Running head: ECONOMICS 1
Economic development is the continued, intensive action of policy makers and societies that stimulates the standard of living and economic health of a given area. It focuses on improving the economies of developing countries. Elements such as health, education, working conditions, and market state are the primary concerns to be considered whenever there are strategies of enhancing the economic growth of a given nation. Financial experts examine both macroeconomic and microeconomic factors. They relate them to the structure of an unindustrialized economy and analyze how that economy can progress both domestically and internationally. Therefore, economic development strategy is of great help. It seeks to determine how poor countries can transform into dynamic ones having diverse economic backgrounds.
There are several theories that explain the process of economic growth. Structural theory focuses on how developing countries transform their domestic economies from traditional subsistence agriculture into a modern economy. The object of development in this theory is the structural transformation of underdeveloped economies so as to permit the growth of well-established economy. The theory insists that the expansion of the industrial sector triggers economic growth. Therefore, there is the need to eliminate the reliance of underdeveloped countries on foreign demand for raw materials.
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The structural theory also emphasizes on the importance of improving technology and methods of production. These enhancements help in eliminating the gap between the most advanced sectors of the economy and those that lag behind. The theory tries to explain how structural aspects of domestic and international economy influence the growth of developing countries. They viewed the government as the primary organization that could intervene to promote industrialization. The imposing of tariffs by the government played a great role in stimulating the internal market.
Neo-Marxist theory of development focused on the relationship between advanced capitalist countries and developing states. The theory shows clearly how industrialized countries historically extracted surplus value from developing countries. They paid very low prices for the primary products from developing countries, transformed them into finished goods, and sold them back at very high prices. The theory insists that a successful social revolution is possible only after a country has undergone a capitalist transformation. Therefore, according to this theory, it is impossible for many developing countries to grow as they tend to stick to the production of cheap raw materials in the international capitalist economy.
The neoliberalism economic theory has a different approach to economic development. It viewed neo-marxist and structural theories as flawed and unrealistic. The theory stresses that for economic growth in developing countries, the government should eliminate market restrictions and limit its interventions. It should privatize state-owned enterprises, promote free trade, and reduce regulations affecting markets.
There are several social policies that Dreze and Sen emphasize on in the development of the economy. The expansion of human capability is the central feature of the process. Poverty is the primary factor that slowers development. Poverty lies not only in the penurious state but also in the lack of real opportunities due to social constraints or personal circumstances to choose other ways of living. The justification for focusing on outputs and incomes relies ultimately in the impact that their augmentation may have on the freedoms that people enjoy leading the kind of lives they value. Therefore, the analysis of economic growth must take note of both causal connections and the enhancement of human capabilities.
Education and health are part of the relevant social policies in economic development. An effective economic growth in a country starts from individual development. Good education and proper health contribute significantly to the freedom of a person. They help people to discover their intrinsic and instrumental roles in the society and enhance their ability to resist oppression. The expansion of education and health can, therefore, have positive influences that go beyond the immediate personal effects leading to economic growth. Indians failure to have an adequate public policy in educational and health matters has contributed to its limited success in the development process. Therefore, the two factors hold a great strategic importance in the process of economic development.
International trade policy is a strategy that aims at allowing more free trade on the global scale. It is an activity that favors economic growth in the developing countries. However, the policy has some controversies. Most trade treaties have extensive protections and rules for businesses producing abroad. They prevent the governments from restricting foreign ownership of firms. Worker organizations in developed countries have complained that trade agreement protects only the capital but does not protect the rights of labor. As a result, the hard-won labor standards of developed countries are weakened.
Environmental standards have also raised significant concerns. Trade pacts allow firms to move their production to the countries that have no environmental regulations. They, however, put pressure on the countries with proper environmental protections urging them to lower standards in order to save jobs. Government subsidies and intellectual properties also prevent the expansion of trade. Subsidized firms have a lower cost and can outcompete in the poor countries whose governments cannot afford such subsidies. Patents and copyrights give firms monopoly power and allow them to charge high prices. Hence, developing countries have objected to these rules requiring to honor copyrights and patents of the developed countries.
In conclusion, economic development builds the conditions for economic growth and enriches the quality of life. It magnifies the capacity of individuals, corporations, and communities to support innovations. Therefore, economic development requires an operational and collaborative institution focused on advancing mutual gain for the public and private sector. Both economic and social aspects should be considered substantially for an effective economic growth in a given state.