IRD
103: DEVELOPMENT CONCEPTS AND ITS APPLICATION
DEFINITION OF
DEVELOPMENT
Historically the word development
in its present context is of a very recent origin. It was used in the covenant of League of
Nations and much later by the charter of the United Nations. The concept of development acquired more
significance after the Second World War in 1945, partly as a requirement to
help reconstruct the countries, which had been ruined by the two world wars,
and later extended towards development of countries emerging from colonial
rule.
From the general Literature of
development and from the descriptions of development projects one may deduce
that development represents a process through which relatively simple
traditional, agrarian societies become industrialized and therefore modernized.
This philosophy, characterized planning and development, was thought in most
developing nations in the 1950s and 1960s.
In the 1950s and 1960s
development tended to be looked at in strictly economic terms. Economic growth was considered synonymous
with economic development, and thus the total development of a society. While economic growth is an essential
component of a country’s development process, it is not sufficient. During this period, also referred to as the
first development, meant the capacity of a national economy, whose initial
economic condition has been more or less static for a long time, to generate
and sustain an annual increase in its Gross National Product (GNP) at rates of
5-7% or more.
Thus the concept of development
has literally been defined as a futuristic concept, meaning to bring forth from
a latent state, to cause to grow into a higher fuller and mature condition. In this sense it is assumed that a country
has certain latent or potential properties that need to be activated into a
more dynamic or desired social form.
Various economists have attempted to define development:
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Prof. Michael Todaro says: Development must therefore
be perceived as a multi-dimensional process involving changes in structures,
attitudes and institutions as well as the acceleration of economic growth, the
reduction of inequality and eradication of absolute poverty. “Thus according to
Todaro Development= growth (improvement
in income and outputs) + Change
(institutions, attitudes, customs and beliefs)
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Prof. Schumpeter says- “Development is a discontinuous
and spontaneous change in the stationary state which forever acts and displaces
the equilibrium state previously existing.”
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Prof Bonne says! “Development requires and involves
some sort of direction, regulations and guidance to regulate the forces of
expansion and maintain them (i.e. this involves government interventions
through policy options and setting of planning targets)
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United Nation’s definition: It says: “In strictly
economic terms “development” for the two decades (1960 and 1970) has meant the
capacity of a national economy, whose initial economic condition has been more
or less static for a long term, to generate and sustain an annual increase in
its GNP at rates perhaps 5-7% or more.”
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Prof. Dudley Seers: Perhaps best posed the basic
questions about the meaning of development when he asserted that:
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What has been happening to poverty?
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What has been happening to inequality?
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What has been happening to unemployment?
We can therefore broadly
conceptualize development as the sustained elevation of an entire society and
social system towards a better or “more humane’’ Life.
Development is much broader than
economic growth. Economic growth focuses
on short-run changes. It considers such
factors as Gross Domestic Products (GDP), per capita, Investment per capita,
and household consumption per capita.
Development considers the whole question of human welfare. Essentially it is concerned with the problems
that have hindered the Third World countries in their attempts to break away
from underdeveloped state. These
problems are not only economic conditions.
Thus during the 1970s development came to be redefined in terms of the
reduction or elimination of poverty, inequality and unemployment within the
context of a growing economy.
In essence there are different
interpretations and concepts of development since each society has its unique values,
lifestyles, and preferences e.t.c. which determines what constitutes the
desired conditions for a good society.
It constitutes a wide range of variables which include the social,
economic, cultural, political and environmental processes that result in
perceptible and cumulative improvement in the standard and quality of life for
an increasing proportion of the population.
The quality of life has been
conceptualized by the UNDP in form of Human Development Index (HDI) as an
appropriate measure of development of all Nations.
UNDERDEVELOPMENT
Having defined development it is
important to also define underdevelopment.
Underdevelopment refers to the process whereby countries, characterized
by subsistence agriculture and domestic production, progressively become
integrated as a dependency into the world market through patterns of trade and
investment. The production of that
country thus becomes geared primarily to the demands of the world market, in
particular the demands dictated by the industrialized nations with a consequent
lack of integration within the country between the various parts of its
domestic economy.
Jhingan (1982) defines
underdevelopment as follows: An
underdeveloped country is a country which has good potential prospects for
using more labor or more capital or more available natural resources or all
those to support its present population on a high level of living, or its per
capita income level is already fairly high to support a large population on a
not lower level of living.
Rodney (1989) contends that
underdevelopment deals with the comparative economies of nations. It expresses a particular relationship of
exploiting of one country by another.
Exploitation is mainly through trade and investment. Trade and investment are mainly through
unfavorable terms and grabbing of African wealth. The whole import and export relationship
between Africa and its trading partners is one of unequal exchange and of
exploitation. Besides, then is (some)
ownership of the means of production by non-African citizens. Investment exploitation manifests itself as
restrictions placed upon the African capacity to make the maximum use of its
economic potential.
CORE VALUES OF DEVELOPMENT
Prof. Goulet has identified 3
core values of development which he says should serve as a conceptual basis and
practical guideline for understanding the inner meaning of development. These are life sustenance, self esteem and
freedom.
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LIFE SUSTENANCE (BASIC NEED APPROACH)
This is concerned with the
provision of basic needs. It was
initiated by the World Bank in the 1970s.
No country can be regarded as fully developed it cannot provide its
entire people with such basic needs as food, housing, clothing and a minimum
education. A major objective of
development must be to raise people out of primary poverty and to provide basic
needs simultaneously.
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SELF ESTEEM (SUSTAINABLE DEVELOPMENT APPROACH
This is concerned with the
feeling of self-respect and independence.
No country can be regarded as fully developed if it is exploited by
others and does not have the power and influence to conduct relations on equal
terms. Developing countries seek
development for self-esteem to eradicate the feeling of dominance and
dependence which is associated with interior economic status.
*
FREEDOM (HUMAN RIGHTS/DEMOCRATIZATION
APPROACH)
This refers to freedom from the
evils of ignorance and poverty so that people are more able to determine their
own destiny. No man is free if he can
not choose and if he is imprisoned by living on the margin of subsistence with
no education and no skills. W. Arthur in
his book “The Theory of Economic Growth” Says “The advantage of economic growth
is not that wealth increases happiness but it increases the range of human
choice”
CONCEPTION OF DEVELOPMENT
Development is a broad and
complex concept. Essentially it relates
to a set of variables which are connected to determine the process of general
advancement of people within a community. The process of development can be
represented by a mathematical relationship. This relationship shows the main
components or conceptions of the development process.
D=f (E, P, S, C, En T)
D=Development
E=Economic conception
P=Political conception
S=Social conception
C=Cultural conception
En=Environmental conception
T=Technical conception
THE ECONOMIC CONCEPTION
(ECONOMIC GROWTH)
This basically deals with
economic growth.
The term economic growth refers
to increases overtime in a country’s real output of goods and services (GNP) or
real output per capita. Here emphasis in attaining higher levels of advancement
considers three main indicators
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Raising GNP
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Increasing the level of investment would encourage
consumers to save more.
Prof. Simon Kuznets has defined a
country’s economic growth s “a long term rise in capacity to supply
increasingly decreasingly diverse economic goods to its population, this
growing capacity based on advancing technology and the institutional and
ideological adjustment that it demands. “This definition has three important
components: First, sustained rise in national output is a manifestation of
economic growth, and the ability to provide a wide range of goods is a sign of
economic maturity. Second, advancing
technology provides the basis or conditions for continuous economic
growth. Third, for an efficient and wide
use of technology and its development, institutional, attitudinal and
ideological adjustments must be made to effect the proper use of innovations
generated by advancing stock of human knowledge.
Todaro defines economic growth as
the study process by which the productive capacity of the economy is increased
overtime to bring about rising levels of national income.
Economic growth also refers to
the aggregate and strictly economic and material improvement in an
economy. It is an aggregate quantitative
change in a country’s development.
Economic development on the other
hand may be defined as “an upward
movement of the entire social system or it may be interpreted as the increase
in the productivity, social, economic equality, attainment of a number of
ideals of modernization, such as a rise in productivity, social and economic
equalization, modern knowledge’s improved institution& attitudes and
rationally coordinated system of policy measures that can remove the host of
undesirable conditions in the social system that have perpetuated the state of
underdevelopment.
The economic development aims at
uplifting or raising the standard of living of the country’s population i.e.
providing the basic needs, durable goods and services. Thus Ed is growth plus radical changes, such
as those aimed at ensuring equitable, availability and distribution of
resources in the economy to the population. This means improvement in GNP and
GNP per capita should be accompanied with other structural aspects for
equitability.
DISTINCTION BETWEEN ECONOMIC
GROWTH & ECONOMIC DEVELOPMENT
*
Prof. Charles Kindleberger in distinguishing the two
says that economic growth means more output, while economic development implies
both more. output & changes in technical and institutional arrangement by
which it is produced
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Okurut and Richardson maintain that economic growth is
simply a subset of development and mainly concerned with raising the national
output income. Economic development to a
larger extent is concerned with third world countries and considers the
problems that have hindered these countries in their attempts to break out of
their underdevelopment. These problems
are not only economic but include political, social, cultural, environmental
and technology dimensions too.
On the other hand economic growth
to a larger extent is associated with developed countries, when modernization
have taken place and therefore the main problem is how to raise the national
output and income in the long run.
Measure & Indicators of
Development
Four methods have been devised:-
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Gross National Product (GNP)
This is the money value of all
goods and services produced in a country from resources owned by the residents
of a country annually. GNP includes only
final goods and services, which means only goods and services sold to the final
consumers. This includes intermediate
products-goods or services, purchased to be used in the production of other
goods or services e.g. (flour purchased to be used in making bread and steel to
be used in making automobiles are examples of these intermediate products.
The flour and steel are taken
account of in GNP by counting the bread and automobiles produced. To count intermediate products separately
would be double counting. GNP is criticized
on its inability to count some economic activities while double counting
others. How do you for instance count
the proceeds from the sales of fuel, when such is reflected from the proceeds
of transporter, farmers & private motorists?
Problems in using GNP per capita
for international comparisons.
Statistics of national income per
head on the most frequently used bases for comparing living standards in
different countries. Such comparisons
need to be used with a lot of caution.
*
The level of accuracy in measurement may differ
widely. If population figures are not
accurately recorded, the resulting per capita figure will be misleading.
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Subsistence economy: In countries where agriculture is
the main activity, there is a large element of guess work in the final
computation. And in most cases a lot of
output is not recorded.
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Income distribution. There are great discrepancies in
the patterns of income distribution in different countries. Two countries may have same income per head
figures but the standard of living will be very different if in one the income
is fairly evenly distributed, while in the other one income distribution is
very unequal.
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Composition. The
composition of total output may be different.
For instance one country may devote a much greater proportion of its
resources to defense than another country yet the two countries have similar
figure for income per head.
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Some difference arises from climatic conditions or
geography. Inhabitants in cold countries
have to spend relatively large proportion of their incomes on keeping warm,
while people living in sparsely populated countries will have to spend more on
communications & transport. It does
not follow that living standards are lower when these expenditures are lower.
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Currency-International comparisons require the
conversion of values measured in one.
Usually comparison is made using either the US$ dollar or the Sterling
pound (£) using the official exchange rates.
This rate of exchange however,
may not be a good indicator of the relative domestic purchasing power of the
two currencies. Moreover, the official
exchange rate only takes account of the commodities entering into international
trade and my represent a very small selection of the commodities traded within
each nation.
The use of national income
figures for purposes of comparison need to be supplemented by various social
indicators such as number of hospital beds and doctors per population, numbers
in further education and the nature and quality of the different welfare
services
GNP should not be confused with
National well-being, although it’s closely related. Some of GNP’s limitations include:
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GNP ignores many non-market transactions such as value
of a person who works in the home but is not paid by his or her spouse. Also un- reported income in the underground
economy.
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GNP ignores the value of leisure. Some people may prefer leisure to work.
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GNP ignores ecological costs of production outputs.
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GNP focuses on output but it is the consumption that
affects our nation’s welfare e.g. a country can produce more and eat less.
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Government spending is measured at costs not its value.
Worthwhile projects are thus undervalued and worthless projects can overvalued.
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Gross Domestic product (GDP)
This is the money value of all
goods and services produced in a country from resources located in that
country, whenever their owners happen to live over a period of one year. Todaro (1985) defines GDP as the total final
output of goods and services produced by the country’s economy i.e. within the
country’s territory by residents and non residents regardless of its allocation
between domestic and foreign claims.
GDP + Net property income from
abroad=GNP.
*
Net
National product (NNP)
The word “Gross” as used in GNP
and GDP indicates that no deductions have been made for that part of total
output which is needed to maintain the nation’s stock of capital assets. Thus NNP is a measure of net output after
deducting an amount needed to replace capital used up in the course of
producing the output.
The value of output required to
replace worn out capital is known as depreciation or capital consumption. Thus:
GNP- Depreciation=NNP
*
Real GNP
This refers to the country’s
total output of final goods and services in real terms (physical terms) rather
than in monetary terms. Thus price changes will have to be ruled out while
calculating real GNP. To take care of
price changes, a base year is assumed & the calculation of the current GNP
would be based on the prices of the base year is assumed & the calculation
of the current GNP would be based on the prices of the base year. The
urbanization of currencies in the world market has enabled accurate
calculations of GNP using the US dollar as the standard.
*
GNP per capital income
This is the average income that
accrues to an individual person per given year in a country. This would determine the degree of
development or growth in the country since, it gives a reflection of the amount
of goods and services available to the individual person or a state of
purchasing power of individuals of any given country. This GNP per capita is arrived at by dividing
total GNP of a country by total population of a given year.
*
National Income (NI)
Net national product consists of
all the goods and services becoming available for consumption together with the
net additions to the nations stock of capital. National income is the sum of
the total payment of wages, rent, interest and profit to factors of production.
NI is also referred to as income at factor costs.
(b) Political Conception
Politics is a process of making
governmental policies with respect to relationships of people and allocation of
resources with a given society. It
includes the decision making and enforcing process in any organization which
makes and enforces for the members. In
essence politics is a process of enquiry into why things happen the way they
are.
The process of develop is also
very much linked to the political structure of the country concerned. The
strength of political stability in the country promotes the degree of social
and economic development. Development will take place situations where those
who have power are resolutely opposed to it. Among other factors, development
requires support and encouragement from political systems. Such political systems must adhere to various
dimensions of domestic governance like public management, effectiveness,
legitimacy of powers and responsiveness, public accountability, information
openness (transparently) and policy pluralism.
In essence the state must provide an enabling environment for fostering
development. It is therefore not possible to realize rapid development in an
economy facing the following problems:
- A
political environment dominated by tribal and agrarian elites who may see
rapid socio-economic change as threat to their authority.
- A
political environment lacking an administrative capacity to stimulate,
co-ordinate regulates economic activities of its citizens.
- A
political environment plagued by violence and uncertainty
(C) SOCIAL-CULTURAL CONCEPTION
The concept of development
concerns itself with human beings in totality. It looks at the overall outlook
of the welfare of a country’s citizens.
