ECONOMIC GROWTH AND DEVELOPMENT

Economic growth refers to the persistent increase in the quantity of goods and services produced in an
economy during a given time/year.

OR
It is the persistent quantitative increase in the GDP/GNP of an economy over time.
On the other hand
Economic development is the persistent qualitative and quantitative increase in the productive capacity
of the economy. It involves positive structural changes in the political, social, and economic set up of the
country.

Determinants of Economic Growth

 . Availability and utilization of resources: When the available natural resources are well utilised
there is high level of output because firms have inputs/raw materials to use in production and
this leads to a high level of economic while when the available resources are not well utilised
there is low rate of economic growth because of limited availability of inputs/raw materials.
 . Policy of government on production and investment: A favourable government policy in form
provision of investment incentives encourages production because low costs of production are
experienced hence there is high rate of economic growth while a unfavourable government
policy such as high taxation leads to high cost of production and therefore a low level of
production and economic growth.
 State and level of technology: Use of modern technology results in high productivity and
efficiency and therefore high level of economic growth, poor technology is a hindrance to
economic growth because of low efficiency in production.
 . The political situation or extent of peace and security: A stable political atmosphere attracts
both local and foreign people to invest because there is no threat to property and lives hence
high output and economic growth and an unstable environment is a threat to local and foreign
investors, destroys property and hence low output and low rate of economic growth.
 Level of infrastructure development both social and physical. Well-developed infrastructure
such as roads, railways, etc. leads to high level of economic growth because it lead to a low cost
of production which encourages production while poor infrastructure leads to low level of
economic growth because of the high cost of production that discourages production.
 Population growth rate. A high population growth rate causes low level of economic growth
because it leads to low level of savings and investment since much of the income is consumed
and leads to level of production and national income. On the other hand a
 low population growth rate leads to high level of savings and investment which results into a
high level of production and high rate of economic growth.
 . Level of skills. When majority of the population in the country are well educated and trained
higher level of economic growth is realised because there is high efficiency in production which
results into a high level of output. While when the majority are less educated there is a low level
of output and economic growth because of low efficiency in production.

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  Degree of monetization. A high degree of monetization (where much of what is produced is for
the market) leads to high level of economic growth because there is great incentive to produce
than a country that is subsistence oriented (where much of what is produced is for own
consumption rather than for the market).
 Entrepreneurial ability. Better entrepreneurial ability leads to high level of economic growth
because several enterprises are established that contribute to national output while poor
entrepreneurial abilities lead to low level of investment in enterprises and this causes low level
of production and economic growth.
 Availability of capital stock. The availability of physical capital encourages production because
of high efficiency, high level of output and national income. Low level of capital stock implies
low level of national output because of low levels of efficiency hence low level of economic
growth.
 Size of the market. Availability of big markets for the goods being produced encourages
producers to produce more since high profits are realized. Limited market internally and
externally limits production because low profits are generated and hence a low rate of economic
growth.
 . Nature of the land tenure system. A poor land tenure system makes acquisition of land
for investment very difficult(limits access to use of land)the and expensive and this limits investment
and mechanization hence a low level of output. On the other hand a good land tenure system makes
acquisition of land for investment and production easy hence high level of output and economic growth.
 Degree of conservatism. A high level of conservatism leads to inability of people to easily adopt
better production techniques since they are reluctant to invest funds and this leads to low level
of production hence low level of economic growth while low level of conservatism leads to
adoption of better production techniques since they invest funds which lead to high level of
production and economic growth.
 . The level of price stability. When prices are stable low production costs are experienced and
this results into high level of production since producers realise high profits which leads to high
level of economic growth while unstable prices increase cost of production and this discourages
production hence a low level of economic growth.
 The level of savings. A high level of savings leads to high level of investment and
Production because there are funds to acquire inputs and this leads to high level of economic growth
while low level of savings leads to low level of investment and production because there are limited
funds to purchase inputs and this leads to low level of economic growth.
 . Degree of corruption. High level of corruption causes low level of production and economic
growth because it reduces funds for implementation of projects and increases cost of
production while a low level of corruption makes implementation of programmes
possible since funds are available and results into a high level of production and economic growth.

