THE FACTORS AFFECTING ECONOMIC DEVELOPMENT
CHAPTER TWO
LITERATURE REVIEW
2.1 MEANING OF ECONOMIC DEVELOPMENT
Economic development according to Crowell (1981) is processes that transform a stagnant society with a low average real income one in which income rises less continuously as technology is embodies in accumulating capital. Typically, economic development is defined as2 growth plus other changes that judge to constitute progress and make life better for all citizens.
Brown Fenbrener 1991 clearly define the concept of economic development raises many questions that involves valve judgment about whether a particular changes or life style is good or bad.
Economic development according to Shuabu (1992) as the process whereby the real per capital income of a country increases over a long period of time this definition of development as2 a process implies that development involves casual relationship.
Therefore economic development means growth plus improvement in the quality of life and distribution of goods and services, development in the standard of living of the people to a better and well improved situation determines how a country can be said to have developed economically.
According to the Basic Human needs approaches a country is developing if and only if more and more of its people are taking adequate diets, clean water, decent shelter, basic healthcare and a peaceful means of making their views to the government.
Measuring Economic development:-
Economic development is measured in four ways:-
i) GNP
One of the methods to measure economic development is in terms of an increase in the country’s real national income over a long period of time. But this in unsatisfactory due to the following reasons:-
a) “Real national income” refers to a country’s total output of final goods and services in real terms rather than in money terms. Thus price changes have to be ruled out while calculating real national income.
b) The measure fails to take into account changes in the growth of population. Thus if a rise in real national income is followed by faster growth in population, there would be no economic growth.
c) The GNP figure does not reveal the cost to the society of environmental pollution, urbanization, industrialization and population growth.
d) It tells nothing about the distribution of income in the economy.
e) There are other factors which pose difficulties in measuring GNP:
• Some goods and services cannot be assessed in money terms, example, painting as a hobby and bringing up children by a mother.
• GNP is associated with double counting.
• Illegal activities like gambling are not costed and included.
• Transfer payments on pension and unemployment allowance, interest on public loans are not included in GNP.
• The GNP as an index of economic development has not been successful in combating poverty, unemployment, inequalities and raising living standards in developing countries. Robert McNamara, the then Governor of World Bank, admitted in February, 1970 on the failure of GNP growth rate as an index of economic development.
ii) GNP Per Capita
This measure relates to an increase in per capita real income of a country over a long period. Economists speak with one voice in defining economic development in terms of increase in per real income. Meier (2006:2) defines economic development “as the process whereby real per capita income of a country increases over a long period of time subject to the stipulations that the number of people below absolute poverty line does not increase and that the distribution of income does not become unequal”. This implies that for economic development to be in place, the rate of increase in real per capita income should be higher than the rate of population. But difficulties still remain:
a) An increase in per capita income may not raise the real standard of living of the masses. Per capita real income could possibly increase
while per capita consumption falls. Government may use up increased income on military or other purpose.
b) The masses may remain poor despite increase in real GNP per capita if the increase income goes to a few rich instead of the poor.
c) Real per capita estimates fail to measure changes in output due to changes in price level as index numbers used are mere approximations.
d) Furthermore, price level, exchange rates and values differ from one country to another. GNP fails to take account of basic needs like nutrition, health, housing, water, education as improvement of living standards by providing basic needs cannot be used to measure increase in GNP per capita.
iii) Welfare
Economic development could also be measured from the point of view if economic welfare. According to Okun and Richardson, (2005) economic development is “a sustained, secular improvement in materials well-being which is reflected in an increasing flow of goods and services.” This indicator is also not free of limitations:
a) Firstly, the weights to be attached to the consumption of individuals since consumption of goods and services depends on tastes and preferences of individuals. Thus it is wrong to have the same weight in preparing welfare index of individuals.
b) The main difficulty arises in the valuation of output. The output may be valued by market prices whereas economic welfare is measured by an increase in real national output.
c) The next limitation is how welfare is produced. The expansion of real national output might have raised real costs (pain and sacrifice) and social cost in the economy.
d) It is needful to note that increase in national income may not necessarily mean improvement in economic welfare. It is possible that with the increase in real national income or per capita income, the rich get richer while poor get poorer.
iv) Social Indicators
Dissatisfied with GNP/GNP per capita as a measure of economic development, certain economists tried to measure it in terms of social indicators. They include a wide variety of items in social indicators like inputs (such as nutritional standards, number of hospital beds, doctors per head population).others included outputs corresponding to this input like improvements in health in terms of infant mortality rates, sickness rate etc. Basic needs focus on alleviation of poverty by providing basic human needs to the poor like health, education, food, water, sanitation housing.