It takes into account the social, cultural and psychological aspects of
human beings. It typically involves
radical changes in institutional, cultural, social and administrative
structures as well as popular values, altitudes customs, beliefs and morals.
National values, aspirations and
the uniqueness of people’s local culture are important in motivating the people
in improving their well being. As such
social and cultural values should be the guiding light for nation’s development
process in addition to serving as the cornerstone for any development effort.
Moreover, social-cultural development emphasizes:-
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Eradication of social problems like disease, poverty,
illiteracy etc.
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Equitable distribution of natural resources to reduce
the disparities between the have and have-nots
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Provision of basic needs
*
Promotion of social discipline to enhance harmony,
understanding and mutual social responsibility.
The other important
socio-cultural factor which affects the process of development is the national
will of the people. This involves values, morals & feelings of
determination of the people. If the national will is weak coupled with rigid
sociological & cultural values the process of development will be severely
retarded. If a society is to develop the people must be willing to adjust their
values, altitudes, perceptions and be ready to learn from others. This is because
traditional values can a times retard development process e.g.
- The
extended family system in Africa has some negative effects. It affects those who can break away from
poverty.
- Religious
institutional set ups. Arabs
discourage women from mixing with men in industrial production, thus
curtailing their production.
(D)ENVIRONMENTAL CONCEPTION
Until the 1970’s, developing
nations and a number of developed nations generally regarded environmental
quality as a luxury that could be afforded only after they have attained a
considerable higher application of western development models.
This has increasingly led to:
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Poisoning or destruction of fragile ecosystem.
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Plunder and waste of irreplaceable resources.
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Belief that man can mould nature with little or no need
to take account of nature’s reactions to such violation.
Total environmental concerns
encompass a broad range of issues including:-
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Public health and environmental safety.
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Control of air, water and land pollution.
*
Sound management of renewable natural resources.
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More efficient use of natural resources through
multiple use, recycling and soil erosion control.
*
Conservation of unique habitats especially for rare or
endangered species (respect for bio diversity)
*
Cultural preservation and conservation.
The United Nations Environmental
programme (UNEP) has spearheaded the concept of eco-development. The concept of eco-development simply means
ecologically sound development. Its basic
principles are that:-
*
Development should respect the ecosystem.
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It should minimize waste and recycle as much as it can.
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It should respect local social and cultural patterns by
involving the local population in deciding the style and pace of development.
*
It should conserve resources including renewable
resource including renewable resources when possible.
The overriding issue in
eco-development is avoiding environmental damage or reduce it to acceptable
minimum without slowing the pace of development.
The environment constitutes
natural capital, its benefits and services like water flow, soil protection,
and breakdown of pollutants that support and enhance economic development.
(e)Technical conception
This entails the development and
adoption of modern technology through scientific research which in turn would
accelerate productivity in the economy.
To achieve this, high rate of capital formation is necessary, which in
turn depends on high rate of savings & investment in the economy.
CHARACTERISTICS OF
TRANSITIONAL SOCIETIES.
While it is often risky to
generalize such divers nations as those in Africa, Asia, The Middle East and
Latin America, there are certain common economic features of developing
countries, which permit us to view them broadly in similar contexts. These include:
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Poverty
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Low income
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High population growth
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Low technology.
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Significance dependence on agricultural production&
primary products for exports.
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Dualistic economy.
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High and increasing levels of unemployment and
underdevelopment (disguised unemployment.
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General economic backwardness & low levels of
productivity.
*
Foreign and trade dependence and dominance &
vulnerability in international relations.
*
Environmental degradation.
1. SIGNIFICANT RELIANCE ON
AGRICULTURE
*
In under-developed countries, two thirds or more people
live in rural areas (70% in Kenya, 1999 census) and their main occupation is
agriculture.
*
There are four times as many people occupied in
agriculture in some under-developed countries as there are in advanced
countries. In low income economies such
as India, Kenya, Bangladesh and Vietnam, more than 71% of the population is
engaged in agriculture while 2%, 5% and 4% are engaged in it in the United
States, Canada and Germany respectively.
*
This heavily concentrates in agriculture are a symptom
of poverty.
*
Though it is the main occupation, it is carried out in
the most unproductive manner, using obsolete and outdated methods of
production.
*
Moreover, the average land holdings are as low as one
to 3 hectares, which usually supports 10-15 people per ha.
2. POVERTY
Poverty means an absence of
well-being or of capabilities that are generally accepted as being desirable or
valuable. The term poverty can be defined from various levels depending on the
people’s perception on the distinction of the poor from the rich. This can be
represented diagrammatically as follows:
BASIC NEES APPROACH
The poor are identified as those
who cannot support themselves and wear ragged clothing.
INCOME/CONCUMPTION
The poor are identified as those
who do not send their children to school or unable to secure medical services
and rely on traditional healers rather than health clinics.
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ASSETS
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PHYSICAL
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COMMON PROPERTY
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CAPITAL
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PRIVATE
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HUMAN CAPITAL
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Land/cattle
Estates/cars/shares
Employment
(The rich own a vehicle, grinding mill and
many cattle. In Kenya people say they are poor because they do not have the
animals, land, and granary as they used too many years ago.)
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HUMAN RIGHTS
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DIGNITY/AUTONOMY
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POLITICAL FREEDOM AND SECURITY
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EQUALITY(GENDER AND ETHNIC
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(The poor are not only poorly
housed and have no means of livelihood, but also powerless).
(a)General poverty and low levels of living
·
An underdeveloped country is poverty-ridden.
·
Poverty is reflected in low GNP per capital
income and absolute poverty.
*
According to the “World Development Report, 1994, 58.7%
of the Worlds’ population in 1992 were living in low-income economies with
average GNP per capital of $ 390; 26% in the middle income economies of $
22,160 GNP per capita.
*
The report pointed out vast income disparities among
nations. While Switzerland had $ 36,080,
Japan and USA had $ 28190 and $ 23240 respectively. The poorest $ 42 countries had GNP per capita
of $ 670 or less of this, Srilanka had $540, Palestine $ 420, both Kenya and
Nigeria had $ 310, India had $310, and Bangladesh $ 220 and Nepal $ 170.
(b)Absolute poverty
*
It’s not relative poverty but absolute poverty that is
more important in assessing such economies.
Absolute poverty is measured not only by low income, but also by
malnutrition, poor health, clothing shelter and lack of education.
*
Thus absolute poverty is reflected in low living
standards of people. Food is the major
item of consumption, where 80% of income is spent on it, as compared with 20%
in advanced countries. Such food is
often of poor quality, dominated by starch.
*
It’s currently assumed that those who live on less than
a dollar a day are living below poverty line, therefore wallowing in absolute
poverty. Approximately 56% of Kenyans
live below this poverty line.
*
THE VICIOUS CIRCLES OF POVERTY
These are circular relationships
that tend to perpetuate the low level of development in Less Developed
Countries (LDCs). Nurkse explain the
idea in these words:
“It implies a
circular constellation of forces tending to act and react upon one another in
such a way as to keep a poor country in a state of poverty.”
For example a poor man may not have enough to
eat hence his health may be weak, hence his working capacity will be how and
thus poor. This aspect may be
represented diagrammatically as follows.
4. DEMONSTRATION EFFECTS
The reason why the saving ratio
does not rise with the increased level of income in the long run is the
“demonstration effect” This refers to the great urge in us to “keep up with the
focuses”- This is the habit of imitating the standard of living of our
prosperous neighbors. Similarly, there is a tendency on the part of people of
the under developed countries to emulate the higher consumption standards of
advanced countries. As a result of the demonstration effect, the rise in income
is spent on increased expenditure and thus savings are negligible. This
demonstration effect is usually caused by foreign films, magazines and visits
abroad.
This tendency to emulate advanced
countries is not only found on individual persons but also on government. These governments emulate social security
programmes found in developed countries such as minimum wage legislation,
health insurance pension and provident funds scheme. These measures put obstacles in the way of
entrepreneurship and thus retard capital accumulation
5. FOREIGN TRADE DEPENDENCE
& VULNERABILITY IN INTERNATIONAL RELATIONS
Under-developed countries are
generally foreign trade oriented. This is reflected in exports of primary
products and imports of consumer goods.
This too much of exports of primary products leads to serious
repercussions on their economies. This
is because:
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The economy concentrates mainly on production of the
primary exports to the expense of other sectors of the economy.
*
The economy becomes particularly susceptible to price
fluctuations of the export commodities.
*
Too much dependency on these export commodities has led
to dependence on imports of manufactured goods.
*
The subtle transfer of rich (mostly capitalists) country values,
attitudes, institutions and standards of behavior to third world countries- the
net effect of all these factors is to create a situation of ‘Vulnerability’
among third world nations, in which forces largely outside their control, can
have decisive and dominating influences on their overall social and economic
well-being.
6. DUALISTIC ECONOMY
A dual economy is the existence
of two separate economic systems within one country. They are common in LDCs, where one system is
geared to local needs and another to the global export market. For example,
plantation or commercial agriculture, operating in the midst of traditional
cropping system.
POPULATION GROWTH
The rate of population increase
quantitatively measured as the percentage yearly net relative increase or
decrease in which event it is negative in population size due to natural
increase and net international migration. Natural increase measures the excess
of births over deaths or in more technical terms, the difference between
fertility and mortality.
Population increase in third
world countries depend almost entirely on the difference between their birth
and death rates. Developing countries have higher population growth rates
compared to the developed countries.
The rate of population growth has
a direct relation to the pace at which economic growth will be achieved. To achieve sustainable economic growth, it is
imperative that the rate of economic growth surpasses that of population
growth. This will ensure that the per capita income increases (does not drop).
However, Developing countries are generally characterized by high population
growth rate and dependency burdens which have negative impacts on the growth
not only of economic development but also the provision of basic needs to the
increasing population.
The problem of population growth
is therefore a problem of numbers between human welfare and development.
*
Population growth today is primarily the result of a
rapid transition from along historical era characterized by high birth and
death rates to one in which death rates have fallen sharply whereas birth rates
especially in LDCs are only just beginning to fall from their historic high
levels. The decline in mortality is due
to rapid technological advancement in modern sanitation measures.
*
Since 1950 developing countries accounted for 8.5% of
global population increase. Even between the year 2000 and 2025 population
growth rate in Africa will still be high at 25% while in Latin America and Asia
will have declined. For instance Brazil
in the 1980’s had the lowest population growth and the highest rate of
abortion.
*
For a long time to come (a generation at least) Africa
will still be hard pressed to sustain rapidly growing human pressures on
resources that are shrinking in quantity and quality.
*
Elimination of poverty will remain troublesome unless
current rates of population growth are checked because of population pressure
people are forced to work harder on shrinking farms on marginal land with
deteriorating quality of farm inputs and conditions of crop sales. Consequently,
however, incomes and material possessions cannot be sustained.
REASONS WHY POPULATION GROWTH
SLOWS DEVELOPMENT PROCESS
Here are four reasons why
population growth slows the development process.
*
It worsens the difficult choice between higher consumption
and the investment needed to bring about higher consumption/increased per
capital income in the future. If the Per capita incomes are lower the faster
the population growth, making investment in population quality through
education, health etc difficult to achieve.
*
Rapid population growth also severely draws down
limited government revenues simply to provide the most rudimentary economic,
social and health services to the additional people. This in turn further reduces the prospect for
any improvement in the levels of living for the existing generation.
*
In many countries where populations are still largely
dependent on agriculture, population growth threatens the delicate balances
between scarce natural resources and the people’s livelihood. In fact the
problem arises because rapid population growth slows down the transfer of labor
out of low productivity agriculture to modern agriculture and modern jobs. In Kenya 70% of the labor force will probably
still be working in agriculture as late as 2025 and the number of workers will
still be twice what it is today, the result is likely to be continuing low
incomes for many families and in some cases a stress on traditional
agricultural systems and environmental damage that threatens the economic
well-being of the majority poor. High
population growth mean limited investment in human capital formation, hence
mainly low skilled manpower is available, which cannot move out of low
productivity agriculture.
*
Rapid increases in population make it hard to manage
the necessary adjustments to promote economic and social change. High fertility in particular is a major
contributor to rapid urban growth; cities in developing countries are growing
to unprecedented sizes. Such growth
poses enormous new problems of management even to maintain let alone improve
living conditions for city residents.
*
High population growth particularly if it surpasses the
rate of production of goods and services causes unemployment.
REASONS FOR HIGHER POPULATION
GROWTH
*
The high population growth rate in developing countries
is due to high crude birth rates and declining death rates.
*
Crude birth rate refers to the yearly number of live
births’ per 1000 population. It is over
30 per 1000 in LDCS (DC). A death rate is the yearly number of deaths per 1000
population.
*
Improved health conditions and the control of major
infectious diseases as well as better methods of public health and sanitation
have reduced mortality and increased fertility thus LDC-DC death rates
differences are substantially smaller than corresponding differences in birth
rates.
Thus the average population
growth is about 21% per year compared with about 0.6% per year in developed
countries.
This rapid increase in numbers
aggravates the shortage of capital in such economies because large investments
are required to be made to equip the growing labor force even with absolute
equipment.
An important consequence of high
birth rates is that a larger proportion of the total population is in the
younger age groups thus, children under the age of 15 years make up almost one
half of the total population in the developing countries as opposed to
approximately one-quarter of the total population in developed countries.
Accordingly the active labor
force in most developing countries has to support proportionately almost twice
as many children as it does in richer countries.
Furthermore, Developing countries
have short life and work expectancy which means that a smaller fraction of
their population is available as an effective labor force.
Average life expectancy at birth
is roughly 50 years in developing countries while it is 74 years in developed
countries. Low life expectancy means
that there are more children to support and a few adults to provide for
them. On the other hand the proportion
of people over the age of 65 years is much greater in the developed countries.
Older people as well as children
are often referred to as an economic dependency burden in the sense that they
are non-productive members of the society and therefore must be supported by a
country’s labor force (usually defined as those between ages 15 and 64 years)
and older. Dependency ratio is the proportion of youths below 15 years and
older people over 64 years to economically active adults (ages 45-64 years)
The overall dependency burden
(i.e. both young and old) represents only about one-third of the population of
developed countries compared with one half of the population of Developing
countries. It is important to point out that over 90% of the dependents in
developing countries are children whereas only 66% are children in developed
countries. Thus developing countries have high dependency burdens.
With many dependents to support,
it is difficult for the worker to save for purpose of investment in capital equipment.
It is also a problem to provide their children with education and basic
necessities of life that are essential for the country’s economic and social
progress in the long run.
POPULATION CONTROL MEASURES
*
In countries or regions where the population size,
distribution and growth are viewed as an existing and/or potential problem, the
primary objective of any strategy to limit its further growth must deal not
only with population variable per se but also with the underlying social and
economic conditions of underdevelopment. Problems such as absolute poverty,
gross inequality widespread unemployment (especially) among females), limited
female access to education, a malnutrition and poor health facilities need to
be given high priority. Their amelioration is both a necessary concomitant of
development and fundamental motivational basis for the expanded freedom of the
individual to choose an optimal an in many cases, smaller-family size.
