Bangladesh economics

Lecture 3
 Topics

• Developed,
• Under Developed,
• Less developed and
• developing countries
 Developed countries:

• Developed countries:
 Those countries cross the optimum level of income and growth is
called developed countries.
 Developed countries are able to ensure higher standard of living of
the people by increasing per capital income and ensuring proper
utilization of national resources by using modern production system,
science and technology.
 Population growth rate is very low.
 Defense system is very developed, international and foreign trade is
very favorable German, Russia, U.S.A is developed countries.
 Under Developed Countries:
 The countries which have no scope for developing is called under
developed countries.
 Underdeveloped country is one which is poor, means low per
capital income and low standard of living and people live under
poverty and they have resources but undiscovered.
 They are in backward position in industrial sector, high population
growth rate, and political instability.
 Less developed countries:
 Less developed country means that country which is spreading out,
prospering, which is developing and increasing its production by
creating awareness among people with a master plan.
 These types of countries are between developed and developing
countries.
 Such as Those countries 80% people depends on agriculture, 50%
people are unemployed, 70% people suffer from malnutrition, 25%
literacy rate and 12% female literacy rate.
 Developing countries:
 The country which is almost in the position of optimum level is
called developing country.
 Developing countries means those countries who are trying to
develop their economic condition by using techniques and strategies
and huge possibility to develop in future.
 This countries economics and social structure is little developed.
 They are trying hard to utilize the natural and human resources to
develop their standard of living, Such as - Bangladesh.
 Developed vs. Developing Countries
Developed Country also called -Industrialized countries or More economically developed countries.
• Reasons Why:
 Form of government (democracy)
 Free market economy.
 Lack of corruption.
 More dependent on manufacturing than agriculture.
 Prevalent (widespread) technology.
• Examples
• United States
• Japan
• Germany
• France
 Developing Country:
Examples:  Country with low standard of
Mexico living.
Brazil  Also Called Third World
South Africa
Countries.
Thailand  Underdeveloped industry.
 Lack of modern technology.
 Low levels-
 Education
 Healthcare
 Life expectancy
 Topic

• Difference between economic growth and economic development

Difference between economic growth and economic development

• Economic Growth:
• It is an increase in a country's real level of national output which can be caused
by-
 an increase in the quality of resources (by education etc.),
 increase in the quantity of resources & improvements in technology or in
another way an increase in the value of goods and services produced by
every sector of the economy.
 Economic Growth can be measured by an increase in a country's GDP(gross
domestic product).
 Difference between economic growth and economic development

• Economic development:
 It applies in the context of people's sense of morality (right and
wrong, good and bad).
 The definition of economic development given by Michael Todaro
is an increase in living standards, improvement in self-esteem
needs and freedom from oppression (forcing) as well as a greater
choice.
 The stages of economic development
• 1.Primitive stage:
 The initial stage or the first steps of economic development is primitive
stage or traditional society.
 The amount of production is very limited and scarce in this stage.
 Modern science and technology is not applied in production sector in this
stage.
•- As a result per-capital income is very low. In this stage savings, investment
and capitalization rate is tremendously low. For that above reasons the rate of
economic development is very low.
 The stages of economic development
• 2.Pre-take off stage:
 Pre-take off stage is the starting point of economic development.
 The knowledge of science and technology spread out and rate of
literacy increased in this stage.
 A group of entrepreneurs are ready to take any types of risk for capital
investment.
 Totally economic development is occurred here but not in satisfactory
stage.
 Thailand, Cambodia are in the pre-take-off stage
 The stages of economic development
• 3. Take off stage:
 Take off stage is the fighting stage of economic development.
 In this stage employment and newly invented industries are
increased.
 For greater employment and savings as well as capital are
increased. 5-10% of total national income is applied in this
stage.
 Generally one country stays in this stage for 20-30 years.
 The stages of economic development