The provision of these needs affects poverty in a shorter period with fewer monetary resources than GNP\GDP per capita strategy. Basic needs lead to a higher level of productivity and income through human development in form of educated and healthy people. The merit of social indicator is the fact that they are concerned with ends, the ends, being human development is a means to this ends.
Hicks and streeten,(1979), consider six social indicators for basic needs:
Basic Needs Indicators
i) Health life expectancy at birth
ii) Education literary signifying primary school
enrolment percentage of population
iii) Food calorie supply per head
iv) Water supply Infant mortality and percentage of
Population with access to potable water
v) Sanitation infant mortality and percentage of
population with access to sanitation
vi) Housing None
Aside from calorie supply per head, all other indicators are output indicators of which infant mortality is both the indictor of sanitation and clean drinking water facilities because children are prone to water borne diseases.
Limitations:
The following are the limitations of social indicators as a measure of economic development.
I. There is no unanimity among economists as to the number and type of items to be included in such index. Thus Goldstein (1985), takes only infant mortality as an indicator of basic needs to construct an index, Hagen, (1962), and UNRISD, (1970), use eleven items.
II. There is the problem of assigning weights to the various items which may depend upon the social, economic, political and social set-up of the country. This involves objectivity.
III. Social indicators are concerned with current welfare not related to the future.
IV. Majority of the indicators like education and health, are inputs and not outputs.
V. They involve value judgment and thus to avoid this, UN organizations use GNP per capita as a measure of economic development (Morris, 1979), Ranis and Stewart, (1979).
SUSTAINABLE ECONOMIC DEVELOPMENT
The term “sustainable development” lacks uniform interpretation. The United Nations World Commission on Environment and Development (1987) defined development as sustainable if it “meets the needs of the present without compromising the ability of future generations to meet their own needs”. Maghori, (2008:5) sees sustainable development as “equitable and balanced development, as it concerns the interest of different groups of people within the same generation and among generations and do so simultaneously in three major interrelated areas – economic, social and environmental”.
Maghori stated the economic objectives to include growth, efficiency and disability, while social objectives include full employment, equity, security, education, health, participation and cultural identity. According to Maghori, environmental objectives relate to healthy environment, rational use of renewable natural resources and conservation of non renewable natural resources, adding that the most critical problem of sustainable development in every country as well as globally, is the eradication of extreme poverty.
There are many definitions of sustainable development. But the most popular of which is by the Bruntland Report, (1980), presented by the International Union for the conservation of nature and natural resources. It defined sustainable development as “meeting the needs of the present generation without compromising the needs of future generations.” Sustainable development means development should “keep going” and emphasizes on the creation of quality of life of all people through increase in real income per capita, improvements in education, health and general quality of natural environmental resources.
Pearce and Warford (2005:5) defined sustainable development as “a process in which natural resources base is not allowed to deteriorate and emphasizes the hitherto unappreciated role of environmental quality and inputs in the process of raising real income and quality of life.
OBJECTIVES OF SUSTAINABLE DEVELOPMENT
i) It aims at creating sustainable improvements in the quality of life for all people as the principal goal of development policy. It betters people’s health, education and gives every one a chance to participate in public life.
ii) It aims at maximizing the net benefits of economic development subject to maintaining the stock of all the environmental and natural resources assets over time.
iii) Sustainable development aims at accelerating economic development with a view to conserving and enhancing the stock of environmental, human and physical capital without making future generations worse off – Jhingan, (2005:5).
