CHAPTER 3: DETERMINANTS OF ECONOMIC DEVELOPMENT
Economic Development - is not determined
by economic factors alone but also non-
economic factors.
Economic Factors:
1. Capital
2. Technology
3. Market
Non-Economic Factors:
1. Government
2. Religion
3. Education
4. Social Structure
5. Values
6. Culture
CAPITAL – refers to finished goods which are
being used to produce other goods.
Physical capital - these are machines,
buildings, tools equipment, etc.
Financial Capital – money
Human capital – people
Machines accelerate the production and
distribution of goods.
TECHNOLOGY-refers to better techniques or
methods of production
Social Technology-concerned with the
improvement of attitudes and values of the
people.
Public Administration Technology-deals
with the improvement of social goods in
order to maximize the satisfaction of social
wants
Invention-the discovery of new technique
Innovation - the practical application of an
invention to production for the market
Technology for the less developed
countries:
 Actually, there is nothing wrong with the
importation of technology. It saves both
money and time. However, the imported
technology should be suitable to local
conditions.
 Many years ago, Japan was a notorious
imitator of Western technology.
 Another case, a poor country bought a giant
machine from Russia.
 Professor Gunnar Myrdal- author of Asian
Drama, noted that Western technology has
been adopted in Southeast Asian without
proper consideration of the local climate and
soil consideration.
 In case of the industrial countries, they use
machines or capital-intensive technology,
because labor is scarce and therefore
expensive.
 For the poor countries, they have an
oversupply of unemployed and
underemployed individuals, therefore they
should use labor-intensive technology. This
means more labor and less machines.
 Schumacher - author of “Small is
Beautiful”, suggested an intermediate
technology for the less developed countries.
This type of technology is between a
primitive technology and modern
technology. It is more efficient than a
primitive technology and less expensive
than a modern technology. Such technology
is labor-intensive.
MARKET - its growth reflects an expanding
economic development.
 Transportation, communication and
electricity greatly help in the growth of
markets. External economies of scale
reduce cost for both producers and traders.
 Technology improves production,
processing and distribution. Goods with
lower cost of production and distribution
have generally lower prices. This increases
the purchasing power of the buyers, and so
demand for the products also increase.
 A market becomes bigger when more
people buy more goods. This stimulates
investments and production. It is only
expected that businessmen are willing to
produce more if there is a good demand for
their products.
SOCIAL STRUCTURE
A society which has a more equitable
distribution of wealth and income and
economic freedoms, provides a more fertile
environment for economic development. Being
an open society, even the humblest citizen can
aspire to be rich or to be a leader of his
country. Opportunities for improvement are
open to all members of society. Hence, a man
in the lower class can move upward. A society
whose wealth and income belong to very few
families does not encourage economic
development. It is even worst in a close
society. People who are belong to the lowest
social class cannot move to higher social
structure. In case of the caste system of India,
poorest people are considered as untouchable
and slaves and performs dirty works. In case of
the Apartheid policy of South Africa, the Blacks
are considered the lowest in the social ladder.
FAMILY SYSTEM
 Family members in Western societies like
US are more individualistic and self-reliant.
In less developed countries, the children
have to take personal care of their poor old
parents.
 An extended family system, which is
common in the Philippine is good in the
sense that there is unity and the welfare of
the old and the young members are
protected by the stronger adult members,
usually the eldest.
 Dominant features that are not favorable to
economic development:
1.Married children lives with their parents
2.Close family ties hamper labor mobility and
the choice of better economic opportunities
3.The family obligations of the older children
to their parent and younger brothers and
sisters have been a part of culture
CULTURAL VALUES
 Some cultural values such as bahala na,
mañana habit, ningas cogon, Filipino
time and other similar values are not
conducive to economic development.
 Professor Myrdal-according to him,
industrialization requires efficiency, mobility,
discipline and punctuality. Filipino officers or
officials, especially those in the government
are not efficient, they are doing little during
office hours.
The desire to imitate
Many peoples in the less developed
countries admire the consumption habits of the
Americans and Europeans. Such misplaced
cultural values do not encourage at all the
production of local goods. Some of the cultural
values which are not favorable for economic
development do not change.
POLITICAL CONDITIONS
Political stability and fair economic
policies stimulate economic development. The
major role of the government is to provide a
high standard of living for its people. Plans,
policies and programs are tools of economic
development. If governments keeps on
changing very often, economic programs and
projects are likely to suffer. This is a waste of
scares resources.
Singapore is a tiny state and has a poor
natural resources and yet very affluent and
progressive Asian country. The principal key to
its economic growth are foreign investments
and tourism.
CORRUPTION IN PUBLIC ADMINISTRATION
According to an economics professor in
Singapore, government corruption is the
number one obstacle to economic development
in Southeast Asia. Government corruption is
present in any society. Professor Myrdal stated
that corruption has reached even the higher
levels of government officials and politicians.
He cited the various government offices which
has been corrupt, such as the public works
departments, government purchasing
agencies, and those involved in the collection
of taxes, customs duties and export and import
licences even in the court of justice and
universities.
In dealing with government offices,
bribery has been a common practice. These
has been a need to bribe government
personnel to expedite applications and
approvals. Asian government have taken
measures and actions to weed out inefficient
and corrupt employees and officials. Besides,
corruption has become an institution, it cannot
be eradicate overnight. Laws and punishments
are not enough to remove corruption. It is more
important that economic conditions of minor
employees be improved and the moral values
of government officials be changed. The
honesty and integrity of top government
officials can serve as a good example for their
subordinates.
RELIGION
During the biblical times, materialism
and the pursuit of wealth were despised and
discouraged. Such religious concepts and
teachings against materialism are not favorable
to economic development. When people shy
away from the pursuit of wealth, economic
growth tends to be slow and primitive and they
will not work harder and to search for
innovations.
Max Weber - author of the “Protestant Ethics
and the Spirit of Capitalism”, claimed that
the Protestant countries are more progressive.
Several Catholic practices are not consistent
with the principles of economic development.
Celebrations which are religious in nature, like
fiesta, marriage, baptism are conducted in
expensive style. The poor become poorer and
incur more debts in trying very hard to comply
with religious traditions.
POPULATION
Population is both an advantage and a
disadvantage in economic development. It is
an advantage if people are productive and
creative.
Population is a great burden if the rate
of population growth is higher than the rate of
production growth. Such situation is more
serious if the resources of the economy are not
equitably distributed.
Poor countries with high birth rates are
advised to adopt family planning programs.
GEOGRAPHY
 It refers to climate, soil, natural
resources, topography and structure of
the land.
 Transportation and communication are
likewise affected by geographical
structure.
 Geographical disadvantages can
eliminated or reduced through the
proper use of technology and capital.