BENEFITS OF ECONOMIC GROWTH

These are the advantages enjoyed by individuals and society as whole as GNP increases and different
commodities are produced in an economy. These include the following;

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BENEFITS OF ECONOMC GROWTH.
 Increased enjoyment of leisure. Economic growth precipitate individuals to enjoy leisure using
acquired income leading to improved standards of living.
 Increased government revenue from taxes. The government gets more revenue to a large tax
base enhanced by different economic activities.
 Increased humanitarian activities with the rich societies reaching out to poor societies. Non
government organizations are attracted to support the poor.
 Increased production of goods and services leading to increased utilization of resources. Resources
are exploited in order to supply raw materials needed for further production.
 Better B.O.P position. This is due to increased exports and reduced imports.
 Development of infrastructure. Infrastructures like roads, railways are constructed to ease mobility
of factors of production and final goods to where they are needed.
 Reduced income inequalities. This is due to the fact many individuals acquire jobs hence narrowing
the income gap between the rich and the poor.
 Increased employment opportunities. Due to numerous investments and increased economic
activities more employment opportunities will crop up.
 Improved technology. This through innovations and inventions plus importation of capital
intensive techniques of production from developed countries for increased production levels.
 Consumption of a variety of goods and services due to high incomes. This enables individuals to
satisfy their choices.,
 Improved labour skills. Due to use of expatriates and machines plus putting in place training
opportunities for labour, more skills are acquired.
 Political stability as the population becomes contented. Individuals become satisfied with the level
of growth and hence reduced political tension.
 Removal of obstacles to growth e.g. conservatism, backward cultures. Individuals tend to accept
new ideas of development e.g. accept to apply fertilizers and modern methods of farming.
 It leads to industrialization leading to increased urbanization. Due to the need to boost out put,
industries are established thus localization hence leading to urbanization.
 It reduces economic dependence hence promoting self reliance. Since most goods as produced
locally this reduces over dependence on imports.
COSTS OF GROWTH
These are the disadvantages which individuals and society as whole suffer as a result of economic
growth that has been achieved. I.e. it is the opportunity cost of economic growth or the side effects of
economic growth.
i. Causes to quick exhaustion of resources due to over exploitation. This is because there are several
firms involved in production and trying to maximize profits.
ii. Environmental degradation/pollution. This is brought about by poor waste management and the
fumes from industries that pollute the environment.
iii. It requires hard work therefore people forego their leisure time. People strain themselves trying to
increase their incomes through increased output and this causes poor health.

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iv. It causes income inequalities. This is because production is undertaken by few who have the required
capital and therefore the rich become richer and the poor become poorer.
v. It causes technological unemployment when capital intensive techniques of production are used.
Machines are used in the place of human beings.
vi. It involves foregoing present consumption and investing most of the incomes in order to increase
output in the future. This results in a decline the welfare of individuals.
vii. It causes rural-urban migration and its associated disadvantages because most economic activities
are urban based. Those who cannot find jobs in rural areas move to urban centres expecting better jobs
which are not readily available hence high crime rate.
viii. It causes foreign domination and profit repatriation. This is because of foreign ownership of some
business undertakings.
ix. Deterioration of cultural values. This is due to urbanization and foreign influence.
x. Occupational hazards which affects the lives of the workers. The profit driven entrepreneurs mind less
about the safety of employs as they try to reduce cost of production.
xi. It increases the debt burden due to increased borrowing / it increases external dependence. The
need to expand enterprises results into borrowing to finance businesses.
xii. It involves displacement of people in some cases. The need for land for expansion of enterprises
causes displacement of people.
xiii. Leads to imbalance in regional development. There is imbalance in development due concentration
of most enterprises in urban centres.
xiv. Low quality of output. This as a result of using poor technology since production emphasises
quantity rather than quality.

CIRCUMSTANCES UNDER WHICH ECONOMIC GROWTH MAY NOT BE ACCOMPANIED BY

CORRESPONDING RATES OF ECONOMIC DEVELOPMENT;
 When there is a high degree of income inequality. This implies that the increased production of
goods and services benefits only the rich who are able to buy them while the majority poor remain
with poor conditions of living because they cannot enjoy the goods and services.
 When there is increased expenditure on nonproductive sectors e.g. military. Increased public
expenditure on procurement of military weapons and expenditure on tear gas does not lead to
improvement in people’s welfare directly hence economic growth is not accompanied by
corresponding rates of economic development.
 When people are over worked and foregoing leisure. Many people get little or no time to rest and
enjoy the increased goods and services produced in the economy yet leisure greatly contributes to
better standard of living/ high quality of life.
 When there is high taxation by the government. When the government imposes high taxes on
people’s incomes that reduces their purchasing power, and this makes them unable to afford the
increased good and services produced, hence poor quality of life.
 When there are high rates of unemployment in the economy. Many people cannot generate
incomes to afford/ buy the goods and services and this leads to poor quality life despite increased
quantity of goods and services produced.

