ECONOMIC DEVELOPMENT AND PLANNING

Economic growth
 This refers to increase in a country’s productivity.
 It is measured by growth/increase in national income or
GDP.
 It is quantitative, and is measured by taking percentage
increase in national income over a given period of time.

Economic growth rate = change in national income

income of previous period
 Economic growth is important because it is used by
planners e.g to set targets.
 It is the quantitative increase in the size of national
ECONOMIC DEVELOPMENT
Economic development is economic growth
accompanied by structural changes in the economy
and improvement in quality of life(improvement in
the standards of living of the people and the nation
as a whole).
Economic development is therefore qualitative.
Indicators of economic development
 Reduced infant mortality
 Improved life expectancy
 Reduction in the gap between the rich and the poor.
 Reduced inequalities in income distribution.
 Improved standard of living.
 Improved infrastructure e.g roads, clean water,
hospitals etc.
 Increased employment.
 Improved methods of production.
 Increased per capita income.
 Increased literacy levels and increased school
enrolment.
 Change in attitudes and values of the people
Note: There can be economic growth without
economic development, e.g when there is
economic growth and ;
 High mortality rate
 Poor roads
 Long working hours
 Poor health facilities
 Low life expectancy, etc.
Difference between economic
Economic growth
i. It is quantitative increase in the Economic development
size of a country’s national vi. Quantitative and qualitative
income. increase in well being of a
ii. Doesn't ensure reduced country’s economy.
inequalities in distribution of vii. Ensures reduced inequalities in
income. income distribution.
iii. Aims at increasing national viii. Aims at increasing real output
income only. per capita
iv. Measured at the rate of GDP ix. Measured in terms of welfare
changes of life
v. There can be economic x. There can be economic growth
development with economic without economic
growth. development.
Characteristics of underdevelopment
 Underdevelopment is a situation where a country
is not able to utilize its potential capacity to give
its population the highest standards of living that
such capacity can support.
 Under developed countries are also called third
world countries, developing countries or less
developed countries.
Under development is seen through;
 Under utilized resources.
Low levels of employment, and
Low levels of income
Characteristics of underdevelopment
1.High population growth rate
This is due to;
 No access to family planning methods.
 Some communities emphasize on large families.
 Idleness.
 Lack of recreational facilities.
2.Unequal distribution of income
This is because a few individuals are very rich while majority are
poor.
3. High levels of unemployment
This results from underutilization of resources such as land and
capital, and this leads to low levels of income and production.
Unemployment may be in form of open unemployment and
disguised unemployment
4.Low standards of living
Most people in underdeveloped countries have low standard of
living and live below poverty line.
This is due to low incomes that lead to low purchasing power.
This is also caused by low literacy levels.
5.Low savings and investment
Low incomes and unemployment lead to people having little or
no savings at all.
This in turn lead to low investments and hence a vicious cycle of
poverty.
6.High dependency Ratio
In under developed countries majority of the population are the
young people.
They have to be supported by the few adults who are working,
hence high dependency ratio, which in turn lead to low
7.Dependence on developed countries
Most underdeveloped countries cannot be able to
support themselves financially.
They keep on relying on developed countries for
financial support and end up getting aid with
strings attached.
8.Poor infrastructure
Underdeveloped countries lack adequate and quality
infrastructure such as;
 Lack of good food.
 Poor housing
 Poor medical facilities
Development Goals
The following are the goals of development
1.To reduce unemployment
Unemployment is undesirable for economic prosperity.
This goal is achieved by encouraging investment to create
employment opportunities.
2.To improve standards of living
Poor standards of living indicate poor development.
This goal is achieved by availing basic needs to all the citizens of
a country e.g food, shelter clothing and security.
3.Reduction of income and wealth inequalities.
In developing countries majority of the population live in abject
poverty while a few are rich.
Economic development help provide basic facilities which in
turn help reduce inequalities in income distribution.
4.Alleviation of poverty
Economic development aims at reducing poverty to
acceptable levels e.g above poverty line.