• 4. Self-Sustaining Stage:
 Self sustaining stage is the highest stage in the optimum level of
economic development.
 In this stage one country fully stops its import and produces it.
They don’t take any loan.
 Here production rate is faster than population growth rate.
 It takes 60 years for one country to reach this stage.
 The stages of economic development
• 5. Mass consumption:
 When the consumption is more than optimum level is called
mass consumption.
 In this stage many industrial institutions are engaged in
luxurious product. Here over consumption of foods, cloths, and
commodities are noticeable.
 USA, UK, Canada, China, Japan has reached in this stage.
 Topic

• Some causes of economic backwardness

 Some causes of economic backwardness

• 1. Poverty cycle:
• Low incomes --> Low savings --> Low investment --> Low productivity --> low
income..
 Absolute poverty- inability to just meet basic physical human necessities/needs
of food/nutrition, clothing, health and shelter in order to survive.
 many researchers simply estimate that 20% of the world’s population falls below
this line.
• UNDP reports that the proportions falling below the poverty line in brackets:
Bangladesh (80%), Ethiopia (60%), Vietnam (55%), Philippines (54%), Brazil (49%),
India (40%), Nigeria (40%), Pakistan (29%), Indonesia (24%) and China (10%)
 Some causes of economic backwardness

• 2. Economic obstacle:
• economic obstacles can be divided into those-
 which are largely the result of domestic policies (internal)
 and those which are related to the structure of the
international economy (external).
 Some causes of economic backwardness

• A). Internal Obstacles:

• The main internal obstacles to economic development are-
 underdeveloped financial systems,
 the lack of economic freedom,
 macroeconomic instability,
 and an underdeveloped infrastructure. 

• B). External Obstacles:

• dependence on exports of primary products,
• unequal terms of trade,
• and dependence on external funding.
 Some causes of economic backwardness

• 3. Political obstacles:
• In developing countries, political obstacles have a much larger
impact on economic development than economic obstacles. This
is because economic policies are created and implemented by
politicians. Political obstacles include--
• -underdeveloped institutions and
• -too much government intervention in the economy.
 Some causes of economic backwardness
• 4. Underdeveloped Institutions:
• In most developing countries, governmental institutions are either
absent, inefficient, or extremely weak.
• Poor governance  has three main consequences:
 Unstable economic and political policies.
 Creates obstacles to economic growth.
 Fosters corruption.
 Some causes of economic backwardness

• 5. Social obstacles:
 Social and cultural factors acting as barriers-
• Religion
• Culture
• Tradition
• Gender Issues
Productivity increased due to technological change in terms of capital and human
skills, encouraging research and development which led to further growth.
The rise in income led to increased consumption.
 Some causes of economic backwardness

• 6. Population Growth:
• As noted 80 percent of the world's population lives in the developing country.
 In many developing countries, the population is growing faster than the ability of
society to provide the education and skills necessary to improve economic growth.
  In addition, a rapidly growing population lowers per capita income growth,
especially for those who are already poor, live in rural areas, and depend on
agriculture.
 Some causes of economic backwardness

• 7. Lack of Access to Education:

  Since human resources ultimately determine the character and
place of economic development,
 a poorly educated  workforce limits increases in productivity
and competitiveness, thus slowing economic growth.
 Some causes of economic backwardness

• 8. Environmental Devastation (destruction):

 In traditional economic growth models, the cost of destroying
the natural resources base was not included in GDP figures.
 Damage to water supplies, land, and, reducing agricultural
productivity, and increasing the income gap between rich and
poor
 Some causes of economic backwardness

• 9 .Macroeconomic Instability:
 As a result of ineffective government policies and/or changes in
the international economy, macro-economic instability has a
devastating effect on economic development.
 Inflation leads to demands for wage increase. slowing economic
growth and investment
 Some causes of economic backwardness

• Macroeconomic stabilization polices typically include three features:

• 1. Limiting inflation 
• 2. Restoring fiscal balance through reduced government expenditures, raising
personal and business taxes, and reforming the financial system.
• 3. Eliminating the current-account deficit by devaluing the currency exchange
rate and promoting exports.
• 
 Some causes of economic backwardness

• 10. Lack of the rule of law:

 Research shows economic development is strongly affected by
the quality of legal institutions.
 The rule of law creates a predictable and secure environment
for people to produce, trade, and invest. This expands
employment opportunities and incomes.
End of Lecture 3…….

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