*
In order to bring about smaller families through
development induced motivations, family planning programmes, providing both the
education and the technological means to regulate fertility for those who wish
to regulate it need to be established.
*
Developed countries need to assist developing countries
achieve their lowered fertility and mortality objectives not only by providing
contraceptives and funding family planning clinics but more importantly (a) by
curtailing their own excessive depletion of non-renewable resources through
programmes that intensively utilize such resources, (b)Making genuine
commitment to eradicating poverty and illiteracy in developing countries as
well as their own, and (c ) by recognizing in both their rhetoric and their
international economic and social dealings that development is the real issue
not simply population control.
POLICIES TO REDUCE FERTILITY
If parents have many children in
the hope of economic gain, the first step in reducing fertility is to reduce
their poverty and their uncertainty about the future. In this sense high
fertility can be reduced through:
*
Provision (increase access to) of good health services
and better nutritional status for both parent and child in order to reduce the
need for many births to ensure against infant and child mortality.
*
Provide education and ensure a rise in family income
levels through increased direct employment and earnings of husband and wife.
*
Provide consumer goods and social opportunities that
compete with child bearing.
*
Establish family planning programs to provide health
and contraceptives services.
*
Manipulation of economic incentives and disincentives
for having children e.g. through the elimination or reduction of maternity
leaves and benefits, the reduction or elimination of financial incentives and
or imposition of financial penalties for having children beyond a certain
number, the establishment of old- age social security provisions and other
forms of old-age insurance, and minimum age child labor, the raising of school
fees and the elimination of heavy and higher public subsidies for secondary and
higher education, and finally the subsidization of smaller families through
direct money payments.
*
Use of media and educational process “both formal
(school system) and informal (adult education) to persuade people to have
smaller families.
*
Coerce people into having small families through the
power of state legislation and penalties.
*
Raise the economic and social status of women and hence
create conditions favorable to delayed marriage and lower marital
fertility. Such approaches include
creation of employment for women outside the home. Make available income-
earning opportunities for women to become economically self-reliant and an
increase in the education of women.
SUMMARY/CONCLUSION
Education, health, alleviation of
poverty and government effort to ensure widespread access to family planning
services have all played a more leading role in reducing the rate of population
growth in most developing countries than reliance on GNP per capita.
Urbanization, industrialization and a shift from household production as
practiced in most developed countries to implicitly reduce population growth
rates.
UNEMPLOYMENT
INTRODUCTION
*
Developing countries have inadequate or inefficient
utilization of labor compared with the developed countries. Almost 30% of the combined rural and urban
labor force in the developing countries is unutilized
Definition
Unemployment is a situation where
the capable and willing people have no accessibility to employment
opportunities or are not fully utilized. Unemployment is partly caused by:
*
High population growth particularly where it surpasses
the rate of economic growth.
*
It may also be due to the spread of education and the
failure of the industrial sector to expand along with the growth of the labor
force, as well as the structural rigidities and lack of man power planning
Generally
unemployment results from a relatively slow growth of labor demand in both the
modern industrial sector and in traditional agriculture combine with a rapidly
growing labor supply, especially as a result of accelerated population growth
and high levels of rural urban migration.
*
Developing countries are characterized by high and
rising levels of unemployment. The
situation is more serious in urban areas due to rural-urban migration. The
number of people searching for work in developing countries depends primarily
on the size and age composition of its population
*
Reduction in death rates expands the size of labor
force while continuous high birth rates create high dependency ratios and
rapidly expanding future labor forces.
FORMS OF UNEMPLOYMENT
*
Open
unemployment
Open
unemployment refers to those people who are able and often eager to work but
for whom no suitable jobs are available. It can be both voluntary and involuntary.
Voluntary includes people who exclude from consideration some jobs for which
they could qualify implying some means of support other than employment.
*
Underemployment
This refers to
those people who are working less than they would like to work on a daily,
weekly or seasonal basis. Underemployment is found in agriculture where farmers
and their families have insufficient land equipment to keep them fully employed
and at the same time they are not in a position to secure employment in other
occupations.
*
Disguised
unemployment
This refers to
people who seem to be occupied on full-time basis either on farms or offices
even though the services they render may actually require less than full-time
basis. It occurs as a result of a particular task being performed by more labor
than is necessary. This labor can be taken away from the occupations without
necessarily affecting production. Thus, the withdrawal of a certain quantity of
the factor labor to other uses will not necessarily diminish the total output.
*
Hidden
unemployment
This refers to
people engaged in “second choice” employment activities perhaps notably education and
household chores, primarily because job opportunities are not available either:
*
At the levels of education already attained or
*
For women given social mores. In this case educational
institutions and households become “employers of last resort”
*
Frictional
unemployment
This is
unemployment arising from the normal operation of the labor market. It occurs
during normal working of the economy when:
*
Workers quit jobs to find other better ones.
*
Employers fire workers and (hire) look for better ones
to replace them.
*
Workers withdraw in order to go for special training.
This type of
unemployment is usually short-term in nature and occurs even in period of full
employment.
*
Structural
unemployment
Structural
unemployment may be said to exist when there is mismatching between the
unemployed and the available jobs in terms of regional location brought about
by lack of geographical mobility, required skills or any other relevant
dimension. It is caused by structural
changes in the economy. As economic
growth proceeds, the mix of required inputs changes, as do the proportions in
which final goods are demanded. These
changes require considerable economic readjustment.
Structural
unemployment occurs when the adjustments are not fast enough so that severe
pockets of unemployment occur in industrial areas, and occupations in which the
demand for factors of production is falling faster than is the supply.
*
Cyclical
unemployment
Cyclical
unemployment is the result of less than full use of productive capacity due to
recession or depression. It is therefore
due to insufficient aggregate demand in the economy. This causes workers to be laid off en mass.
If aggregate demand can be strengthened by an increase in consumption,
investment and government spending, the levels of business activity can be
increased and the cyclical unemployment reduced.
STRATEGIES FOR OVERCOMING
UNEMPLOYMENT
*
Creating an appropriate rural-urban economic
balance. The main thrust of this
activity should be in the integrated development of the rural sector, the
spread of small- scale industries throughout the country side, economic
activity and social investment towards the rural areas.
*
Expansion of small-scale labor-intensive
industries. These can be accomplished
through government investment and incentives, particularly for activities in
the urban informal sector, and indirectly through income redistribution to the
rural poor whose structure of consumer demand is both less import-intensive and
more labor-intensive than the rich.
*
Encourage appropriate labor-intensive technologies of
production especially through tax incentives.
*
Invest generously in basic education, relevant and new
skills and workers retraining.
*
Liberate the private enterprise and make markets more
accessible to everyone.
*
Extend employment safety nets through labor-Intensive
public works programmes in periods of major economic distress.
*
Early retirement at the optional age of 40 years to
give room for the young and active.
*
Wooing of investors to expand trade and industry and
expansion of the agricultural sector.
This can be achieved by instituting policy measures that will attract
foreign investment and the transfer of technology to Kenya. With regard to the agricultural sector, it
should be possible to generate farm incomes that grow by 5% per year through
encouraging the subdivision of large firms (using taxation to ensure that all
cultivable land is utilized).
*
Ensure that women are allowed higher occupational
choices in all sectors of the economy.
To be pursued through expansion of education and other opportunities
that will make women equally productive.
THEORIES OF DEVELOPMENT
*
Adams Smith’s classical theory of development.
*
Prof.W.W Rostow’s five stages of development theory.
*
Karl Marx theory of development.
1. ADAM SMITH’S THEORY
*
He is the foremost classical economist
*
His monumental work, “An Inquiry into the nature and
causes of the wealth of nations.” Published in 1776, was primarily concerned
with the problems of economic development though he did not expound any
systematic growth theory, yet a coherent theory has been constructed out of his
work by later day economist. Smith’s
theory is based on the following premises:
(a)Natural law.
*
He believed in the doctrine of ‘natural law’ in
economic affairs.
*
He regarded every person as the best judge of his self
interest who should be left to pursue it to his own advantage.
*
In furthering his self interest, he would also further
the common good.
*
He says in the pursuance of this, each individual was
led by an ‘invisible hand’ which guided market mechanism.
*
He believed that since every individual, if left free
will maximize his own wealth, therefore, all individuals if left free will
maximize aggregate wealth.
*
He was thus a staunch advocate of free trade and policy
of Laissez-fair and an opponent of government intervention in commerce and
industry.
(b)Division of labor
*
According to him division of labor results in the
greatest improvement in the productive powers of labor.
*
He attributes the increase in productivity to:
*
The increase in the dexterity of every worker.
*
The saving in time to produce goods.
*
Technological advancement.
*
It is therefore improved technology that leads to
division of labor and the expansion of market. What however, leads to division
of labor is certain prosperity in human nature.
*
He contends that division of labor depends on the size
of the market with an increase in population and transport facilities, there is
bound to be greater division of labor and increase in capital.
(c) Processes of capital
accumulation
*
He says capital accumulation must precede the
introduction of division of labor.
*
He regarded capital accumulation as a necessary
condition for economic development.
*
According to him the problem of economic development
was largely the inability of the people to save more and invest more in a
country.
*
He held that the laboring classes were incapable of
saving and investing as this required capital investment or the renting of land
which were held by capitalists and landlords.
*
This was due to the “iron law of wages” which states
that the laboring class earned only enough for subsistence. Whatever wages went
beyond the subsistence level, will lead to an increase in the labor force. This will create competition among the
laborers, forcing the employers to reduce the wages.
*
When the wages go below subsistence level, many
laborers seek other means of survival, forcing the employers to increase wages
to subsistence level.
1) Why
do capitalists make investments?
*
Investments were made because the capitals expected to
earn profits on them: and the future expectations with regards to profits
depended on the present climate for investment as well as actual profits.
*
Smith believed that profits tended to fall with
economic development. This is because as the rate of capital accumulation
increase there is competition among the capitalist, leading to rise in wages
and decline in profits.
*
On the role of interest rates, Smith notes that as
interest rates decline, money lenders are forced to increase volume of lending
in order to maintain their previous standards of living. And as interest rates
continued to decline as a result of competition among the money leaders, they
are forced to invest their money in other profitable ventures, thus still
leading to further economic development.
(e) Agents of Growth.
*
According to smith farmers, producers and businessmen
are the agents of economic development as these are interrelated.
*
He says development of agriculture leads to
construction work and commerce. Also
agricultural surplus income leads to increased demand for commercial services
and manufactured goods.
*
Manufactured goods when used by farmers leads to
increased productivity and hence the farmers, the producer and trader benefits.
(f) Process of growth
Smith states that a social group
such as a nation, experiences a certain rate of economic growth
That is accounted for by increase
in numbers and by savings. He likens
such growth to the growth of a tree and terms it a cumulative growth. He notes that when there is prosperity as a
result of progress in agriculture, manufacturing industries and commerce, it
leads to capital accumulation, technical progress, increase in population, and
expansion of markets, division of labor and rise in profits continuously.
(g) Stationary state.
He says that this progressive
state is not endless. The growth must come to an end. This happened when
competition for wages has reduced wages to subsistence level and competition
among businessmen would bring profits very low.
The stationary state is very dull and declining is hard for different
sections of the society
CRITICAL APPRAISAL OF SMITH’S
THEORY
Smith’s theory has greater merit
of pointing out how economic growth came about and what factors and policies
impede it. Among the criticism of
Smith’s theory include:
*
Ignore the middle class-This theory assumes existence
of a rigid division of society between capitalists (landlords) and laborers and
ignore. The middle class which plays a
significant role in economic development.
*
One sided saving base-Smith did not realize that the
largest savings in an advanced economy are the income-receivers and not the
capitalists and landlords.
*
Unrealistic assumption of perfect competition- The
laissez-fair policy of perfect competition is not found in any economy. There
are restrictions placed by government within countries and international trade.
*
Neglect of entrepreneur-Smith neglects the role of
entrepreneur in development.
Entrepreneur organizes and brings about innovations, thereby leading to
capital formation.
*
Unrealistic assumption of stationary state- Development
takes place by fits and starts and therefore not uniform and steady as argued
by Smith. Therefore, the assumption that
there is stationary state and decline is not realistic.
Smith’s theory’s applicability
to under developed countries
The theory has limited validity
underdeveloped countries. This is
because:-
*
The market is small and therefore the capacity to save
and the inducement to invest are low.
*
There are often no political, social and institutional
conditions necessary for Smith theory to become realized.
*
Laissez-fair has lost its significance since competition
has been gradually replaced by monopoly which has tended to perpetuate and
strengthened the vicious circles of poverty.
ROSTOW’S THEORY OF FIVE STAGES
OF ECONOMIC GROWTH
Rostow distinguishes five stages
of economic growth:-
*
The traditional society
*
The preconditions for takeoff.
*
The takeoff.
*
The drive to maturity
*
The age of high mass consumption.
*
The traditional society
This is a society whose
structures is developed within limited production functions based on
Pre-Newtonian science and technology and has pre-Newtonian attitudes towards
the physical world. Social structure of
such society was hierarchical in which family and clan connection played a
dominant role. Political power was concentrated in the regions in the hands of
landlords, aristocracy supported by a large number of soldiers and civil
servants. Agriculture happened to be the
mainstay of such society’s economies.
Income was used on the construction of temples and other monuments, on
expensive funerals and weddings and on prosecution of wars
*
The pre-conditions for Takeoff-
It is the state where the
traditional society gives way to modern society. In Western Europe and Britain, it was the
Renaissance period in the (15th and (16th that resulted
in the take off. Rostow notes that “The
idea spreads that economic progress is possible and is a necessary condition
for some other purpose judged to be good; be it national dignity, private
profit, the welfare or better life for the children. Rostow says precondition of sustained
industrialization usually require radical changes in three non-industrial
sectors.
*
A build up in social over-head capital especially in
transport in order to enlarge the extent of the market.
*
A technological revolution in agriculture so that
agriculture productivity increases to meet the requirement of arising general
and urban population.
*
An expansion of imports, including capital imports
financed by efficient production and marketing of natural resource for exports.
However in other countries ‘reactive nationalism’ and the demonstration
effects set the conditions for takeoff e.g. Japan and China after Opium war and
Germany and Italy unification after napoleon wars in Europe. While colonial experience in many third world
countries was responsible for this.
*
The Take off
Rostow says of take off as an
industrial revolution tied directly to radical changes in the methods of
production having their decisive consequence over a relatively short period of
time. The conditions of take-off are
broadly group into three:
*
A rise in the rate of productive investment from say5%
or less to over 10% of national income or net national product.
*
The development of one or more substantial
manufacturing sectors with a high rate of growth.
*
The emergence of a political, social and institutional
frame work which exports the impulse to expansion in the modern sector and
leads to growth.
*
(IV)The Drive of maturity
This is a period of long
sustained growth which may extent for four decades. Rostow states that when a
society has effectively applied the modern technology to the bulk of its
resources. During this time new
technology takes place of old ones. New
leading sectors are created and the economy is able to withstand un-expected
shocks. Rostow argues that three
significant changes take place during this period:
*
The character of working population changes and it
becomes skilled and prefers to live in urban areas rather than rural. Real wages rise as workers organize
themselves in order to have greater economic and social security.