POLICIES FOR SUSTAINABLE DEVELOPMENT
Agricultural and industrial development along with urbanization, spread of infrastructure and population growth have led to environmental degradation which harms human health, reduce economic productivity and caused loss of amenities. Environmental degradation and its negative effects can be reduced by economic and environmental policies viz:- i) Reducing Poverty
Such development projects should aim at providing greater employment opportunities to the poor. Government could expand health and family planning services and education to the poor and help combat population explosion.
ii) Removing Subsidies
Subsidies for resource use by private and public sectors should be removed. Subsidies on use of electricity, fertilizers, pesticides, diesel, petrol, gas etc lead to wasteful use and environmental problems.
iii) Clarifying and Extending Property Rights
Places where the use of common lands, forest, irrigation systems, fisheries etc are regulated and rules for their proper use are laid down by the community, the ownership rights should be clearly specified in the administrative records.
iv) Market Based Approaches
There is also urgent need for adopting market based approaches for the protection of environment. These signal to consumers and industries the cost of using natural resources on environment. These costs are reflected in the prices paid for goods and services so as to guide industries and consumers to combat air and water pollution. The market based approach is used in both developed and developing countries.
v) Regulatory Policies
Regulatory policies also help to reduce environmental degradation. Regulators have to make decisions on prices, quantity and technology. Such decisions involve choice of use of technologies, resources and prices of pollution etc. It also lays down technical standards, regulations and charges on air, ater and land use.
vi) Economic Incentives
Economic incentives also relate to price, quantity and technology: incentives take the shape of variable fees to resources user for the quantity of pollutants in air, water and land use.
vii) Trade policy:
Trade policy in relation to environment, is segmented into domestic and international trade policy. Domestic trade policy emphasizes on the establishment of less pollution industries away from the cities and use of environment friendly processes for pollution industries by adopting cleaner technologies.
As regards international trade policy, there is controversy as to whether liberalized trade causes environmental degradation. This controversy led to the conclusion that overall trade liberalization is likely to produce negative environment externalities rather than environmental gains.
Public participation/Global efforts
Public awareness and participation are highly effective to improve environmental conditions, providing formal and informal education programmes on environmental degradation and cleanliness. In Japan, consumer cooperative popularize green products, which are recyclable, rechargeable and biodegradable.
In terms of global efforts, there are numerous international conventions and agreement on environmental protection and conservations which every country should follow. These include the Montreal protocol on phasing out ozone-depleting chemicals, the Basel Convention which relates to control of transboundary movement and disposal of hazardous wastes. Others include the Rio Declaration on environment and development agenda 21 and the GATT clauses on environment.
Jhingan, (2005:22) noted that there is threat of trade sanctions against countries that fail to honour agreements relating to biodiversity protection or greenhouse gas emissions, though some countries don’t adhere to them.
FACTORS AFFECTING ECONOMIC DEVELOPMENT IN NIGERIA
i. Communication
ii. The deplorable nature of Nigerian’s road network.
iii. Lack of capital to embark on useful small scale
iv. The economic boom of the past 1973 oil price rise period.
v. Political instability is a problem to economic development.
vi. Lack of manpower resources.
vii. Inadequate infrastructure facilities.
Just as economic development means the progress taking place in some sense that brings gain in welfare making life better for the general masses, a country is said be developing if and only if a steadily increasing percentage of the citizen has an adequate diet, clean water decent shelter, basic health care, elementary education and a means of expressing individual view through petition demonstration and genuine election. The problem facing that point mentioned above tends to hinder economic development.
Additional communication has been identified as an obstacle to economic development of the country with an absence of a good road network.
Telecommunication services are inadequate message and information hardly circulates easily. Likely it is possible for the government to perform its function effectively and efficiently in the absence of various information available to the media. The unacceptable nature of Nigeria road network tends to affect commercial economic and industrial activities which have relative effect on the economic development of the country as it is difficult to undertake venture involving very fragile easily perishable and delicate materials transportation.
Lack of capital to embark on useful small-scale enterprises is another impediment in the way of economic development. The rural workers now practice farming in subsistence level little or nothing is left available commercially. The produce varieties of food often they produce only for themselves. This condition continuous because there is lack of incentives and encouragement from the government in her economic policies. The traditional system of farming makes output and productivities very low.
Also technological limitation and poor road network between rural and urban area discourages high level of production in the rural and urban araeas.
According to Hodder (1998) states that Nigeria has been dramatically affected by the economic Boom of past 1973 oil prices rise period as a result, Nigeria has become much less dependence upon foreign aid, but at the same time, oil wealth has brought with the problem, which Nigeria is finding difficult to cope with, Nigeria is now a classic example of too much money chasing a few goods as a result of which so many things that are demanded have to be imported.