People below this line struggle to get the basic needs.
5.Equilibruim in balance of payments
Economic development aims at reducing B.o.P deficits
and attain equilibrium position.
6.Development of infrastructure e.g roads, electricity,
communication, health and housing facilities.
7.Self sufficiency
Development plans aims at reducing dependency on
other countries for provision of food, security and
8.Diversification of the economy
This is desirable so that a country does not depend on
one sector only
This can be achieved by allocating money to different
sectors or ministries.
9.Promotion of gender equity
This is achieved by providing equal opportunities to
men and women in all aspects of life such as
education, employment and politics.
Factors that hinder development goals
1.Inadequate capital
This refers to wealth that is used in production process.
Capital is required for funding research, education and training in order to
increase production.
2.Socio-cultural constraints
Some cultures are resistant to change and become hindrance to development.
Large and extended families increases dependency and discourage savings
and investment.
3.Political instability
This discourages investment, both local and foreign.
4.Poverty
Economic development cannot take place where there is poverty, and people
are lacking basic goods and services.
5.Low resource endowment
Little or absence of resources affect development.
Such resources include minerals, fertile soils, and good climate.
6.poor technology
Poor technology lead to low productivity and poor
development.
7.Poor human resource endowment
The size , composition, skills and literacy of the
population determine its development.
When these are not favourable they hinder economic
development.
8.Small market for goods and services
This lead to low /small market for goods and services
and discourage investment.
Disadvantages of development
1.Lead to growth of slums
This is due to urbanization and rural-urban migration.
2.Leads to unemployment
This is due to use of modern technology and machines.
3.Lead to social problems
It leads to social problems such as crimes, robberies
etc.
4.Lead to degradation of the environment
Industrial development may cause damage to the
environment e.g destroying natural habitats.
5.Leads to pollution.
DEVELOPMENT PLANNING
This refers to the process through which the government
focuses on the future, and influence the course of
economic activities to achieve a specific objective.
It involves;
1. Establishing objectives to be achieved, which may
include;
 Improvement of standards of living
 Reducing foreign dominance in the economy
 Eradication of illiteracy.
 Reducing gap between the rich and the poor, etc.
2.Identifying resources needed
3.Establishing method to be used to achieve the objectives.
Need/Importance of development planning
1.Helps in ranking projects
Planning helps in ranking projects in order of priority; taking
into account their importance and contribution to the
economy.
2.Helps in proper allocation of resources
Resources are limited and therefore, planning helps to allocate
them in the most productive areas.
It therefore helps in deciding where to invest.
This ensures that resources are not left idle and are not put
into wrong uses/purposes.
3.Used to stimulate efforts
Planning helps to stimulate efforts by setting targets to be
achieved; and this encourages people and businesses to
4.Promote equitable/Balanced regional
development
Planning helps in distributing resources and
industries to various sectors parts of the country,
hence helps in achievement of balanced sectorial
and regional development.
5.It is used to source for foreign aid
Good development plans are used by governments
to get financial aid from donors to finance projects.
Plans convince donors that the money will be used
well.
This is because donors are able to see the policies
6.Used for making long term decisions.
Development plans are used for making long term
decisions because they provide long term view of
the future.
7.Used to gauge progress
Development plans are used to gauge whether
progress is made, and if not steps are taken to
correct any discrepancy.
Classification/types of development plans
1.According to the degree of coverage
Comprehensive plans-covers the whole economy.
Partial plans-covers a few sectors of the economy.
2.According to the degree of government control
Directive plans-controlled by the government, and the government
outlines targets to be achieved.
Indicative plans –prepared by individual sectors.
3.According to time
Long-term plans-cover a long period of 15-20 or 30 years.
Medium-term plans-cover a period of 4-5 years.
They are derived from long term plans.
Short-term plans-cover a short period of 1-2 years.
-Obtain funding from the government via the
Conditions for successful development plans
1.There should be a body responsible for planning.
It should be made up of experts e.g economists,
staticians and engineers.
2.Realistic/achievable targets should be set.