*
The character of entrepreneurship changes becomes
polished into polite and efficient managers.
*
The society feels bored of the miracles of
industrialization and seeks for something leading to further changes
*
(V)The Age of High Mass Consumption
This has been characterized by
the migration to sub-urban, the extensive use of automobile, the durable
consumer and house-hold gadgets. In this
stage Rostow says “The balance of attention of the society is shifted. Mass consumption welfare in the widest sense
meaning projecting national values beyond the frontiers, ensuring equitable
distribution of national resources and create new commercial centers and
sectors
Critical Appraisal of Rostow’s
Theory.
*
It is not clear whether these stages are inevitable
like birth, childhood, maturity and old age.
*
Questions are asked by economists whether it can be
distinguished clearly where one stage ends and another begins.
*
It has been found that some countries like USA, Canada,
Australia and New Zealand developed without passing through the stage of
traditional societies.
*
On the other hand, precondition for takeoff may not
necessarily precede the take off; while there have been cases of overlapping in
the stages.
*
It is not clear why Rostow created separate stage of
drive to maturity which is similar to the stage of take off.
THE MARXIST THEORY OF
DEVELOPMENT
*
Karl Marx is a celebrated author of “Das Kapital”
*
He has been epitomized as Marx the prophet and is
ranked with Jesus Christ and Mohammad if we are to judge him by the number of
his followers.
*
He predicted the inevitable doom of capitalism and it
was on this basis that communism built its force.
*
His theory had the greatest influence in shaping
policies in Soviet Union, China and other communist states.
*
He contributed to the theory of economic development in
three aspects.
*
In broad respect of providing an economic
interpretation of history.
*
In narrow respect of specifying the motivating forces
of capitalist development.
*
In suggesting an alternative path of planned economic development.
-The premise of his theory
includes:
*
Materialistic interpretation of history.
*
This attempts to show that all historic events and the
result of continuous economic struggle between different classes and groups in
society.
*
The main cause of this struggle is the conflict between
“the modes of production”. This refers to a particular arrangement of
production in society that determines entire social, political and religious
way of living.
*
This mode of production relates to the class structure
in the society characterized by the following components:
*
The organization
of labor in a scheme of division and co-operation, the skill of labor
and the status of labor in the social context with respect to degrees of
freedom and servitude.
*
The geographical environment and the knowledge of the
use of the resources and materials.
*
Technical means and processes and state of science
generally.
*
According to Marx every society’s class structure
consists of the propertied and non-propertied
(the haves and have- nots, the bourgie and bourgeois)
*
He notes that as the society continuous evolving and
changing, the forces of production come to clash with the society’s class
structure.
*
This leads to class struggle- the struggle between the
haves and have-nots which ultimately over-throw the whole social system.
*
Surplus value
*
Class struggle is the outcome of accumulation of
surplus value in the hands of a few capitalists.
*
Capitalism, according to Marx, is divided into two-the
protagonists (the workers who sell their labor) and the capitalists who own the
means of production.
*
Labor power is like any other commodity in the market.
The value of labor power is the value of the means of subsistence necessary for
the maintenance of laborers, which is determined by the number of hours
necessary for its production.
*
If a laborer works for a ten- hour day but it takes him
six hours labor to produce goods to cover his subsistence, he will be paid
wages equal to six hours labor. The difference worth four hours goes into the
capitalist pocket in the form of net profits.
*
Marx calls this unpaid work “surplus value”
*
The extra labor that the laborer puts in and for which
he receives nothing, Marx calls “surplus labor”
*
*
Capital Accumulation.
He says that it
is the surplus labor that leads to capital accumulation and thus increased
profits to the capitalist. The
capitalist tries to increase surplus value and consequently profits by:-
*
Prolonging the working day in order to increase the
working hours of surplus labor. For instance, if increased from 10 to 12 hours
will increase the surplus value to 6 hour from 4 hours.
*
Diminishing the number of hours required to produce the
laborers subsistence. This would lead to reduced wages. For instance from 4 to
6 hours will result in surplus value increasing from 4 to 6 hours.
*
Speeding up of labor and increasing productivity of
labor. This is done through
technological innovation that will raise technological innovation that will
rise productivity and lower the cost of production.
*
Of the three, Marx notes that increase in production of
labor is the likely choice of the capitalist.
Thus in order to make improvements in productivity of labor the
capitalist save the surplus value, reinvest acquiring a large stock of capital
and thus accumulates capital.
*
Profits are therefore determined by the amount of
capital.
*
Marx separates capital into constant capital (C) and
variable capital (V). Constants capital is that which assist in productivity
and is invested in stock or raw material while capital devoted to the purchase
of labor power in the form of wages is variable
capital devoted to the purchase of labor power in the form of wages is
variable capital.
*
Hence to get total value of product (W), constant
capital(C) is added to variable capital (V) plus surplus value (S) i.e. W = (C
+V) +S.
*
He notes that one of the consequences of capital
accumulation is the concentration of capital in gigantic enterprises.
Competition among capitalist forces them to make their products cheap. Those
capitalists who are unable to replace labor by machines as a means of labor
save will be squeezed out and their enterprises are taken by big capitalists.
*
Capital accumulation and concentration involves
increase in constant capital and decline in variable capital. This, Marx says, creates huge industrial
reserve army and further worsens world condition of those in employment; as
capitalist can’t discuss with dissatisfied and trouble-some workers, they
replace them by the ranks of the reserve army.
*
He notes that capitalist are also able to cut down
wages to semi starvation levels and appropriate more and more surplus
value. This is what Marx calls “The law
of increasing misery of the masses”.
*
Capitalist crisis.
Marx argues that
as more labor is replaced by the machines, there is continual reduction of the
surplus value. He says more productivity
increases competition among the capitalist, leading to even more labor-saving
measures and cost reducing devices. This
includes longer working hours, wage reduction and speed ups of labor. The rate
of profits decline all the more, production is no longer profitable. Consumption dwindles as machines displace men
and the industrial reserve army expands, bankruptcies ensue and every
capitalist tries to dump workers as profits disappear. This is capitalist
crises.
*
The cause of economic crisis is poverty and limited
purchasing power. Economic crisis appears in the form of an over-production of
commodities, acute difficulties in finding markets, fall in prices and sharp
curtailment in production.
*
During the crisis, unemployment increase sharply, the
wages of workers are further cut down, credit facilities breakdown.
*
This state does not continue forever, however, as
revival soon starts. The low level of
prices, cut down in wages, elimination of speculative ventures and destruction
of capital tend to raise the profit which eventually leads to new investment,
and the whole cycle of depression, recovery, boom and burst is repeated again.
*
Marx says in each period of crisis, stronger capitalist
expropriate the weaker capitalists and along with it grows the indignation of
the working class, which he predicted will increase in numbers, be disciplined,
be united and organized and will eventually seize power and expropriate the
expropriators.
*
Marx provides the economic explanation of the necessity
and inevitability of the revolutionary transformation from capitalists’
society.
*
Capitalism, according to Marx, will lead to proletarian
revolution whereby the dictatorship of the proletariat is established, poverty
will disappear. The state will wither
away and each individual will contribute to national income according to his
abilities and receive income according to his needs. Socialism replaces
capitalism.
CRITICAL APPRAISAL OF MARX
THEORY.
*
The whole Marxian analysis is built on the theory of
surplus value. This surplus value is
unrealistic as a in the real world, we are concerned with real tangible prices
not values.
*
Marx has proved to be a false prophet.
The evolution of
societies that followed socialist ideology did not develop along times
presented by Marx. In fact these
countries were not capitalist but were poor and still are poor compared to
capitalist states.
There are no
increasing of miseries in advanced capitalist societies instead, working conditions
and wages have substantially increased over the years and the middle class
instead of disappearing has remain dominant.
The state has
not withered away; instead it’s the communist states behind ‘the iron curtain’
that discarded communist ideology including their patron saint-the soviet
union- which not only embraced capitalism but disintegrated into 15 independent
republics.
*
Marx contends that with increasing technological
progress the industrial reserve army expands.
In fact technology is the engine that drives the economy leading to
increased creation of jobs.
*
Marx contends that as development proceeds there is an
increase in organic composition of capital which brings about a decline in the
profit rate. But Marx failed to
visualize that technological innovations can be capital saving too, and that
with a fall in capital-output ratios and increase in productivity and total
output, profits can rise along with wages.
*
Marx also could not foresee the emergence of political
democracy as a protector and preserve of capitalism. The introduction of social security measures,
anti-trust laws and the mixed economies have given a lie to the Marxian
production that capitalism contains within itself the seeds of its own
destruction.
AFRICAN
DEVELOPMENT-OBJECTIVES
Structural
characteristics of the African economy 70s & 80s.
We have seen in
our proceedings discussions, African structural development problems have been
identified as including mass poverty, population explosion, lack of technology
under-utilized natural resources, over-dependence on primary production; heavy
resources over dependence or primary productions; heavy reliance on
agriculture; foreign debt burden; lopsided policies in favour of urban areas as
opposed to rural areas; poor weather conditions and drought and poor economic
policies.
The African
continent began to experience structural development problems as early as
1970s. These problems were caused by
both external and internal factors.
External factors: most of the African countries, in the 19790s and 1980s
experienced external shocks in the form of:-
*
High prices of oil and manufactured goods: constant
petroleum product price raises from the OPEC countries in the 1973, 1975, 1979,
1981 and 1984, cause high inflation resulting in increased poverty among the
African people.
*
Trade imbalance: - in the two decades under
consideration the agricultural product prices in the international trade
declined drastically yet manufacturing product prices in the international
market remains constant, hence most of the African countries suffered from
imbalance of trade in the international scene.
This
caused the problem of inadequate foreign exchange; hence the acquisition of
physical capital from developed countries to be used in development process in
these countries was hindered.
*
Foreign Debt- In the same period most African countries
also realized the problem of foreign debt burden in their economies.
-for
instance by beginning of 1980, the total African foreign debt was US$230
billion.
-Therefore
most of African countries find it rather difficult servicing the foreign
debt. This also increases the rate of
poverty levels in the domestic economies.
*
Foreign policies/Aid:- by late 1970s most African
countries experienced difficulties in accessing foreign assistance from Global
financial institution such as World Bank, IMF e.t.c. as well as bilateral
assistance from friendly government.
Instead
these aid agencies came up with stringent economic policies such as the
structural adjustment programmes (SAPs), which has caused great suffering to
the vulnerable members of the societies in these countries.
(b)Internal
Shocks
*
Draught/Poor weather-Most African economies to a large
extent depend in agricultural activities which entirely on weather conditions
prevailing in a country. Kenya for
instance suffered poor weather in 1982 and 1984, which was responsible for mass
poverty and famine, since most communities living in ASAL areas lost their
livestock in large numbers
*
High inflation Rate:-due to constant increase in the
oil prices the level of inflation had been sky rocketing.
These
impacts negatively in the purchasing power of the people increasing poverty
level of people
*
Poor infrastructural Development- Infrastructure in
development is the supporting capital.
Development will be hindered by poor infrastructure.
LAGOS PLAN OF
ACTION (LPA)
To address both
external and internal shocks the African economies, the African countries
ministers of foreign affairs and economic affairs met in Monrovia Liberal,
1979. They discussed Africa’s structural development problems and possible
development strategies or objectives. The Monrovia meeting drafted three main
African development strategies or objectives. The Monrovia development
objectives were ratified by OAU heads of state meeting in April 1980 in Lagos,
Nigeria. This came to be known as Lagos
Plan of Action (LPA) the objectives
*
Alleviation of poverty and raising the welfare of
people.(Human-centered development objectives)
*
Establishing a self sustaining process of economic
growth and development. (Sustainable
development objectives).
*
Integrating the African economies national and regional
collective self reliance (economic integration objective).
1. Human Centered Development Objective
This objective aims
at alleviating poverty and raising the welfare of the African people. The
ultimate goal of development in Africa is to ensure the overall well being of
the people through a sustained improvement in their living standards. It is through this aspect of development that
underlies all other objectives that Africa can embrace economic social cultural
or political.
The realization
of this objective of raising the welfare of the people has proved elusive. Instead there has been increase misery and
suffering for most of populations increase absolute poverty. The urgency of
alleviation of mass poverty should not only be rooted in the humanistic aspect
of development but should focus on encouraging the full and the active
participation of the people themselves.
To achieve and
sustain development it is necessary to ensure the education and training,
health, well being of the people in order to enable them participating fully
and effectively in the development process.
The attainment of food self sufficiency as an objective call for change
in the food consumption patterns in the regions and undertaking of the effort
to maintain population growth at sustainable levels. To ensure accessibility to the goods and
services there is need to provide income generating opportunities to the poor
by involving the following considerations:-
*
Maintenance of sustained economic growth.
*
Transformation of African economic and social
structures
*
Maintenance of sustaining resources
The social
economic transformation should be beyond merely looking at the factors carried
with a process of economic and social modernization that focus only on how to
increase the patterns of production, consumption and institutions that
prevail. Transformation should
incorporate African values in the choice of technologies. In transforming the production process the
tools needed should include.
*
Increasing the productivity and efficiency of
resources.
*
Decreasing the dependence on external resources
*
Ensuring a broad based participation of the people in decision
making.
3. Economic
integration Objectives
The motivation
for Africa to pursue a deliberate objective of collective self-reliance should
deeply be based on in the imperatives of the regions’ historical experiences
its unique cultural heritage, as well as current national and global
realities. Self reliance should be seen
as both the goal and means through which the region will eventually fund its
identity and full dignity. African
economic integration aims at solving the problems balkanization of African
states economies especially with regards to disintegrated socio- economic
infrastructure and under utilization of available African production
resources. The Lagos plan of action
intended to achieve this by the end of the century.
Among the regional
economic blocs that have been active even before the Lagos plan of action
include:-
*
The East African community
*
Economic community of West African States (ECOWAS)
*
Southern African Development Cooperation(SADC)
*
MAGHREB Union.
From these
initial efforts early into the independence of African countries, economic
integration, through an Africa wide economic integration; has not been
achieved, significant progress has been made in the recent years, with the
formation of COMESA (Common Market of Easter and Southern Africa Countries)
NEPAD (New
Partnership for African Development)
NEPAD has
renewed hope for African Development. It
is hoped to play a major role in the development process of Africa. NEPAD is the outcome of efforts instituted by
World Bank economic commission for Africa’s search for development solutions
from the impoverished African continent and was launched in 2002 in
Johannesburg, South Africa.
With the
formation of African union from the moribund OAU, NEPAD represents new thinking
in the management of econ-political affairs of the African states unlike OAUs
policy of non-interference in the internal affairs of its member state. The main aim of NEPAD is to attract capital
inflow from development partners from outside Africa, to direct their
investment to African states, to upgrading the region infrastructure to address
the African debt problem; and unemployment.
NEPAD is also a developmental forum of network linking Africa and the
rest of the world.
Areas of
Economic Integration
*
Scientific research and institution of higher learning.
*
Customs union-taxation on goods arriving in the
continent from outside.