Thus while Nigeria clearly has all the preconditions and resources for breaking out of her traditional poverty and bringing development to just her elite, she faces many problems at the same time, malnutrition of in come and reward with their accompanying political and social problems wide spread corruption violent, crime and as split of indiscipline that may easily arise when a country thinks it can overcome all it problems with money political instability, is a problem to economic development. Political instability to economic development. Nigeria is a very good example.
Every success military regime tends to see things wrong in the development plan made by the regime it over throws and begins to review the one it inherited or draw up a new one together.
Economic development plan cannot take of under conditions where political uncertainly prevails since independence military has occupied power for 29 years while the civilian has tasted for 18 years.
Lack of manpower resources when about 50% of a country’s citizen is illiterate and skilled labor is inadequate and this tends to hinder economic development of such a country. Unless mass illiteracy is whipped out, a meaningful economic development will take a long time to achieve inadequate infrastructural facilities which include roads, railways, irrigation system, hydro electric power station, postal and telecommunication system, schools hospital, harbor and water ways.
The big cities and state such as Lagos, Benin, Asaba, port Harcourt, Abuja, warri, Kaduna, Ibadan, and some other states fairly will provide with these infrastructural facilities, this account for the concentration of industries in these cities.
But the infrastructural facilities that enhance development of the country is still inadequate.
SOLUTIONS TO PROBLEMS FACING ECONOMIC DEVELOPMENT
i. The government should provide good and modern communication facilities to the people in Nigeria.
ii. Road construction must be the top priority of every government administration in the country.
iii. The government should embark on giving out soft loans to private investors and entrepreneurships.
iv. The government should diversity the economic resources of the country and avoids total dependence on crude oil. The government should heavily invest on agriculture.
v. There should be a stable and responsible government in Nigeria. The government must encourage a peaceful and enabling environment for it people through democracy.
Nigeria as the giant of Africa supposes on to have lacked modern communication equipment. The country should have been proud of sophisticated telecommunication gadgets compared to those ones abroad. The recent introduction of MTN, ECONENT, STARCOM and GLOBACOM marked a huge success in the communication network of the country. The government must contribute its quarter towards effect communication management in Nigeria thereby encouraging foreign investors into information, business management technologies as well as2 sufficiently function the N.T.A
In the aspect of roads, the country needed not only construction but also timely maintenance of the old ones and building of bridges across the rivers to enable the riverine communities enjoy from the national cake.
The federal road maintenance agency (FERMA) introduced by president Obasanjo in late 2003 is a welcome development. The deplorable state of Nigeria roads have urgently called for the need of the government to engage in tarring our roads with asphalt.
The federal ministry of works must involve in capacity building on the past of their civil engineers and surveyors.
Talking about small scale business the government should provide micro credit scheme in other to make the local people have access to loans with little or on interest rate. Multinational oil corporations have long started this scheme as part of their host communities; the government should not take economic development alone. It should be a collection effort of every citizen in the country.
In the same vein our economic resources needed not to be wasted but effectively utilized.
The government should plan alternative means of putting other economic potentials to better use.
Nigeria is a rich country that is not only based with oil but also other resources including agriculture i.e. cocoa production and oil palm which where the main stay of Nigeria economic before the oil boom in 1973.
Our government should encourage agriculture by given necessary farming assistance to local framers and making them know the importance of agriculture. Many countries have lead more effort on agriculture and today they produce agricultural products in a very large scale.
There should be a stable an responsible government in Nigeria. The government must encourage a peaceful and enabling environment for its people through democracy.
Lack of responsible leadership has been identified as one of the major factors hampering the economic development of Nigeria. A responsible leader does not allow his people to suffer e.g. F. Kennedy formal U.S.A. president and Nelson Mandela of South Africa. The Nigeria people will be happy to be rule by such good leaders.
Democracy as synonymous to peaceful co-existence there should be peace tolerance and accommodation in the country as that could only be the path way to development. The era of political assassination, violence, intolerance rascality and communal crisis had expired and undermined the Nigeria. For the people and enjoy them to embrace the virtue of peace, unity and togetherness. The government in order to meant the needs of all its citizens should seek for good assistance from the World Bank, Non-Government Organization (NGO) International Monetary Fund (IMF) and other international government organization as well as assistant from foreign countries while the government is doing this his should get involved in carrying out youth empowerment programme as well as training and retraining state ministries.
Nigeria would be sure of economic prosperity if these solution offered to the attendant problems are followed to the latter