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 In case there is high production of capital goods than consumer goods. The capital goods do not
influence welfare directly unlike consumer goods. Therefore, people’s welfare remains low despite
economic growth.
 When there is production and consumption of poor quality goods in the country. These goods
negatively affect the quality of life hence there is no economic development despite increase in the
quantity of output produced.
 In case of high rates of inflation in the economy. The persistent increase in the general price level
(inflation) makes goods very expensive and many people cannot afford to buy them, hence low
quality of life despite economic growth.
 When there is high population growth. This increases the dependence burden on working
population hence reducing the amount of goods and services available to households and savings.
 In case of increased social costs as a result of economic growth such as pollution, which deteriorates
or reduces the quality of life of the citizens despite the increased quantity of goods and services
produced.
 When there is increased public debt and debt servicing . This implies that a lot of income from the
increased output produced is spent on offsetting mature debts and clearing interest on loans,
instead of improving the welfare of the citizens directly. Hence low quality of life despite economic
growth.
 If people’s attitudes have not changed because of high levels of illiteracy. That is to say with high
level of conservatism and traditionalism which negatively affect peoples’ attitude towards
development.This means limited use of modern methods of production hence low efficiency of
labour.
 When there is worsening balance of payment position.This means less foreign exchange earnings
and high foreign exchange expenditure leaving limited resources for investment and production of
goods and services hence low standards of living.

CIRCUMSTANCES UNDER WHICH ECONOMIC GROWTH MAY BE ACCOMPANIED BY CORRESPONDING

RATES OF ECONOMIC DEVELOPMENT;
N.B EXPLAIN THE FOLLOWING POINTS.
 Incase incomes are evenly distributed.
 When there is improvement in the quality of life of the people.
 When it does not lead to excessive hard work
 When there is improvement in the quality of goods and services produced.
 When there is increased production of consumer goods.
 When there is increased expenditure on productive ventures.
 When there is security.
 When there is structural transformation of the society.
 When there is no inflation in an economy.
 When there is low rate of direct taxation,
State any four (4) indicators of under development.
 High population growth rate.

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  Low standards of living.
 High levels of illiteracy.
 High infant mortality.
 High levels of malnutrition.
 Low levels of self-esteem.
 Low levels of life expectancy.
 High levels of conservatism
Features of economic development in my country;
 Increasing literacy levels.
 Political stability.
 Reduced economic dependence.
 Infrastructure development.
 Improved technology.
Components / indicators of economic development
 Economic growth—increase in the volume of goods and services
 High level of skills / high level of literacy of individuals
 Commercialization of the economy
 Low population growth rates
 High level of technology
 High level of infrastructural development
 Political stability
 High level of capital accumulation
 High level of entrepreneurship
 Favorable terms of trade
 Positive attitudes towards work/ reduce conservatism
 High level of accountability/ reduced corruption
 Reduced dependence on foreign aid
Requirements for economic growth and development
 Commercialization of the economy/ reduce dependence on the subsistence sector
 Promotion of technological development through innovations and inventions
 Increase in the level of industrialization
 Increase in income levels of the country and the citizens
 Control of capital outflow which is a result of repatriation of profits, purchase of expensive imports
etc
 Control of population growth rates to desired levels
 Development of infrastructure
 Creation of a conducive investment climate such as tax holidays, enabling laws etc
 Widening market for commodities such as by joining/ strengthening regional groupings/
integrations
 Diversification of the economy
 Developing the human resource base through education and training