*
Infrastructure Development e.g. the great north road,
Tazara railways, Benguela railways; the proposed Kenya-Sudan railways.
*
Intra and inter African trade.
Common
utilization of natural resource such as Lake Victoria, rivers Congo, Zambezi
The New Partnership for Africa’s Development (NEPAD), formerly known as the New
African Initiative, is a pledge by African leaders, based on a vision to
eradicate poverty and to place their countries, both individually and
collectively, on a path of sustainable growth and development, and at the same
time to participate actively in the world economy and body politic. The programme is anchored on the determination
of Africans to extricate themselves and the continent from the malaise of
underdevelopment and exclusion in a globalizing world, Allan, Colm and Zohra
Dawood (2002)
THE ROLE OF
NEPAD N AFRICA
NEPAD and
effective state.
The partnership
aspect of NEPAD is clear in urging the African countries to: Organize dialogue
between the government and the private sector to develop a shared vision of
economic development strategy and remove constraints on private sector
development. “NEPAD document, par 164). The division of labor is more
articulated in NEPAD Annual Report 2002 which clarifies that”. NEPAD presents a
new paradigm in development thinking on the African continent- that states and
markets are complementary partners in socio-economic Development. It is
imperative that African government strive towards creating an enabling,
market-friendly environment in the development process. Private sector will be
the veritable engine of economic growth while governments concentrate on the
infrastructure and the development and the creation of the enabling
environment.”
NEPAD and
civil society: the weak part in the partnership project?
While the
partnership between the state and the private sector and the initiatives taken
to promote the role of the latter were given much concern in the last four
years, rhetorically and practically, the partnership with civil society
organization for development has not attracted the same extent of concern. Although the various documents and reports of
the initiative emphasize the role of civil society organization, much emphasis
is put on its integration in the NEPAD process as a channel for popular
participation in the initiative rather than on drawing a partnership in
development projects.
Areas of
Economic Integration in NEPAD:
*
Scientific research and institution of higher learning.
*
Customs union- taxation on goods arriving in the
continent from outside.
*
Infrastructural Development: e.g. the great north road,
Tazara railways, Benguala railways; the proposed Kenya –Sudan railways.
*
Intra and inter African trade
THE ROLE OF
NEPAD ON KENYA’S DEVELOPMENT DISCOURSE:
NEPAD has
renewed hope for Kenya and also African Development. It is hoped to play a major role in the
development process of Africa. NEPAD is
the outcome of efforts instituted by World Bank economic commission for Kenya’s
search for development solutions to myriad of problems
Democracy and
Good Governance:
This is another
aspect of NEPAD that Kenya values greatly. In 2002 Kenya voted overwhelmingly
for an accountable, transparent and people-driven government, putting behind
Kenyan unsatisfactory experience as a nation in the previous 40 years. NEPAD
encourages democratic and peaceful politics that are accountable to the voter,
and Kenyans has chosen that path for itself. NEDAP is perhaps most famous for
this aspect of development.
Increasing
foreign direct Investment
This is another
aspect that NEDAP programme that we in Kenya value greatly. At the moment Kenya lags behind Uganda and
Tanzania in attracting foreign investors to the country. Kenya needs both domestic and foreign
investors in order to create jobs for its people who have no employment, or
sources of income. Under NEDAP, a comprehensive programme of attracting foreign
investment in Africa has been designed.
The African
Peer Review Mechanisms (APRM)
Kenya was the
first of four African countries to undergo the APRM. The other countries are Ghana, Rwanda, and
Mauritius. The APRM is actually a toll
of improving good governance in Africa.
It starts with an internal self review process under which ordinary
citizens asses how well their government is serving them.
The NEPAD E
–Schools Project:
NEPAD aims to
bring modern information and communications technology to African schools, so
that our children have full computer literacy when they leave primary schools.
Promotion of
small and medium enterprises
Kenya should
also provide incentive for more investments and employment creation by the
formal sector in public or private. That
is why NEPAD’s effort to increase foreign investment in Africa is so relevant
to us.
Promotion of
Privatization of Government Parastatals
President Hon.
Mwai Kibaki announced the Government’s divestiture of 9% ownership in Safaricom
to enable Telkom Kenya to discharge its obligations, prior to privatization at
the Nairobi Stock Exchange in a few months time Kenya expects to create an
additional 200,000 jobs in the communications sector as a result of
liberalization in the telecommunications industry.
Promoting
Kenyan farmers
Kenya farmers
went through a very difficult period especially in the 1990s. Rural roads construction and cheaper
communications network will assist the farmers increase productivity.
Improving
Road Network
Kenya
infrastructure rehabilitation project has taken it much longer than it was
anticipated in 2003. New roads have been
built, construction of stalled government buildings is at a very advanced stage
all over the republic, but the pace has to be accelerated. Kenya Railways together with Uganda Railways
have already been “considered” to on private company for 25 years. Again, Kenya expects this to create
additional jobs and to make rail transport within Kenya more efficient and
affordable. All this will help the local
economy in districts like this one and others. NEDAP supports an international
road network that links African countries.
Good roads help people and goods to move. In Kenya there is the great north road from
Namanga to Moyale, and the northern corridor from Mombasa to Malaba.
CRITICISM OF
NEW PARTNERSHIP FOR AFRICAN DEVELOPMENT NEPAD
NEPAD is
based on the wrong assumption
NEPAD is based
on the wrong assumption that countries of the North, particularly the G8
countries, are interested in helping Kenya develop. This is at variance with evidence of
history. The North seems to have fully
internalized Newton’s Third Law i.e. that for every action, there must be equal
and opposite reaction. This is what industrialized
countries and the global institutions they control have done with all the
previous home-grown African development initiatives
NEPAD is
premised on an elusive economic framework
NEPAD is
premised on an economic framework that cannot take Kenya in extension, Africa
out of the present development crisis simply because it is the one responsible
for it. This is explicitly recognized in
the NEPAD document itself. It proposes a
regime that has been forced down the throats of Kenyan leaders for the last two
decades under SAPs. According to the
authors of NEPAD, we should, as a matter of policy, concentrate all our efforts
in creating an attractive environment for Transnational Corporations, so that
industrialized countries would be encouraged to put their money into Africa in
the form of foreign direct investment (FDI)
NEPAD is
undemocratic
Popular forces
in Kenya the farmers through their associations, the workers and their unions,
the civil society and their organizations, the indigenous business community,
women and their organization and the professionals and intelligentsia were not
consulted, let alone involve in the development of the initiative. As the adage goes, “you cannot shave a
person’s head in his absence. “ If NEPAD
is about Kenya’s development, why were ignored? Now East African presidents are
also crying foul as far as their participation is concerned
NEPAD is a
begging bowl
It is a
contradiction in perception and practices that while the rhetoric of NEPAD
decries our dependence on aid and declares that trade and investment is the way
out, leaders are in a hurry to have G8 commit aid resources for NEPAD. What is the resource envelope? Some US$ 64
billion. One wonders whether or not the
leaders are aware that by fighting trade barriers in the North they would have
more resources for development than this pittance they are begging
NEPAD speaks
the language of the industrialized countries
Civil society
has only started to engage with NEPAD, but the response from African NGOs
Unions and intellectuals largely criticize the neo-liberal paradigm of NEPAD
that they suspect to be very much the language of the industrialized countries,
particularly the G8. For example, the African Forum for Envisioning Africa:
Focus on NEPAD concludes, NEPAD follows the same neo-liberal principles that
under heavy criticism by civil Society worldwide and responsible for increasing
gaps between rich and poor and result in economic disasters such as the recent
clashes in Argentina. In spite of the recognition of the central role of the
African people, civil society has not played any role in the conception, design
and formulation of NEPAD.
NEPAD can be
enhanced in Kenya through:
*
Governance, Security and the Rule of Law should be
enhanced to promote the positive role of NEPAD to Kenya.
*
Improving Kenya’s infrastructure in such areas as roads,
rail, energy, water and sanitation this will make the fruits of NEPAD to be
realized.
*
Revitalizing productive sectors with special emphasis
on agriculture and livestock, tourism, mining and manufacturing will ensure
that the realization of NEPAD benefit.
*
Macto0economic stability or, in other words, low
inflation (5 percent), stable exchange rate this will make Kenya to benefit
from NEPAD.
*
Interest rates, and low government deficit has to be
tackled to attract NEPAD market.
*
In addition ERS gives considerable attention to the
people living in arid and semi-arid lands, the need for equity in the
distribution of government resources, and the need to protect our environment.
GENERAL
BENEFITS OF REGIONAL INTEGRATIONS
· They create a large market for goods to be
bought and sold.
· They have helped to create harmony and
cooperation among the member states.
· Reduction of tariffs makes the goods cheaper
to the people in the region.
· The expanded market for goods has promoted
industrial development as the demand for goods increases.
· Availability of goods has promoted higher
living standards among the people in the regions.
· Expansion of agriculture and industries has
created employment opportunities.
· Inter-state trade has encouraged the
development of transport and communications.
· The member states have put funds and
resources in common pool, in order to invest in joint development projects.
· Trade in the regions has boosted agricultural
development as trade and industrial development depend on agricultural raw
materials.
· Inter-state trade has reduced the reliance of
countries in Africa on goods and services from other parts of the world.
· The presence of common market has made it
easier for goods to be readily available to the people of the region.
PROBLEMS
FACING REGIONAL INTEGRATIONS
1) The civic wars taking place in some countries
cause insecurity, which affects trade between the countries e.g. Somalia.
2) Political differences among leaders of the
member states, may affect cooperation among the member states.
3) The member states are not at the same level
of industrialization, making some countries to rely on those that are
industrialized. For example, Kenya, Egypt, South Africa and Nigeria are more
industrialized than other members in their groups.
4) Some of the countries produce similar goods,
making the volume of trade to be low and less rewarding.
5) Free trade affects local industries, as the
imported goods without taxes are usually cheaper than locally produced goods.
6) Free trade denies the importing countries the
revenue they would have earned from taxing imported goods.
7) Poor transport and communication linkages
between member states limit inflow of goods and services.
8) Some member countries do not remit their
annual subscriptions, which affect the operations of the organizations.
9) The flow of goods and services between the
states is still low because of poverty among the majority of the people in the
region.
10) Some people in the countries do not believe
that goods made in the neighbouring countries are of good quality. This reduces
the demand for goods in the region.
11) There is also a problem on multiplication of
regional integration blocs.
12) Trade imbalance and foreign debt.
13) Corruption
14) Bad governance
15) Poor climatic conditions
SECTORAL
DEVELOPMENT OF KENYA’S ECONOMY
The economy of
each country is subdivided into sectors and sub sectors. The development of a country therefore
depends on the development and growth of each of these sectors. Government therefore is charged with
formulating the right policies to generate/spur growth in these sectors. Among
the major sectors that contribute significantly to our economy include:-
*
Agriculture
*
Tourism
*
Informal sectors and formal sectors
*
Industrial (manufacturing sectors)
*
Service sectors.
TOURSIM
Tourism is the
art of traveling for leisure. It is a
business of providing holiday and entertainment for others. A tourist is person who travels for pleasure
and of adventure. Tourism has
outstripped major agricultural commodities such as tea and coffee as the single
most major contributor in the economy of Kenya, though in the recent years it
has experienced decline due to localized techno political clashes in major
tourist circuits in the coast and adverse travel advisories issued to citizens
by western countries, over threat of terrorist attacks. Tourists come to Kenya
to view the country’s rich bio diversity and pre historic sites: especially the
wildlife. Tourism requires political
stability and good infrastructure for it’s to thrive.
SIGNIFICANCE
OF TOURISM
A part from
earning foreign exchange for the country, tourism is also significantly
contributing to the country’s economy.
*
Offering substantial employment opportunities directly
and indirectly to thousand of Kenyans.
*
Providing market for locally produced goods such as
wood carvings.
*
Providing socio-economic infrastructure such as roads
in rural areas.
*
Cultural exchange between different people of the
world.
*
Leads to improvement of information technology between
countries
Challenges facing Tourism
*
Pouching- This is encouraged through the availability
of market of pouched items e.g. elephant tusks, skins of leopard, lion claws
and teeth and other game trophies.
*
Tourism is associated with the increase drug abuse
among the youths.
*
Increase in crime rates: Presence of tourists attract criminals especially
thieves and robbers who intend to rob tourist of their valuable things like
watches, jewelry, vehicles and money,
*
Change in social values: Tourist from diverse
background may lead to erosions of some social values of local people who may
prefer the foreign culture e.g. increased commercial sex in the coastal town of
Kenya.
*
Over emphasis of tourism: A country tends to emphasis
on development and improvement of Tourism sector at the expense of other
sectors of the economy. They allocate more resource and leave others
undeveloped.
*
Shortage of hotel accommodation during peak season:
Lodges and hotels may be fully booked for several weeks leading to shortage in
accommodation facilities. This
discourages domestic tourists.
*
Effect of tourism on wildlife and environment: When vehicles transporting tourists in the
parks and game reserves they have negative impacts on the habitat. It includes
disruption of animal feeding and environmental pollution by tourist vehicles.
*
Excessive taxation in the tourist sector: Tax being
charged in parks and reserves section seems to be higher as compared to other
regions. This combine with excessive tourist hotel charges discourages
tourism. Some foreign tourists have
attempted to re-direct their traveling from Kenya to the neighbouring countries
such as Tanzania and Uganda.
*
Negative publicity abroad: Because of insecurity that
most foreign tourists have faced in Kenya has been negative published in the
western world in a way that reduces the number of foreign tourist cong to
Kenya.
*
Inadequate infrastructure: This is due to poor road network joining
tourism centers fro exam during rainy seasons the roads are impassible.
*
Human activities: These include mining, agriculture,
road construction which interferes with the environment by destroying the flora
and fauna forcing the animals to migrate.
*
Terrorist attack- August 7, 1998 and December 2002,
paradise hotel attacks have created a fear of terrorist attacks, with western
countries advising their citizen not to visit Kenya. A part from the fear of Terrorism, the likoni
clashes of 1997, created a climate of fear and political instability that lead
to a steep drop in the tourist arrivals.
*
Inadequate infrastructure-there is poor road network in
Kenya particularly in rural areas where wild life sanctuaries are
situated. Beside there is inadequate
water and electricity supply in hotels.
*
Exorbitant charges in hotels and national parks have
stunted the growth of domestic tourism.
Reliance on western European and American tourist arrivals
How to overcome problems
facing Tourism
*
The government need to improve security situation by
increasing security patrol in areas affected, for example hotels, airports,
national parks. To achieve this the
government have formed a special tourist police post with a specific trading to
protect tourists facilities and tourist activities in the country in general
*
The government should train adequate game rangers and
wardens who are meant to ensure safety.
The government with the assistance of UN should ban trade in animal
products and trophies e.g. tusks of rhinos’ horns as well as lion, leopard,
cheetah, snake, and crocodile skin.
*
Kenya security personnel should be trained on ways of
detecting and countering modern terrorism, security installation at the airport
and tourist resort has been upgraded.
*
The government through wildlife management and
administration should protect wildlife by prosecuting those who encroach on
wildlife fields.
