw
materials, and a whole new branch of petrochemicals had come into existence. The combination of
metals by metallurgical innovations meant that products could be offered to meet far-reaching demands
of heat resistance, lightness, tensile strength, etc. .At the end of colonialism (say 1960), Europe was on
the verge of another epoch – that of nuclear power It is common knowledge that the gap between the
output of the metropoles and that of the colonies increased by at least fifteen to twenty times during the
epoch of colonialism. More than anything else, it was the advance of scientific technique in the
metropoles which was the cause of the great gulf between African and Western European levels of
productivity by the end of the colonial period. Therefore, it is essential to understand the role of

12
colonialism itself in bringing about that scientific progress in the metropoles, and its application to
industry
b. The example of Unilever as a major beneficiary of African exploitation
Just as it was necessary to follow African surplus through the channels of exploitation such as banks and
mining companies, so the nonmonetary contribution which Africa made to European capitalism can
also be accurately traced by following the careers of the said companies. We offer below a brief outline
of the relevant features of the development of a single firm – that of Unilever – in relationship to its
exploitation of African resources and people.
In 1885, while Africa was being carved up at the Conference table, one William H. Lever started making
soap on the Merseyside near Liverpool in England. He called his soap ‘Sunlight’ and in the swamps
where his factory stood, the township of Port Sunlight grew up. Within ten years, the firm of Lever was
selling 40,000 tons of soap per year in England alone and was building an export business and factories
in other parts of Europe, America and the British colonies. Then came ‘Lifebuoy’, ‘Lux’, ‘Vim’, and
within another ten years, Lever was selling 60,000 tons of soap in Britain, and in addition had factories
producing and selling in Canada, the U.S.A., South Africa, Switzerland, Germany and Belgium.
However, soap did not grow in any of those countries. The basic item in its manufacture was stearin,
obtained from oils and fats. Apart from animal tallow and whale oil, the desirable raw materials all came
from the tropics: namely palm oil, palm-kernel oil, groundnut oil, and copra. West Africa happened to
be the world’s great palm produce zone and was also a major grower of groundnuts
3.6. Features of an Underdeveloped Economy

An underdeveloped economy has the following features:

 There is a low income per capita: The low level income per head of the population is due to the
generally low level of productivity which results in low national income or low Gross Domestic
Product. Then the total Gross Domestic Product is spread among the population, the share of each
person is small. A low level of income per capita leads to low standard of living
 There is a lows level of technology: Much production is done by using primitive methods: the use
of modern methods of roduction is not widespread. The extent of industrialization is still limited. In
agriculture, the use of modern implements such as tractors and harvesters is limited. Traditional tools
such as hand hoes, cutlasses and digging sticks are widely used.
 There is a high level of illiteracy: In many developing countries a large percentage of the population
cannot read and write. The illiteracy rate has been put at over 80% in some countries. The high level
of illiteracy is partly due to widespread poverty. Many parents cannot afford the cost of education
for their children or themselves. The low level of literacy results in an abundance of unskilled
labour and relative scarcity of skilled manpower.
 There is a low level of productivity of labour in agriculture and industry: The low level of
productivity results from the low level of technology, the low level of investment, the shortage
of skilled manpower etc. Much production is for subsistence. Low productivity (especially in
agriculture) leads to widespread hunger and low living standards.

13
 Primary forms of production contribute a greater percentage of the Gross Domestic Product:
Primary forms of production such as agriculture crop farming, fishing; forestry, hunting,
livestock farming and mining are the dominant economic activities. Secondary forms of
production, especially manufacturing, contribute a little share to the Gross Domestic Product. There
is a high degree of under-empowerment. In underdeveloped countries, many factors of production
are either idle or not fully engaged in production. The available job opportunities are highly
insufficient for all those who wish to work. So many people are left unemployed. Also, capital such
as machinery and equipment is not used to full capacity.
 There is an inequitable distribution of income: In other words, there is great disparity in income
levels among the population. There are a few people who are very rich while the masses are poor.
In addition, there is greater poverty in the rural areas than in the urban centres.
 The rate of capital formation is slow: Capital formation is negligible because of the existence of
the vicious circle of poverty. Low income leads to low saving, and consequently to a small
amount of funds being available for investment purposes. In addition, many of those who are rich
are not enterprising. Others who have the business acumen may have no capital to invest.
 There is a poorly developed infrastructure: Basic facilities such as electricity, transportation,
communication, water supply and education, which are essential for an industrial take-off, are
poorly developed. Industrial development is therefore handicapped.
 There is low saving: The majority of the population spends a large proportion of their income on food
and other essentials of life instead of investing it. This is partly due to the fact that the income of many
people is low; little is left for saving after their basic requirements have been met. In addition, There
is a great propensity to consume, resulting in low savings for investment. There are high birth and
high death rates. In many developing countries the annual birth rate is high. In some cases it is well
over 30%. The death rate is also high due to disease and malnutrition.

14