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 Positive attitudes towards work/ reduced level of conservatism
 Increase in exploitation of strategic natural resources.
ROSTOW’S STAGES OF ECONOMIC GROWTH AND DEVELOPMENT.
According to Professor W.W OR ROSTOW, an American economist, he observed that economic growth
takes place through five different major stages which include;
1. Traditional stage.
2. Pre-condition for takeoff.
3. Take off.
4. Drive to maturity.
5. Stage of high mass consumption.
1. TRADITIONAL STAGE
This is the first stage according to Rostov. There is little progress and hence the economy is static.
People are after what to eat today and tomorrow to care for itself.
FEATURES / CHARACTERISTICS.
 Production is for home consumption.
 Primitive tools are used during the production process.
 There is barter system of exchange.
 There is high rate of illiteracy.
 There is a closed economy i.e. no trade with the outside world.
 The social structure is dominated by kings and chiefs.
 There is no savings in this type of the economy.
Note; No country is still in this stage but examples can be identified from some societies e.g. Bushmen
from Kalahari Desert.
2. TRANSITIONAL / PRECONDITION FOR TAKE OFF
This is the stage when societies are in the process of transition. It is the period when society lays
foundation for take off.
FEATURES / CHARACTERISTICS
 Improvement in technology.
 Industrialization starts to take root.
 Improvement in socio-economic infrastructures.
 Emergence of foreign trade (economy becomes open)
 Illiteracy rate reduces.
 Emergence of entrepreneurs in the economy.
 Cultural barriers begin to reduce.
 The economy becomes dualistic in nature.
 Savings rise to 5% of GDP/GNP/NY.
 Investment increases to 5% of GDP/GNP/NY.
3. TAKE OFF STAGE
It is the 3rd stage of economic growth where a country enters into self sustained growth characterized
by high levels of savings and high technology.
FEATURES/XTCS;

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  High levels of investment between 10 – 15% of national income.
 High levels of savings between 10 –15% of national income.
 High levels of employment.
 High levels of industrialization
 High levels of urbanization.
 High levels of technology.
 High literacy rates.
 The economy becomes self reliant.
4. DRIVE TO MATURITY.
This is the 4th stage of economic growth according to Prof. Rostow, It is characterized by;
 High levels of investment between 10 –20% of national income.
 High levels of savings between 10 –20% of national income.
 High levels of industrialization.
 High levels of urbanization.
 High levels of technology.
 High levels of employment.
5. HIGH MASS CONSUMPTION.
This is the 5th stage of economic growth according to Prof. Rostow. It is characterized by;
 Leisure is a priority.
 Very high standard of living.
 Existence of balance of payment surplus.
 High levels of economic and political stability.
 Use of highly advanced technology.
LIMITATION CRITICISMS OF THE THEORY
 Assumes continuity in the road to development yet there would be a decline in economic
growth.
 Assumes capital accumulation is the only engine of economic growth which is not true since
other factors such as market and technology matter.
 It does not consider the nature of income distribution.
 It does not consider other external factors which affect economic performance e.g. foreign aid.
 High levels of saving may not mean economic growth.
 Some stages may not be necessary as some economies like USA, CANADA that are born free of
traditional stage.
 It is difficult to demarcate one stage of growth from the other e.g. 4 th and 5th stages.
 Resources are not homogeneous in all countries/societies.

NB: Uganda is in the pre-conditions for take-off stage because of the following reasons:
1. The manufacturing sector is beginning to develop as a leading sector.
2. Savings and investment are coming up
3. Bottlenecks to development are slowly being over come
4. The Ugandan economy is experiencing a steady growth rate

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5. Agricultural modernization is taking place
6. Infrastructure is being developed slowly but steadily
7. There is a general improvement in the living standards
8. Technological advancement is taking place
9. Illiteracy rates are greatly reducing through UPE and USE
10. There is an increase in the entrepreneurial class.

THE BALANCED GROWTH STRATEGY

This is a theory associated with Professor RegnasNurkes and it emphasizes harmonious and
simultaneous development of all sectors of the economy so that they complement each other and grow
more or less at the same pace.
. In this strategy balance should be achieved in sectors like industry and agriculture consumer goods and
capital goods, domestic and foreign sectors investment in human capital and physical capital etc.
CONDITIONS FOR THE SUCCESS OF BALANCED GROWTH THEORY (UNEB P1 2018 SECTION A)
 Availability of enough capital
 Availability of skilled labour.
 Presence of entrepreneurial abilities.
 Favourable political climate.
 Favourable government policy on investment.
 Existence of well developed infrastructure.
 Low level of conservatism.
 Presence of large market.
 Presence of a strong planning machinery.
 High level of accountability.
 Easy access to land.
 Presence of better technology.
 Existence of strong linkages btn sector.