*
Studies need to be undertaken before human activities
e.g. mining are carried out to ensure minimal damage to the physical
environment. Areas where such
destruction has occurred need to be rehabilitation.
*
Government through national environmental management
Authority (NEMA) has to establish controls and standards to check environmental
pollution. Inspection of factories and
industries regularly to ensure affluent is treated according to the prescribed
international standard before being released.
*
Government has to inspect tourists at departure point
to ensure unlicensed trophies leave the country.
*
The government has also established tourism development
authority which has been given the mandate to manage and formulate the tourism
policies in collaboration with tourist ministry.
2. The
informal sector
The UN’s
International labour organization (ILO) was the first emphasis eth importance
of the informal sector in Kenya. In
their report 1972, they defined the informal sector that portion of the urban
economy that escape enumeration of official statistics. Among these include the
street vendors, the shoe shiners, the open air market operators, open garages,
furniture’s markets and repairers, the maize roasters, the cart pullers, the
news paper sellers and the kiosk owners.
This refers to the whole operation referred to as the “Jua Kali” in
Kiswahili.
The informal
sector could also be defined as a small scale production and service sector
between the formal and traditional sectors.
This sector is therefore characterized by economic activities, which
take place both in the rural and urban areas.
The activities could either be legal or illegal. The activities could either be legal or
illegal. The government rarely supported
and often regulated if not sometimes deliberately and forcefully discouraged
largely ignores the informal sector.
Characteristics
of the informal sector
*
Ease of entry
*
Reliance on indigenous resources
*
Family ownership of the enterprises
*
Small scale of operations.
Industrial
The development of this sector
also means that the sophisticated tools and equipment are available to be used
to enhance the appropriate utilization of the available natural resources. This
sector tends also to be somehow stable and therefore the high degree of its
development may imply that the economy in general is likely to be stable. In the same note, the prices of goods that
originate from this sector are also stable and are likely to generate stable
income, hence high growth on GDP of the country and per capita income. More people are also likely to be employed in
this sector releasing pressure on the primary and agricultural sector.
Significance of industrial and
informal sector in Kenya
*
Earn foreign exchange. Kenya exports a lot of her
products; this earns her a lot of money which can be used to develop other
sectors like education, health care, and transport.
*
Create employment opportunities. Many people get
employed in the industries and earn income; their living standards are
therefore raised.
*
Leads to improved infrastructure. When an industry is
developed in an area transport in a community, network is developed and also
power and water supply become adequate.
*
Leads to increased agriculture production. Many
agricultural based industries in Kenya get their raw material from farming
activities. With the establishment of
more industries, agricultural products will have to be boosted to meet the
rising demand of raw material.
*
Leads to favourable balance of Trade. A country that is
industrialized is able to maintain a healthy balance of trade with its trading
partners. This is because
industrialization reduces over reliance on imported products. This helps the country save foreign exchange.
*
Leads to diversification of economy. Kenya mainly
depends on agriculture. Adverse climatic
conditions may result in crop failure and so limit the country’s source of
revenue. It is therefore important for Kenya to diversify its economy to avoid
overlying on a single sector of economy
Problems/ challenges facing
industrial and informal sector in Kenya
*
Lack of entrepreneurship skills.
*
Poor social-economic infrastructure; this hinders the
transportation of raw material from the farm to the industries and the finished
products to the market. There is also
low production in industries due to shortage of electricity supply.
*
Insecurity. Inadequate security causes the workers to
be unstable from performing the duties; terrorism may also bring down
industrial buildings due to bomb blasts’.
*
Frequent fires may occur, bringing down industrial
buildings thus causing losses.
*
Poor management in the industrial sector due to
nepotism, tribalism and favoritism among employers
*
Inadequate manpower due to qualification required in
the industry. People may not have such qualification or techniques
*
Unfavourable terms of trade e.g. lack of incentive,
high value added tax (VAT)
*
Influx of foreign investors producing goods of low
quality thus bringing unnecessary competition in the local industries
*
Overdependence of foreign technology that will force
workers to be retrained and retrenched.
Ways of overcoming problems
facing industrial development
*
The government should provide incentives to the
industries like export processing zone (EPZ), reducing the VAT among other
things.
*
Encouraging mass education as well as technical
education to eliminate high rate of illiteracy
*
To encourage the highly educated to get involved in
scientific research in order to acquire modern technology.
*
To promote informal sector as a means to develop
appropriate technology as well as entrepreneurship skills which will be used
later in the manufacturing sector in Kenya.
*
Kenya government has to establish some specific public
banks and parastatals to assist in the process of industrializing the Kenya
economy.
*
Through institutions of higher learning, the government
has to try to encourage scientific innovation at university as a means of
acquiring the modern technology.
*
Encouraging the industries to insure their workers and
their property, so as to avoid occurrence of losses.
*
The government should improve the infrastructure all
over the country; this includes feeder roads, telecommunication facilities and
provision of electricity and any other social amenities.
*
The government should encourage local investors and
controlling the number of foreign investors
*
Political instability like wars, clashes and uprising
affects industrial development
*
HIV/AIDS pandemic reduces the effectiveness of workers
in the industry. The government should assist in providing control measures.
*
Migration of skilled workers to other countries leading
to brain drain.
Factors required for the
development of industrial and informal sector
*
Availability of raw material could influence the rapid
development.
*
Good socio-economic infrastructural network and
supportive capital
*
Availability of managerial ability or entrepreneurship
skills
*
Availability of capital.
*
Availability of market
*
Availability of human capital.
*
Political stability and security
*
Availability of advanced technology
MANAPOWER DEVELOPMENT
Manpower planning relate to the
long range development of semi-skilled and skilled manpower requirement of the
economy, and to plan educational priorities and investment in human resource
development so as to enlarge employment opportunities in the future. There are
three ways of approaching man-power planning in less developed countries
*
Identifying skilled manpower shortages in each sector
of the economy and reasons thereof.
*
Identifying manpower surpluses in both the modernizing
and traditional sectors and reasons for such surpluses.
*
Laying down a strategies for man power planning
Challenges facing manpower
development
*
There is a shortage of highly developed
manpower in all LD’s.
Such manpower
includes; scientist, engineers doctors, agronomists and veterinarians. They
live in cities and do not like to move to rural areas, where their services are
needed a lot. Thus their shortage is
increased by their relative immobility.
Reasons for their shortages
*
Failure to recognize on the part of LD’s that the
requirement for such sub-professional manpower is many times higher than the
professional personnel.
*
Few persons who are qualified to enter a technical
institute prefer to enter a university because the holder of a university
degree has a higher status and pay.
*
The chances available in the technical institute are
very few compared to the Universities.
*
Invisible shortages
There are invisible manpower
shortage in the farm of unfulfilled jobs in the LDC’S despite wide spread
unemployment and underemployment. In the
majority of establishments, person with the requisite skills are not available. This affects adversely productivity and
production of such establishments.
*
Frictional shortages
The LDC’S also experience
frictional manpower shortages due to the lack of organized employment market,
to the increase in sudden market demand for man-power in labour shortage
regions, and immobility of labour.
For example; agricultural
transformation and urbanization has created such shortage.
*
Replacement of foreign personnel
There is current manpower
shortages of highly skilled manpower at the top level in the LDC’S of African
& Gulf countries due to the replacement of foreign personnel
Manpower surpluses
This relates to both skilled and
unskilled worker available for and in-such of gainful employment. The manpower surpluses in LDC’S consist of
the following categories.
*
Underemployment (open & disguised unemployment)
*
Educated unemployed & underemployed. This refers to
those persons who have obtained at least a secondary certificate but are not
employed.
*
Urban un-employment and under-employed.
Strategy For manpower development (How to overcome)
*
Building of incentives. In LDC’S people should be
encouraged to engage in such productive activities needed to accelerate the
process of economic development
*
Training of Employed manpower. The 2nd important plan for the
strategy of human resource development is to upgrade.
The
qualification and improving the performance of employed manpower in strategic
occupations. For this purpose, efforts
should be made to develop management training programmes, supervisory training
courses, productivity centres, and institutes of public administration.
*
Development of formal education
The 3rd
component of the strategic for man planning is the building of the system of
formal education. The LDC’S should give top proprieties to secondary education
because it is the secondary-level education persons who are needed at all level
in government, industry, commerce and agriculture. They are also required to replace foreign
labour force to meet manpower requirement of our growing economy.
INFRASTRUCTURE
Infrastructure is all that deal
with transport and communications.
Transport is the physical carriage and movement of goods and people from
one place to another. Transport facilitates
the growth of different sectors of the country’s economy. Factors of production and finished goods are
all moved from place to place using means such as roads, air and railway.
Communication is the whole
process of transmitting or exchanging information between persons. It promotes understanding and unity by
linking people in different places. We
have verbal, written and Audio-visual communications
Roles of infrastructural
sector in Kenya.
*
Transport and communication services offer employment
opportunities to many people including drivers, mechanics, engineers,
journalist broadcast and computer programmers.
*
It has led to improvement of in settlements. Opening up of rural and remote areas has
resulted to development of settlements as people embark on exploitation of
natural resources in these areas.
*
It assists in the administration of a country as it
makes provision of essential social services easy and ensures implementation f
government policies.
*
Has promoted international understanding by encouraging
by cultural economic social interaction.
*
Trade has been boasted through transportation of trade
items. This has promoted trading
relations and exchange of ideas hence boasting economic development.
*
It has facilitated the exploitation of natural
resources, which provide raw materials for industries.
*
Has facilitated expansion of industries due to
availability of raw materials thus industrialization in Africa hence mass
production of industrial goods.
Challenges facing
infrastructure in Kenya.
*
Kenya lacks adequate access to modern transport and
telecommunication facilitates skilled labour and technical support on how to
make it effective.
*
Physical barriers like mountains, rapids, hills and
rugged terrain hampers the construction of transport and communication
infrastructure.
*
Inadequate capital has affected the type and quality of
infrastructure, since establishment of transport and communication systems
require heavy capital investment.
*
Lack of integrated traffic system due to the absence of
unified transport system creates problems in inter-state movements.
*
Presence of heavy rainfall has made it difficult and
expensive to construct transport systems.
*
Political instability due to war, violence has led to
destruction of transport and communication systems like post-election violence.
*
Kenya’s transport system is mainly inherited from the
colonial masters who were interested in external transportation than
inter-regional transportation. This
fragmentation resulted to lack of compatibility and continuity in Africa’s transport
system while standardization of the system is very expensive.
*
Most rivers in Kenya are not navigable due to presence
of rock obstacle, rugged nature of the land, presence of hyacinth shallowness,
seasonal fluctuation of water and siltation process thus hindering
transportation.
Possible solution to these
problems
*
The government of Kenya should take a step of
establishing other types of transport like air to reduce the pressure on land
transport.
*
More personnel should be trained in technical skills
required in the establishment and management of transport and communication
systems.
*
The government should use grants and loans from large
international financial bodies like World Bank to improve and establish
transport routes and communication facilities.
*
The law-keepers should take action against poor road
users.
*
Leaders should encourage regional economic development
through establishment of regional trading blocs which unite to construct roads
plying between two countries
*
The government should set up several ground satellites
and radio-Television boosters like Longonot in order to improve the existing
telecommunication facilities
*
The government should consider the state of security in
the country and political stability to avoid emergency of wars, conflicts or
chaos.
*
The traffic department in Kenya should set up
integrated traffic system to avoid inter-state movements.
AGRICULTURE
Agriculture is the art of
producing cash crops and food crops for the purpose of ensuring food security
or adequate food supply for the people in a particular area. Cash crops which form part of raw materials
for industrial development as well as for export to earn foreign exchange which
people in a given community may use to acquire other commodities which they may
not produce locally. In a broader sense
agriculture may not only include food and cash crops production but also
livestock production.
Kenya is an
agrarian economy and agriculture is described as the backbone of the economy.
Over 70% of Kenyans are involved in subsistence agriculture, while tiny
fractions of the population are involved it plantation agriculture. Agriculture
is practiced in Kenya is:-
*
Dependent on nature rain fall
*
Poor marketing or complete lack of marketing by the
state of perishable commodities.
*
Use of high yielding varieties
*
Application of pesticides and fertilizer
Among the
development strategies adopted by the government include the formation of the
AFC, the ADC among other parastatal cooperative societies engaged in marketing
of agricultural goods, regulation of the market research and development and
provision of credit facilities.
Agriculture forms the backbone of
the economy of Kenya and East African despite the concerted efforts of
industrialization in the last two or three decades. Agriculture occupies a place of prime. Being the largest industry in the country,
agriculture is the source of livelihood of over 70% population in East
Africa. The following facts may be
emphasized in relation to agriculture.
*
Agriculture contributes a high share of the national
income. In east Africa .For instance, in
Kenya it actually contributes over 40%.
To be specific, approximately 60% of the national product or the GNP of
Kenya is being derived from agricultural sector. This underscores the significance of this
sector in Kenyan economic development.
While this trend is a appreciated and also common in most developing
countries; the truth is that the development efforts should be geared towards
reversing the trend to be in line with what is happening in other developed
countries, where-by the contribution of agriculture in GNP is in the
decline. For instance, a developed
economy e.g. U.S.A, the trend has been in the decrease only about 10% of the
USA GNP may come from agricultural sector.
This shows that in developed economies other sectors e.g. industrial,
tertiary and service sectors tend to play an importance role as opposed to
agricultural sector. To achieve this
trend as it is in developed economies it means that the region or the country
must have developed her technology and also acquire improved or well trained
human capital.
*
The share of agriculture in National income has been
decreasing steadily. Agricultural sector
may be considered to be a traditional sector and all efforts towards
development must start by developing agricultural sector. In other words at the initial stage of
development agricultural sector has to play an important role hence
contributing the large share of GNP. But
as the economy of the country concern is developing, then the role of
agriculture need to be in the decline.
All the currently developed economies started by developing agricultural
sector. But as modern technical know-how
was being acquired and directed to other sectors e.g. industry and service, the
role of agriculture declined.
*
Agricultural activities in any given region or country
may be divided into two sectors
*
A large scale (plantation) sector which to a long
extend has been associated with colonial powers and it is also highly
mechanized, being oriented towards the production of mainly cash crops and it
of commercial in nature. For instance,
in Kenya these were mainly predominant in highland areas whereby cash crops
e.g. tea, coffee were being produced in large scale.
*
Another important sub-sector of agriculture as oppose
to large scale farming is small scale farming.
In East Africa and Kenya in particular small scale farming has been on
the increase as opposed to large scale farming since independence. Form the production of both food and cash
crop. Currently, even the cash crops
formally produced in large scale production (tea, coffee, sugarcane) are all
being produced by small scale farmers.
*
Agriculture has been the main source of livelihood in
Kenya. Seven out of ten people depends on agriculture. This is so because other sectors in the
economy e.g. industry and service has not yet develop to the point of absorbing
or supporting the extra population’s livelihood.
*
Agriculture dominates an economy to such an extent that
a very high proportion of working population is engaged in agriculture. For instance about 60% of the Kenya’s working
force is engaged in agricultural sector as compared to 3% in agricultural
sector as compared to 3% in ok or 5% in U.S.A in the mid 1990s. It is only in back ward and under- developed
countries that large number of the working population engage in agriculture
e.g.
