In the World’s Development Report of 1995, it was said that more than three-fourth of population lives in poor and less developed countries but they get just 16% of world’s income whereas the 20% richest of the world live in developed countries and they are getting 85% of the world’s income.
Again, it is being observed that the population of the rich countries lives in excellent and luxurious houses. They plenty of amounts to eat. They wear superior clothes; they are healthy; they have longer expectancy periods; and they have greater economic and financial protection.
Their per capita incomes are mere than $30000 per annum. They have separate rooms in their houses not for their children but also for their pets where one can find the abundance of consumer durables as well as electrical appliances.
One can observe the flood of local and imported consumables and luxuries. The illiteracy is hardly seen in these countries. The education facilities from secondary education to university level are commonly available. The modern facilities regarding means of transportation and communication are very much present all the time and at all places.
They get complete participation in the decision-making. The availability of clean drinking water, health care, proper and pure diet as well as controlled pollution is made sure in the advanced societies of the world.
On the contrary, the three-quarter of world’s population which has exceeded 7 billion passes an extremely poor and backward life. They get limited facilities regarding fooding, clothing, housing and education. Their incomes are so low that they hardly maintain the link between soul and body. They do not get the recreational opportunities.
They often live in such houses which do not have water supply and water sanitation system. Most of the houses have just one room where at the average six persona reside. Because of lower incomes, the demand of the people just remains confined to necessary consumer goods.
The developing countries have higher infant mortality rates along with rising trends of other diseases. The illiteracy is commonly available. Each sector is furnished with dualism. Here poverty and unemployment go side by side and the people do not have any type of protection.
The education system is furnished with a lot of problems. The developing countries lack good governance and the participation of common man in decision-making is missing.
Now the question rises as to
- why some countries achieved better growth and why the levels of incomes, employment, health standard and caloric levels increased in the developed countries.
- While most of the countries of the world remained entrapped in poverty.
- Why they remained backward and why their incomes could not increase.
- why the unemployment and poverty went on rising in the poor countries.
The dissimilar levels of growth among the countries of the world are ascribed to the following factors.
Normally, economic development is associated with capital accumulation. The developed countries raised the levels of savings and investment to the desirable extent, which helped them to initiate the process of development. They invented new and new goods; they followed the innovations. The earned incomes were reinvested.
The entrepreneurs discovered new and new markets for their products. Thus, the surplus earned through exportation was used for economic growth. Thus, in these countries the investment, industrial development followed by Industrial Revolution, increase in exports and the chain of discoveries played an important role in order to have economic development.
On the other hand, in case of developing countries, because of lower incomes, the savings and investment remained low. Because of illiteracy and socioeconomic backwardness, those entrepreneurs could not come into being who could make inventions and innovations. As a result, the backward countries remained poor.
Effective Use of Labour Force:
The developed countries utilized their manpower effectively. There was a time when capital accumulation was considered the most important factor of economic growth, particularly when the Classical, Neo-Classical and Harrod-Domar models had been overemphasizing upon physical and capital formation.
But afterwards, such thinking came to light that investment in man can be made which would help for human resource development, i.e., the greater facilities of education, healthy, food, shelter, clean water and training be provided to the people. As a result, the skill and efficiency of manpower will increase.
The same has been presented by Prof. Romer’s Endogenous growth theory. Thus, the developed countries along with increase in physical capital, formation also stressed upon human capital formation. All such led to increase the productivity and efficiency of the manpower force along with improved health.
On the other hand, in the developing countries, the population growth rate was fairly high, but the quality of manpower was not satisfactory. The level of education and training remained poor. As a result, their incomes remained low. Because of lower incomes and outputs, there prevailed backwardness in each sector of the economy.
The developed countries paid special attention to attain technical progress. particularly by decreasing their population through birth-control devices. They promoted those technologies which were capital intensive. Such technologies, on the one side, increased productivity, while on the other side they produced consumer durables, electronics, machinery, computers, ships, air-crafts, vehicles, bulldozers and the means of communication whose demand is increasing all over the world.
Thus, the developed countries, on the basis of monopolies over their technologies an^ products are earning abnormal profits. On the contrary, the developing countries neither had the technology, nor they could get it through technology transfers. They have to import the durables as well as machinery and capital goods. As a result, they remained poor and backward.
Exploitation by Developed Countries:
So many economists like Gunner Myrdal and those from Marxist school of thought are of the view that there prevailed and still prevailing such circumstances at the international level that the rich countries are getting rich while the poor countries are getting poor.
In the early 19th century, the developed countries deliberately exploited the poor countries by ruling them. Later on, the developing countries failed to get proper and fair prices of their primary and semi-manufactured goods. The developed countries remained putting restrictions on the exports of developing countries.
In the recent days of the year 2005, when Globalization and WTO are heading with full vigor, the poverty and inequalities will increase further as the products of developed countries will be sold in the world being cheaper and of improved quality. In such situation, there will be a further increase in income, employment, output and employment of the developed countries, particularly when they are having financial and economic discipline along with greater social protection.
As a result, they will have more prosperity. On the other hand, the developing countries of Asia, Africa and Latin America will not be able to raise their levels of income and employment, especially when they have to compete with the developed countries. This is the reason that the UN and the so many international institutions are desirous to reduce international inequalities, and the people of the developing countries could avail of the same facilities of food, health, education, employment and nutrition which are having the developed countries.