Introduction to Development theory

THEORIES OF DEVELOPMENT CONCEPT

BACKGROUND

                             There are different practices for economic development. Despite of several efforts for economic development, the condition of economic development in underdeveloped countries has remained backward for a long time. Most of the underdeveloped countries have dominance of rural areas. Government’s policies and programs of economic and social development cannot encompass the living stander of the entire rural people. Rural community lags behind in education, health, social service.

                              Many countries of Asia, Africa, and Latin American are giving emphasis on rural development. Nowadays, developed countries also assisting in rural development of underdeveloped countries. They provide manpower and resources to them for this purpose. Although some countries have positive result, it has proved fruitless in many other countries. Different methods have been applied according to the rural development condition. The problems have remained same. However the rural development is unavoidably necessary to achieve all round development of underdeveloped countries. In this failure effort of the past, it is necessary to improve techniques and process of rural development. The underdeveloped countries are effortful in this direction.

                               There are many economists who have developed many theories to developed economic development. Some have emphasis on development of agriculture. Some have emphasis on transformation of agriculture and industrial development for economic prosperity.

                                Some important and contextual concepts are discussed below.

        LEWIS’ THEROY OF UNLIMITED SUPPLY OF LABOUR

# Lewis’ has considered labour as the important means for production and economic development. According to him, underdeveloped countries should fully utilize the available labour force for economic and social development. His explanation of the economic structure and economic development process of underdevelopment countries are discussed below.

INTRODUCTION

                                The economist W.A Lewis’ has presented economic development theory linking with availability of labour. His theory has given importance on structural change of economy as the base of development. This concept is largely related to the matter of how agricultural occupation can be developed towards modernization and industrial sector and how it can lead the agricultural dependent population of rural area towards prosperity. He has mentioned that agricultural development facilitates industrial development and creates a situation of industrial production.

                                 Lews’ has said that the backward economy has dual character. They are

Modern / Capitalist Sector (C.S)

Traditional / Subsistence Sector (S.S)

MODERN / CAPITALIST SECTOR (C.S)

                                     The modern/ capitalist sector remains under the control of capitalists. This sector buys labour force or employs it in production or worker sell their labour in such situation. This includes construction, manufacturing, business, and service, mineral related business etc. Expansion of such business or industries helps to increase profit. As such businesses are profit oriented both private and public investments become possible.

TRADITIONAL / SBSISTENCE SECTOR (S.S)

                                           The traditional agricultural sector is subsistence oriented. In this sector labour force remains more than capital. On whole, this sector is labour oriented. People live conducting agricultural and subsistence business. Such businesses are self employment oriented rather than hiring labour. As more than necessary people or least skilled forces involves in this sectors per unit labour productivity of land remain at lower level. In some case, marginal productivity of labour declines to zero level or even may be negative due to lack of certain technology.

                                  The economist Lewis’ has also claimed that even though there have such differences between traditional and modern business sector, they are related to each other. He says traditional sector can assist in the development of modern sector. According to him, modern sector develop different industries, produces different goods and services including mineral excavation. As sufficient labour forces remain in traditional agricultural sector, it can supply excess labour forces to modern sector. Modern or capitalist sector needs sufficient labour forces for its expansion. Traditional sector provides as much as labour as they need. Subsistence or disguised unemployed, person getting periodical jobs small retailers idle house wives can go to modern sector for employment.

                                    As more labour forces can be shifted to modern sectors, it helps in economic development in two ways.

     As unemployed and disguised unemployed persons of traditional sector are sifted to modern sector, average productivity of this sector increase.

     As unemployed and disguised unemployed get employment in modern sector.

                                From this modern sector/capitalist sector income grows resulting in market expansion. This strengthens the base of modern sector for further development.

Lewis believed that large number of unemployed persons remain in traditional sector. They seek employment opportunities. In this context, he has taken population growth as the most important source of labour supply. Population grows continuously but the agricultural land does not nor can it create employment opportunities for the growing population. As a result, unemployment problem arise. Unemployed persons also employment to earn for liking. Employment opportunities are gradually created in modern sector and provided to the growing number of unemployed worker/ labour people.

                           When the workers labours are brought to modern sector, they are paid wages. The amount to be paid depends on the wages they used to earn while they were working in the traditional sector. Marginal productivity of some workers in traditional sectors remains at zero level. But on the whole, the families earn more or less, average productivity remains higher than zero.

                           It is necessary to give more wages than average income to attract them from traditional sector. If fewer wages than that is paid, they remain as disguised unemployed and stay indifferent towards new employment opportunities. In such situation only if a little more wage than they are earning is given, they become ready to come to modern sector. Lewis argued that about 30%more wage than their average income they are earning from traditional sector should be offer to attrack workers to modern sector

                    According to him, reasons for being more wage rate in capitalist sector that in subsistence sector are as follows.

1. When production increases, real wage also increases in subsistence sector. So, worker may demands more wages in the capitalist sector.
2. When excess workers are shifted from subsistence sector to capitalist sector, real wage rate increases in subsistence sector even if the production level has remained at same level. The workers who go to the capitalist sector also demand more wages as their income increases. So, there appears a situation to give more wages to the labourers in capitalist sector.
3. Living standard, consumption etc. become of high level in capitalist sector. So more wages needed as they need more expenses to maintain the same standard of living.