*
Kenya- 60%
*
Indonesia- 70%
*
India- 70%
*
Egypt- 55%
*
Burma- 64%
*
UK- 3%
*
U.S.A- 5%
However, in many a times the same
developing countries and up seeking for food assistance from developed
economies e.g. USA. By fewer people participating in agricultural sector in
developed economies, does it mean that agricultural sector is not important in
such countries? What then is wrong when the large percentage of labour force is
engaged in agricultural sector in developing economies yet they run to
developed economies for food aid? The above questions may be explained as
follows:
*
Due to advanced technology in developed economies, the
production form agricultural sector tends to be high hence mass production. At the same time, other sectors e.g.
industries and services are also well developed and could take care of excess
labour force from agriculture hence fewer people are being engage in
agricultural sector.
*
Due to advance technology in developed economies the
agricultural sector has been highly mechanized hence mass production and also
means just a few people or small labour force percentage is required in
agricultural sector.
*
The advanced technology which has been acquired by
developed economies has enabled them to take control or major in agricultural
sector. For instance, the advanced
technology meant that they are likely to apply irrigation technology which
would solve the problem of inadequate rain, produce high yielding seedlings to
improve productivity, produce insecticides to take care of crop disease. All these would improve production in
developed economies and explain why agricultural production in developed
economies is quite high.
*
The significance of Kenyan agriculture arises from the
fact that it has been the source of supply of raw materials to our leading
industries. The little industrial
achievement gained in Kenya is agro-based hence they depend on the provision of
raw materials from agricultural sector e.g. sugar processing industries, tea
and coffee processing industries, milk processing industry etc.
*
Agricultural products e.g. tea, coffee, pyrethrum
flowers etc constitutes the main items of exports. Therefore, agriculture is the backbone of
Kenya’s economy and prosperity of agriculture can also stand for prosperity of
Kenyan economy.
Three growth strategies will have
to be pursued in Kenya in order to stimulate agricultural development:
*
Within existing crop patterns farmers should be
encouraged to adopt more productive practices, especially the wider use of
improved seed varieties, fertilizers, disease and pest control, pricing
policies, marketing policies and institutions and extensions services will be
the main instruments in obtaining much higher yields through known techniques.
*
Research into new varieties, especially for maize and
other grains has to be reorganized and accelerated to generate the new high
yielding varieties that will be essential to keep pace with consumption.
*
To a limited extend the production pattern will have to
be diversified in favour of crops such as tea, coffee and vegetables that
produce high income and generates considerably more employment per hector than
other crops and livestock activities.
LAND TENURE SYSTEM AND
AGRICULTURE DEVELOPMENT
Land tenure system from the
economic perspective implies land use and management in particular country or
region, which include land rights and ownership of individuals and state. Land ownership, land use and management go a
long way to determine agricultural development of any country. If private ownership is allowed, as in the
case of capitalistic oriented political system, then the private individual
owning pieces of land should be encouraged to put them in proper and appropriate
use in term of agricultural activities.
As much as possible, these possible these private individuals owning
land should be discouraged from holding or leaving them lying fallow or just
leaving them to squatters. Because if
this happens, it may go a long way to discourage development since productivity
from the land may be less
Agricultural development in most
developing economies has been low due to rigid land tenure systems which tend
to emphasize the under utilization, mismanagement of land as a source of
development. To achieve much in term of
agricultural development, efficient land planning and management needs to be
put in place
Kenya has only 5.22 million
hectares of land devoted to crop and livestock production. This limited quantity of land must be used as
productively as modern seed technology complementary inputs and farming methods
can make possible. Anything short of
optimal land use would jeopardize the economic future of the country.
For the purpose of rapid economic
development, privatization of land use and management is necessary since it is
seen as a fact that if well co-ordinated may encourage private individuals to
participate fully in development matters and increase agricultural productivity
in the country, particularly when the market policies and price systems of
those agricultural products are favourable.
On the other hand, land demarcation particularly in ASAL areas among the
nomads seemed to be controversial. The
general view this land may do well in terms of development if it is owned
collectively as either group ranches or by community concerned. To increase
land productivity in a country like Kenya we need to emphasize on:
*
Promotion of irrigation technology especially in those
areas where rainfall is unreliable and erratic.
*
Introduction of high yielding seedlings e.g. Katumani
and Ruiru 11
*
The use of fertilizer, insecticides for pest control.
*
Encouragement of extension services.
*
Provision of credit facilities
MARKET GARDENING AND URBAN
AGRICULTURE
Market gardening is the
agricultural activity which is likely to take place around large cities and big
towns with an ultimate aim of producing vegetables, milk, fruits and other food
items to serve those who are living in the nearby city or town. For instance, much vegetable serving Eldoret
town tends to come from Flux, Kaptagat, Burnt forest, Timborwa, Turbo etc. In Nairobi this is taking place around
Kiambu, Kikuyu, Thika, Limur etc.In Mombasa they are served by Shimba Hills in
Kwale and Taita Hills in Taveta district.
Urban agriculture is the agricultural
activity in small scale that takes place in urban areas among the urban
dwellers. Someone may decide to have a
kitchen garden for tomatoes, sukuma wiki or may keep one animal to provide
domestic milk. Or an urban entrepreneur
may produce flowers within the urban area.
This agricultural activity in urban areas by urban dwellers is called
urban agriculture.
ORGANISZATIOANL STRATEGIES FOR
DEVELOPMENT PLANNING
According to UN publications
planning significances the process of choosing or selecting among alternative
courses of actions with a view of allocating scarce resources to reach
specified objectives. Planning for
economic development implies external directions or regulations of economic
activities by the planning authority which in most cases is identified with the
government of the state. It means
increasing the rate of capital formation by raising the levels of income,
saving and investment.
WHY PLAN
*
To increase the rate of economic development. It means increasing eh rate of capital
formation by raising the levels of income, savings and investments.
*
To guard effects of market failure. Prices are distorted when markets fail. This failure comes as a result of lack of
market information and lack of well organized capital markets system. Thus planning by governments will help to
overcome the market weakness experience in developing countries.
*
To ensure proper resource mobilization and
allocation. Due to scarce resources in
developing countries, they cannot afford to waste the limited resources,
particularly capital and skilled labour on unproductive ventures.
*
To win people psychological support. It is assumed that with an elaborate
statement of national economic and social objective in the form of specific
development plan can have an important psychological impact on a diverse and
fragmented population. It may succeed in rallying people behind the government
in a national campaign to eliminate poverty, ignorance and diseases.
*
To source foreign aid.
The formation of detailed development plans and carefully designed
investment projects has often been necessary conditions for the receipt of
bilateral and multilateral aid.
HISTORICAL BACKGROUND OF
DEVELOPMENT PLANNING IN KENYA
Development planning in Kenya can
be traced back to colonial era particularly in the late 40s and 50s when
colonial government introduced planning in agricultural sector. However, serious efforts on development
planning came as early as 1965 when the independent Kenyan government came up
with a Sessional paper No. 10 of 1965, entitled “African socialism and its
application to economic planning in Kenya.” And again by 1966 there was the
formation of the first five year development plan. Since then the mixed economy as economic
system to enable the government achieves rapid development.
Thus government plays an
important role in development planning due to the fact that in developing
countries some of the necessary infrastructures that are required to support
the economy are less developed and to develop them require a substantial
capital and other resources, which may be beyond the reach of private
entrepreneurs. Furthermore, it takes
long for such projects to be completed.
CENTRALIZED DEVELOPMENT
PLANNING (C.D.P) (TOP DOWN DEVELOPMENT PLANNING)
In C.D.P planning, activities are
centralized (concentrated) in planning head office planning activities are made
in the ministerial head office. C.D.P
does not give room for beneficiaries to participate in the planning activities.
However, the objectives of planning still remains-improving the living
standards of people.
CDP need substantial statistical
date to succeed. Statistical data on
various economic variables which include population, the defined boundary
(locality), cultural variable and resource base.
The CDP planners have been termed
at tourist planners because they lack the knowledge and interest of the
localities they are planning for. Hence
the objective may not be achieved and thus the people become the losers. The projects began may be abandoned by people
because they would view them as belonging to the planners. The projects lack vertical and horizontal
co-ordination. Sometimes coercion was used to make the people participate.
Shortcomings of centralized planning
a) Its is not easy to set up national development
priorities for the whole country or region or all sectors of the economy,
yet sometimes, planners at the command might be lacking the knowledge of the
whole country whose priorities they have to set. Hence poor priorities.
b) Non availability of information can
easily render the approach to come up with unrealistic targets that are not in
harmony with the countries demand.
c) It lacks both community participation and
feeling. Community ownership and participation is normally associated to
the sustainability of project results or benefits.
d) Large manpower requirement. It requires
a large number of manpower in inform of planners and administrators to
implement and monitor the various development programmes.
e) Inter-sectorial coordination or integration
of the various planning activities is usually cumbersome bearing in mind
the shortages in manpower. They don’t have vertical and horizontal
co-ordination
BOTTOM UP PLANNING
(DECENTRALIZED)
After realizing the failure of
the CDP the government (from 1974 onwards) came up with Rural Development
projects. This came up with what was
called district planning. In 1978, there
was the formation of the District Development Committee. This planning system was supposed to trickle
down to the location level. These development
committees were supposed to identify their own problems. At this juncture the government changed from
the CDP approach to the decentralized approach.
This was aimed at correcting the failures of the CDP i.e. lack of
complementary and vertical planning
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*
In the figure above, vertical lines represent various
ministries in the government. Horizontal lines represent various
representatives to the ministers.
*
Development plan of 1983 tried to incorporate the
vertical and horizontal issues. This
gave birth to District focus for Rural Development (DFRRD)
*
Development co-ordination was started so as to
co-ordinate development in liaison to other ministries and departments.
*
There was macro, sectorial, Rural and long
range/perceptive planning
*
Sectorial planning-co-ordinate the work with ministries
at the vertical level. This was vertical co-ordination of development planning
*
Rural planning gives the horizontal planning through
the District Development officer (DDO)
*
Macro planning deal with macro variables e.g. interest,
income.
*
Long range planning deals with variables which require
long duration to be completed e.g. poverty eradication unemployment, population
growth rate, fertility rate etc.
The beneficiaries were encouraged
through this process to participate effectively in the process of project
identification, setting of priorities, mobilization of resources required in
the implementation and actual implementation of all the project priorities in
each district.
Development plans may be of
three types
*
Annual/annex/short period development plans. These are
of one year period. It is characterized
by national Budget .National Budget is a document that summarized the country’s
resources within that year period and it states how these resources may be
directed and controlled to implement various development programmes/projects
within the country. It may be divided
into two main parts-Development expenditure and recurrent expenditure. Development expenditure is meant to implement
various development programmes and projects within a given period of time
probably one year. The recurrent expenditure
aims at meeting the day to day expenditure of various ministerial activities.
*
Medium Development plans. These range between 3 and 8 years
period. The Kenyan government adapted
the medium development plans which are of 5 years
*
Large range development plans perspective plans. They
range from 10-30 years. This type tend
to address issues which were not properly addressed in the national 5 year
development plans, but which needs consideration in long terms. Sessional
papers drafted in Kenya are good examples of this planning approach e.g. the
poverty eradication policy paper lounged in February 2000. The latest is the vision 2030.
PROBLEMS IN DESGINING AND
FORMULATING DEVELOPMENT PLANS
*
High rate of illiteracy
*
Data is sometime sketch and unreliable. Plans based on
this data end up no achieving the objective intended
*
Poor technology
*
Institutional weaknesses e.g. District Development
committee (DDCS) are weaker at lower level where people need to be
participating. This affects peoples
participating. Insurance and banking are
weak, hence not able to mobilize resources.
*
Foreign influences- world Bank IMF forces their wills
on development plans because they are looked as financiers
*
Lack of political will.
This is especially during the implementation of development plans which
normally results into corruption and lack of transparency among the
implementers
*
Rapid growth of population. It tends to grow faster than development
growth which causes problems in resources mobilization towards development.
FOREIGN AID
Foreign Aid
is the money or food that is sent from one country to another to help countries
in difficult situations. This can be in the form of multinational aid i.e.
involving several countries and or intergovernmental aid (Bilateral aid) i.e.
between two countries.
Reasons why countries accept foreign aid
*
Foreign aid help to speed up the structural
transformation of many developing countries since it is usually aimed at making
an economy market oriented and efficient.
*
It is useful in the developing countries that have been
exposed to natural catastrophe e.g. drought and famine making them spend their
limited foreign exchange on essentials.
*
Foreign aid bring with it new technological know- how
and new skills into the country.
*
It facilitates and accelerates the process of
development by helping to relieve savings by introducing higher growth rate.
*
It helps finance certain projects like roads, schools
and hospitals which a country may be unable to finance from its tax revenue.
Why donors give foreign aid
*
To assist in raising the standards of living in the
developing countries.
*
To help increase the state revenue of the developing
countries
*
Others give out foreign aid with an intention of
exploiting new areas of natural resources
*
To assist the developing countries to overcome
technological backwardness
*
To assist developing countries establish basic and key
industries
*
To assist I reducing inflationary pressure
*
To support friendly countries
*
To assist in the adoption and implementation of
democracy.
*
As a way of transferring of high level manpower
Disadvantages of foreign aid
*
Some foreign aid are country tied i.e. all the high
level personnel and materials to be used must come from the mother country
*
Some foreign aid are project tied i.e. the money given
must be used in the project ear marked for.
*
These aids come
with high interest rates
*
Foreign aid stifles domestic product
STRUCTURAL ADJUSTMENT
PROGRAMMES (SAPs)
Structural adjustment is a
term used to describe the policy changes implemented by the International Monetary Fund (IMF) and the World Bank
(the Bretton Woods Institutions) in developing countries. These policy changes
are conditions (Conditionalities) for getting new loans from
the IMF
or World Bank,
or for obtaining lower interest rates on existing loans. Conditionalities are
implemented to ensure that the money lent will be spent in accordance with the
overall goals of the loan. The Structural Adjustment Programs (SAPs) are
created with the goal of reducing the borrowing country's fiscal
imbalances. The bank from which a borrowing country receives its
loan depends upon the type of necessity. The SAPs are supposed to allow the
economies of the developing countries to become more market oriented. This then
forces them to concentrate more on trade and production so it can boost their
economy.
Through conditionalities,
Structural Adjustment Programs generally implement "free market"
programs and policy. These programs include internal changes (notably privatization
and deregulation)
as well as external ones, especially the reduction of trade
barriers. Countries which fail to enact these programs may be
subject to severe fiscal discipline. Critics argue that financial threats to
poor countries amount to blackmail; that poor nations have no choice but to
comply.
Since the late 1990s, some
proponents of structural adjustment such as the World Bank have spoken of
"poverty reduction" as a goal.
Structural Adjustment Programs were often criticized for implementing generic
free market policy, as well as the lack of involvement from the country. To
increase the borrowing country's involvement, developing countries are now encouraged
to draw up Poverty Reduction Strategy Papers
(PRSPs). These PRSPs essentially take the place of the SAPs. Some believe that
the increase of the local government's participation in creating the policy
will lead to greater ownership of the loan programs, thus better fiscal policy.