3.Incorruptible and efficient administration.
4. Non interference by politicians.
5.It should have the support of all parties e.g the public.
6.It should be balanced e.g it should not favour some
regions or sectors at the expense of others.
7.Availability of adequate and accurate statistical data.
Factors that hinder development planning
Problems at formulation stage
1.Lack of accurate data
Adequate and accurate data is required for planning.
Lack of this hinder economic development because it makes the quality of
the plan to be low.
2.Inappropriate development plans
Developing countries copy development plans from developed countries.
They assume that because they worked in developed countries, they will
also work in developing country.
Some of these plans may not be appropriate and end up failing.
3.Lack of qualified personnel.
Developing countries lack qualified(trained and experienced)local
personnel to formulate and implement development plans.
Such countries therefore, rely on foreign experts who may not have
perfect knowledge of the developing countries they are planning for.
4.presence of the private sector
Developing countries have both public and private
sectors.
The private sector does not fall directly under the
control of the planning authority.
They may therefore, pursue other objectives different
from those of the planners.
5.Existence of large subsistence sector
The subsistence sector makes planning difficult and
unrealistic because they are not fully monetary and
have inaccurate data.
Problems at implementation stage
6.Lack of funds/high costs
Development planning is an expensive(costly) process.
Because of this projects are never accomplished due to lack of funds.
7.Lack of resources
Developing countries lack resources such as skilled labour, finance
and capital, equipments used in implementing development plans.
Therefore, plans may fail.
8.Overambitious
Some plans may be unrealistic and end up failing
9. Inflation
When there is inflation prices rise rapidly , resulting in high
cost of implementing projects.
10. Natural calamities
Natural calamities such as drought, floods, diseases
and earthquakes may negatively effect
implementation of development projects.
Money meant for the projects are diverted to
combating the calamity.
Poor enlightenment and public mobilization
For MDGs to be successful there has to be sufficient public participation.
This can only be achieved if the program is implemented through
enlightenment and mobilization activities. There has been poor media
coverage especially in developing countries. This is also coupled with
embezzlement and misappropriation of funds for example in Nigeria.
Dictatorial behavior of leaders in other countries, corrupt practices in
low and high places also prevent successful implementation of the
program.
Poor support of MDGs
There has also been poor support for MDGs programs in many
developing countries. It is essential to note that for a successful
progress to be achieved; international organization and advanced
nations have to fully support the less advanced countries. This is not
the case in many countries especially in West Africa. The support is
not forthcoming and it seriously affects realization of the goals in
many parts of the globe.
Cultural differences and problems
Many developing countries that would benefit a great deal from MDGs face cultural
problems. There are different ethnic groups in the countries therefore variation of
culture. This is also reflected in their slow acceptance of developments and
changes in the countries. Therefore, it is imperative for each segment of the
countries involved in MDG of the world to have equal access and a clear
perception of the program to enhance its success.
Economic problems
Poor economy is one of the factors that hinder implementation of the program by a
great percentage. High levels of unemployment, poverty, lack of access to social
amenities and misappropriation of funds aggregate the situation. This makes it
difficult for pioneers of the program to mobilize the public and implement MDGs
successfully.
What’s more, financial contribution from the private sector towards MDGs is
required. This is because more than 80 percent of investment comes from private
sector and it helps a great deal in enhancing high and positive economic growth.
With balanced, high and sustainable economic growth in different countries,
implementing the program will not be much of a problem. It however requires
discipline especially in revenue. Maximizing revenues will help to promote
healthy economic growth and good business transactions.
Political instability
Political instability is a serious threat to successful
implementation of the program. It diverts focus, the zeal
as well as attention of the government and the general
public on MDGs. Therefore, adequate measures should
be taken to address ethnic tension, bad governance and
injustices for MGDs to be achieved.
Poor leadership and administrative bottleneck
Poor leadership in many countries also hinders
achievement of MDGs. Leaders in many developing
countries cannot rise up to the challenges that come with
leadership including political issues. This in turn leads to
partial participation of the general public in the program.