Prerequisites mean those pre-conditions and factors which should be available for economic growth and development. After a deep study of economic growth and development, one thing is very clear that the process of economic growth and development is influenced by a number of factors. To make easy understanding, these factors are classified into two hands, known as Economic Factors and Non-economic Factors.
Economic Factors: such as Resources, Human Resources, Capital Technology, etc., and
Non-economic Factors: such as Social institutes, political setup administrative structure etc.
According to Prof. Walson:
Economic development is the expansion of production and consumption faster than population growth because of steadily higher productivity of resources and factors which should be available combination of resources.
A brief discussion on both economic and non-economic factors is given below.
The role of economic factors in the development process of a country values a lot. increase or decrease in the economic growth rate of the country mainly affected due change in these factors. The main economic factors are discussed below:
The primary factor that affects the development of a country is the availability of natural resources in the country such as; forestry, minerals, climate conditions, water resources etc. The abundance of these natural resources is considered necessary for the economic growth of any country.
Deficiency in these resources is a hurdle to development process of a country. In case of LDC’s natural resources are cither underutilized or mis utilized that is one of the main cause of their backwardness. But due to inadequate resources these are underutilized.
Presence of natural resources is not only condition for economic development, but proper utilization of the existing resources should be ensured to achieve targets of development. Most of the countries in the world with deficient in natural resources, yet they have made faster growth process by adopting improved techniques, modem research, higher knowledge. Japan, France, Germany are the most considerable examples.
Capital formation or accumulation is another primary factor of economic growth of a country. As computed capital accumulation means to increase the capital stock of a country. This stock of capital may use to enhance the growth and development of a country. The process of capital formation basically depends upon:
Sources of Capital Accumulation:
Sources of capital formation includes:
- Volume of savings
- The financial institutions, which mobilize the savings
- Investment of these savings
- Foreign Loans
- Foreign Aids
- Technical Assistance
In case of LDC’s the process of capital formation is very slow due to number of reasons such as, low saving capacity, high consumption level, habitual to use imported goods etc. Therefore, involuntary savings are the ultimate solution for enhancing the capital formation in LDC’s.
Capital formation is especially important for economic growth of LDCS because of
- To meet the requirements of increasing population.
- Employment opportunities.
- Technical progress.
- Provision for social and economic overhead.
- Employing the natural resources.
Human Capital/ Human Resources:
By human resources we mean the body of human knowledge that contributes to productive activities. Labour is an important factor in development. Education and the health are the primary factor for the development of a country. The analysis of investment in health and education is unified in human capital approach.
The knowledge base of a nation is added by research and disseminated by teaching through general education and vocational training. Investment in human capital results in new, technically improved, products and production process which improve economic efficiency and it can be as significant as physical capital in economic growth.
LDCS are facing the shortage of skilled persons such as; scientists, managers, engineers, administrators etc. Investment should be made to setup research and training institutes to promote the human capabilities that will lead the progress of less developed countries.
Technology plays pivotal role in the process of economic development of a country. Technological progress regarded as one of the key factors of economic growth of developing countries. Productivity and efficiency of labour depends upon existing capital, technology and other factors of production.
In modem economic growth the five factors, mentioned by Kuznet,
- a scientific discovery
- an invention
- an innovation
- an improvement
- and the spread of invention, have helped in the development of technology.
Due to shortage of technology in developing countries, LDC’s must import it to accelerate their production capacity in the short run.
LDC’s must develop their technical skills while importing modern technology from developed countries. However, LDC’s should be very careful while adopting modern technology in his industrial and agricultural sector.
Social Overhead Capital (SOC):
Social overhead capital is also called infrastructure of a country. It may be defined as capital goods used directly or indirectly in the production of goods and services i.e. roads, railways, highways, communications, transports, electric power and research centers etc. Improved SOC increases economic growth. It provides incentives for the organization for investment.
Developed means of transportation and communication expand national and intonational trade. Agriculture and industrial sectors get specialization exchange of goods between rural and urban areas, mobility of labour, organization and extend market for agriculture and industry also stimulate balanced growth.
Along with economic factors, non-economic factor also considered an important factor to economic growth.
In the words of Nurkse “economic development has much to do with human endowment, social attitudes, political conditions and historical accidents.”
Therefore, non-economic factors such as;
Social attitudes, political, administrative, cultural factors, are also having great importance in economic growth of a country.
A brief discussion of these factors is given bellow:
Social values and attitude in society should be of helpful nature for rapid economic growth. Values like thrift, love of work, mobility etc., are needed to be promoted and reared.
In LDCS people are conservative and are influenced more by traditional custom and give preference to waste their time and money on non-economic ventures such a festivals and ceremonies etc. They are influenced by traditional customs and prefer leisure instead of hardworking.
In LDCS joint family system is very old and has now almost outlived its utility. This system has destroyed the habit of independent economic decisions and engrave dependency on others, which leads people to work shirking.
In LDCS factors like social attitudes, values and institutions which are not conductive to economic development. Religion gives less inducement to the virtues of thrift and hard work. People are fatalists and therefore are not hard working.
LDCS mostly suffering from lack of technical education and training, No one can eliminate of technical education from the process of development. The country that lacks in this regard cannot be hoped to miracles in the race of development.
Development rears new life-style that become challenge to the society in such circumstances.
To achieve the targets of economic growth and development, their social and cultural habits, values attitudes and institution should be changed. Social elements like the joint family system, caste and religious approach should be modified to make them favourable for economic development. This suggested solution is not an easy task to practice. This process should be practiced in different steps and stages.
Political stability is very important factor of economic growth and development.
In the view of Professor Lewis
“the behaviour of government plays an important role in stimulating or discouraging economic activity”.
The encouragement of investors and to attract foreign investment in the country, peace and stability in political perspectives is mandatory.
In LDCS weak political structure is a big hurdle to economic development. All LDCS have mostly under the colonial rule. They have developed as independent nation from this rule, but their independence has not necessarily led to national consolidation. Rapid change in government as a political instability creates the bases for low capital formation and keeps process of economic growth and development very slow.
We can see this practice in LDC, that how rapid change in government and the policies of government authorities, adversely affected the growth of country. Every new government has made new policies in their own interest. Factors like marshal law are big hurdle to economic growth and development. It can be concluded that basic responsibility of slow economic growth and development goes to political instability in the country.
Administrative factors also helped in modern economic growth. Honest, efficient, capable and hardworking administration can only give a big push to economic growth and development of a country.
Weak infrastructure of administration corrupt, dishonest, non-professional management are the characteristics of LDCS. Rapid growth in population creates the problems of mass consumption, unemployment, poverty and other economic and social problems.
To manage all issues, an effective, honest and professional administration is required which is not available in LDCS. That is why these countries are tailed to overcome their problems and to achieve the high level of output and growth as well.