The content of these PRSPs has turned out to be quite similar to the original
content of bank authored Structural Adjustment Programs. Critics argue that the
similarities show that the banks, and the countries that fund them, are still
overly involved in the policy making process.
RATIONALE FOR SAPs
1) The
continued poor economic development in third word countries.
2) Governments
of developing countries were extensively involved in enterprise.
3) Prices
of various commodities were controlled by the government.
4) Governments
introduced trade barriers
5) There
were a lot of government subsidies in a number of sectors e.g. education,
health, agriculture e.t.c.
6) Many
African countries had over valued their currencies.
7) There
was investment instability due to political instability.
8) Bad
governance and high levels of corruption
CONDITIONS
Some of the conditions for
structural adjustment can include:
- Cutting
expenditures, also known as Austerity.
- Focusing
economic output on direct export and resource extraction,
- Devaluation
of currencies,
- Trade liberalization, or lifting
import and export restrictions,
- Increasing
the stability of investment (by supplementing foreign direct investment
with the opening of domestic stock
markets),
- Balancing
budgets and not overspending,
- Removing
price
controls and state subsidies,
- Privatization,
or divestiture
of all or part of state-owned enterprises,
- Enhancing
the rights of foreign investors vis-a-vis national laws,
- Improving
governance
and fighting corruption.
These conditions have also been
sometimes labeled as the Washington Consensus.
History
Structural adjustment policies
emerged from two of the Bretton Woods institutions, the IMF and
the World Bank. They emerged from conditionalities
that IMF and World Bank have been attaching to their loans since the early
1950s. In the beginning, these conditionalities mainly focused upon a country's
macroeconomic policy.
Structural Adjustment Policies,
as they are known today, originated due to a series of global economic
disasters during the late 1970s; the oil crisis, debt crisis, multiple
economic depressions, and stagflation. These fiscal disasters led policy
members to decide that deeper intervention was necessary to improve a country's
overall well being.
In 2002 SAPs underwent another
transition, the introduction of Poverty Reduction Strategy Papers.
PRSPs were introduced as a
result of the bank's beliefs that, "successful economic policy programs
must be founded on strong country ownership". In addition, SAPS with their
emphasis on poverty reduction have attempted to further align themselves with
the Millennium Development Goals (MDG). As a
result of PRSPs,
a more flexible and creative approach to policy creation has been implemented
at the IMF and World Bank.
While the main focus of SAPs has
continued to be the balancing of external debts and trade deficits, the reasons
for those debts have undergone a transition. Today, SAPs and their lending
institutions have increased their sphere of influence by providing relief to
countries experiencing economic problems due to natural disasters, as well as
economic mis-management. Since their inception SAPs have been adopted by a
number of other International Financial Institutions
(IFIs).
Criticisms
There are multiple criticisms
that focus on different elements of SAPs.
National Sovereignty
Critics claim that SAPs threaten
the sovereignty
of national economies because an outside organization is dictating a nation's
economic policy. Critics argue that the creation of good policy is in a
sovereign nation's own best interest. Thus, SAPs are unnecessary given the
state is acting in its best interest. However, it is important to consider that
in many developing countries the government will favour political gain over
national economic interests, which are it will engage in rent-seeking practices
to consolidate political power rather than address crucial economic issues. In
many countries in sub-Sarahan Africa, political stability has gone hand in hand
with gross economic decline.
While public debt
in developing and developed countries is a nearly universal fact, low-income
countries face a much more vulnerable position to maintain an equilibrated balance of payments, with some of the
world's 47 poorest nations have already $488 billion in debt in 2003.
Due to this near universality of
debt, a popular criticism is that the structural adjustment's terms have become
a template for the governance of much of humanity. Hence, some argue that the
democratic policy process of countless countries has been undermined by
decisions formulated miles away by western economic bureaucrats
and that the implementation of such policy has solely benefited the largest
donor countries (the U.S., UK, Canada, and Japan).
For example, the opening of
countries to outside investment allows U.S. corporations to build factories in
impoverished areas. The corporations are able to exploit the surplus of
inexpensive labor, and usual lack of environmental regulations to create goods
at a lower price. As a result, corporate profits rise and trade flows increase
for that particular country. While this increases the GDP the majority of the
profit actually benefits the corporation and the country in which the
corporation is based. Conversely, many argue that the people employed by the
corporations are desperately in need of any work at all. It is argued that the
alternative forms of employment or life styles available to them are much
worse.
Structural adjustment became a
major tool for global development of a system of nongovernmental organizations
allowing for bypassing local administrations in poor countries in the
realization of welfare policies.
Privatization
A common policy required in
structural adjustment is the privatization of state-owned industries and
resources. Ostensibly, this policy aims to increase efficiency and investment,
and decrease state spending. State-owned resources are to be sold whether they
generate a fiscal profit or not.
Critics, however, have condemned
privatization requirements. When resources are transferred to foreign
corporations and/or national elites, the goal of public prosperity is replaced
with the goal of private accumulation. Furthermore, state-owned firms may show
fiscal losses because they fulfill a wider social role, such as providing
low-cost utilities and jobs. Many scholars have argued that SAPs and Neoliberal
policies have negatively affected many developing countries; the privatization
of water in Bolivia and the privatization of the health system in Sub-Saharan
Africa are few examples of such negative implications. Privatization makes
essential needs such as water and health care a commodity, and those who are
poor are unable to access such basic necessities because they are unable to pay
for these commodities. Therefore, many scholars have argued that SAPs are not
in the interest of the borrowing country, but rather caters to the elites of
the developing and undeveloped worlds. In other words, SAPs are extremely
detrimental for poor countries that have structural adjustment programs in
place, as many people cannot afford to pay for health care or education,
leaving populations sicker and more uneducated. This causes negative
consequences, as sick people are not productive and cannot work to bring
themselves out of debt; therefore, the privatization of a previously social service
such as health care is actually counter-intuitive to the purpose of structural
adjustment programs.
Agriculture
The agricultural,
anti-land reform
and food trade policies associated with SAPs have been pointed to as a major
engine in the urbanization of the global South, the ballooning of megacities,
worldwide migration towards the global North, and the growth in urban poverty
and slums.
In the irrigation sub-sector the
trend has been towards disengagement of governments from irrigation development
and management. This has led to a process of delegation of maintenance and
operation activities of irrigation schemes to the organized users with mixed
results. Indeed, the loans from the World Bank, the major lender for irrigation
development, have fallen sharply from the mid 1970's showing some recovery only
since 2003.
They are also a source of
contention for environmental activists. A large portion of SAPs policy on
agriculture focuses on the increased use of fertilizers and pesticides which
harm the health of local bodies of water and therefore fish populations. The
runoff caused by the over use of fertilizers increases the amount of algae in
local water bodies, causing different scales of dead zones (areas where oxygen
is completely consumed by decomposing algae and fish, making it impossible for
life forms needing oxygen to survive in the dead zones). Dead zones affect both
local and international bodies of water. Structural adjustment programs do
little to help the agricultural sector of developing nations. Due to
the conditions of SAPs, one of which is to devalue a nation’s currency, a
developing nation’s agricultural exports become more competitive due to their
devalued currency. Essentially a country is able to export more goods out due
to other country’s ability and demand to purchase the previous country’s
agricultural good. However, the nation also loses purchasing power which may
not be able to be compensated by the increase in demand for its export goods.
Ultimately, the agricultural sector of a developing nation will suffer and
decline.
An example of this degradation is
in Western Mali during the 1980s. Firstly, the privatization of the
agricultural sector increased the inequality of food distribution and
inequality wealth in general as some farmers adapted to privatization and
flourished and others fell behind. Secondly, instead of "mining"
(using a plot of land until it was depleted of nutrients then moving to a
different plot of land allowing the first to replenish), the land like farmers
did before structural adjustment, farmers were introduced to fertilizers that
left the land nutrient barren and unusable.
“Despite the growth in the GDP,
structural adjustment does not appear of much help to the agricultural sector.
In theory, devaluation, by lowering the relative price of farm commodities on
the international market, should make a country’s agricultural exports more
competitive. However, it is by no means certain that increased exports
compensate for the loss of purchasing power of a cheaper currency.”
Environment
Local environments can easily
become casualties of pro-trade policies. Pro-trade policy promotes an increase
of industry geared toward Western needs. As a result of the new policy, local
industries begin to focus on producing inexpensive goods to sell on the
international market. The focus on creating the least expensive product often
leads to environmentally exploitative industry. As these new industries are
often unregulated there are no laws prohibiting this exploitation. For example,
emissions from factories are much less regulated in developing nations. As a
result, the environmental cost (the harm done to the ozone layer for example)
of producing a product like steel in China is much greater, than it would be in
the U.S.
Another example would be the run
off of chemicals or pharmaceuticals into local rivers and other bodies of
water. In developing nations the pollution of rivers has become a cause for
international intervention. This pollution not only affects local populations
who sometimes bathe and drink the polluted waters but is also damaging the
oceans on a large scale.
It is possible for SAPs to
include clauses that require industry regulations. However, for the most part,
regulatory clauses have not been included in SAPs. The majority of the policy
creators view these regulations as a hindrance to trade and therefore to
economic development. In addition, many argue that it is unfair for developed
nations (and IFIs) to demand that their environmental policies be followed. All
developed nations have gone through a period of industrialization wherein local
environments were damaged. While these periods of industrialization led to
increased environmental problems, they also greatly contributed to the development,
prosperity, and increased standard of living for the country's citizens. They
argue that developed countries essentially have had a head start in economic development, and
that less developed countries deserve their own head start. Critics debate
whether the world can handle this head start or not. It has been argued that
developing countries would benefit more from debt cancellation than an industrial
"head start."
Perhaps it is due to the
ineffectiveness of Structural-Adjustment Policies that rural farmers must
resort to measures that harm the environment. Extensive cultivation or the
draining of resources has resulted from the industrialization implemented by
the policies of SAPs. The objectives of SAPs may be to reform the economical
structure of impoverished or developing nations. However, their lack of
consideration and research completed for their influences on the household
level can cause the global issue of environmental degradation as farmers may
result to unsustainable measures. Potential deforestation and desertification
are only a few of the negative results of extensive cultivation.
Austerity
Critics hold SAPs responsible for
much of the economic stagnation that has occurred in borrowing countries. SAPs
emphasize maintaining a balanced budget which forces austerity programs. The
casualties of balancing a budget are often social programs.
The programs most often cut are
education, public health, and other miscellaneous social safety nets. Commonly,
these are programs that are already under funded and desperately need monetary
investment for improvement. For example, if a government cuts education
funding, universality is impaired, and therefore long term economic growth.
Similarly, cuts to health programs have allowed diseases such as AIDS to
devastate some areas' economies by destroying the workforce. Recent studies
have shown strong connections between SAPs with Tuberculosis rates in
developing nations.
Gendered Effects
Poverty is a gendered issue. That
is, various differences in circumstances between males and females cause
variances in the way poverty affects each. With that said, structural
adjustment programs fail to address poverty as a gendered issue. Thus, the
implementation of SAPs caused many problems which are discussed hereafter. With
the adoption of SAPs comes a withdrawal from social spending. With less money
going towards education, health, welfare, and local infrastructures, local
peoples are burdened with increasing responsibility to provide for their
villages/towns/cities. Local health, welfare, and infrastructure (especially
water and sanitation) are usually considered "women's work" and fall
directly to them. Withdrawing government support directly affects the amount of
work women are required to do, resulting in lessened health and well-being for
women and indeed the entire family.
In addition, opening markets
causes an upsurge of jobs in cities. As rural men leave to go to these jobs,
women and children are left behind, with increased responsibility for wives and
mothers to single-handedly run the household.
Involuntary Resettlement
The introduction of a SAP may
cause someone to be forced to involuntary resettle in order to work on the
project at hand. Involuntary resettlement is important because it can make many
people worse off than they were before. For example when someone is forced to
move to a new location they could leave a larger plot of land or their farms
behind. The involuntary resettlement could also move the person to a location
with fewer resources or less arid land. The work created by the project they
were forced to resettle for is also short-lived. In conclusion, involuntary
resettlement can make people worse off and force them to have lowered their
standard of living.
Praise
Many claim that borrowing
countries are running on borrowed time, and will eventually have to make such
changes to balance their budgets or control inflation.
If these conditionalities are not implemented, the countries can expect even
bigger problems in the future.
In principle, conditionality is a
tactic used not only to make sure loans are paid back, but also to ensure that
they are used effectively. If there are no conditions on the loan, the country
might not use the money to reduce poverty. This argument however, logically
misses the counter-argument that there are much other conditionality which could
be imposed which would not necessarily create the burden of payment (and
therefore, the subsequent lack of ongoing governmental investment) which is
seen by many critics as creating a vicious circle. A corollary of this problem
is that, should such a vicious circle indeed exist, it's only overriding
tendency is to allow for outside multinational investment to provide the
service and food needs to the society, which can no longer function in a
productive, cost effective manner.
IMPACTS OF SAPs ON
EDUCATION SECTOR
1)
It led to the introduction of cost sharing programmes
in all levels of education
2)
This in essence led to high cost of education
3)
When education cost shot up, there was high rate of
school drop-outs
4)
High rate of drop outs led to increasing levels of
illiteracy in the community
5)
The government also froze recruitment of teachers
6)
This lack of teacher recruitment led to low standards
of education
7)
There were fewer schools, classes and teaching
materials.
MOI UNIVERSITY
DEPARTMENT OF DEVELOPMENT STUDIES
IRD 1O3: DEVELOPMENT CONCEPTS AND ITS APPLICATION
COURSE OUTLINE
1.
Conceptualization
of Development
Economic, Social, Political and
Environmental Conceptions and indicators of Development
2. Theories of Development:
Rostow, Smith, Marx
3.
Characteristics
of transitional Societies
Low incomes, Dual Economies,
Poverty, Population Growth, Scarce Strategic Natural Resources, Demonstration
Effects and Unemployment.
4.
Africa’s
Development Objectives
Alleviation of Mass Poverty,
Self-sustaining Growth and Development, Regional Integration and Collective
Self-reliance.
5.
Sectorial
Development
Agricultural and Rural Development,
Industry and Informal Sector, Tourism, Infrastructural Development- water,
institutions such as schools, colleges e.t.c. for manpower development; roads,
airways, telecom, railways, shipment.
6.
Organization
Strategies for Development
Top down Planning and Bottom up
planning
7.
Definition
of Foreign Aid
·
Why countries accept foreign aid
·
Why donors give foreign aid
8.
Structural
Reforms and their impact on Development
The rationale of Structural
Reforms, Impact of Structural Adjustment Programmes in specific sectors (e.g.
education, Health, Agriculture)
COURSE OBJECTIVES:
By the end of the lesson the student should be able to:
1. Have
an understanding of the economic aspects of development process.
2. Appreciate
development problems experienced by the Less Industrialized Countries.
3. Suggest
solutions to these problems.