ARGUMENTS FOR BALANCED GROWTH STRATEGY

1. There is promotion of inter sectoral linkages in the economy resulting in to an integrated and self-
sustaining economy. The linkages are forward and backward.
2. There is skills development. It encourages training in various labour skills which improves the
efficiency of labour thus increased productivity in the long run.
3. It improves the BOP position of a country. It eases the problem of unfavourable bop through
diversification of production and increasing export earnings.
4. It helps widen the tax base through industrialisation and diversification of economic activities. This
increases government revenue
5. It widens employment opportunities. More employment opportunities are created in the various
sectors of the economy hence improved earnings.
6. It leads to increased output. This is because several firms are established thus accelerates economic
growth.

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7. The strategy ensures better utilization of resources by the different sectors. This is due the large
number firms involved in production and the increased demand for goods and services.
8. It leads production of a variety of goods. This is because there are several firms producing
differentiated goods hence widening consumer choice.
9. It widens the market. The simultaneous development of sectors creates market inn each sector since
the sectors are interdependent / because of increased activities.
10. There is reduced dependence on other economies or one sector. This is because there are more
goods available locally which reduces the demand for imports.
11. It reduces income inequalities in the economy as most people are employed in various sectors where
they earn incomes
12. The strategy promotes balanced regional development. The various sectors of the economy are
catered for, this is because of investment in most sectors so that they grow at the same time.
13. It promotes the development of infrastructure. There is construction of infrastructure to ease
movement of goods and services.
14. The strategy promotes technological development. This is because there is technology transfer and
increased innovations and investments.

NB: Forward linkages exist when setting of an industry results into emergence of other industries with
the newly established plats forming markets for products (and by-products) of the already existing
industry.
While
Backward linkages is where existence of an industry leads to setting of new industries to supply existing
industry with inputs.
DISADVANTAGES OF BALANCED GROWTH STRATEGY
1. It is an expensive or costly strategy as it requires a lot of capital which developing countries do not
have to sustain investment in all sectors of the economy. This causes shortage of inputs.
2. It involves wastage of resources because of limited markets in developing countries as the purchasing
power is low due poverty.
3. The strategy leads to quick depletion of resources because it makes extra ordinary demands on the
available resources.
4. It necessitates borrowing since a country may not have sufficient capital to invest in all sectors
resulting into a debt burden.
5. The strategy encourages dependence on other countries for resources since the local resources may
not be enough to support all the sectors of the economy.
6. It may lead to heavy losses because of project failure brought about by incidents like war, lack of
sufficient capital etc.
7. It is inflationary in the short run because of too much spending by the different sectors of the
economy
8. The strategy strains government planning machinery because of the limited skilled manpower in
developing countries hence poor planning that does not achieve high rates of growth.
9. Limited control of government over the economy i.e. failure by the government to oversee all the
sectors due to limited manpower.

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Factors which limit the operation of balance growth strategy
1. Limited capital. This limits the ability to purchase the required inputs hence limited production.
2. Limited entrepreneurship. There is limited establishment of enterprises.
3. Limited skilled labour. There is inefficiency in production hence wastage of resources.
4. Inadequate market. This limits the capacity to produce goods since there are low profits and causes
wastage of resources.
5. Poor infrastructure. Limits movement of factors of production and finished goods hence high cost of
production.
6. Poor/uncoordinated planning/weak planning machinery.
7. Conservatism. This causes the inability to finance business undertakings and improve the technology.
8. Weak inter-sectoral linkages.
9. Unfavourable government policy on investment.
10. Limited government control over the economy. Some sectors are neglected hence imbalance in
development.
11. Limited technology. There is production of poor quality goods and services.
12. Political instability. This destroys projects hence wastage of resources.
13. Corruption. It reduces the funds for projects hence causing unfinished projects.
14. Poor land tenure system. Acquisition of land for expansion is difficult hence limiting production

THE UNBALANCED GROWTH STRATGY

This is a theory associated with Professor Albert Hircman and it emphasizes that resources should be
allocated for one leading sector of strategic importance that will lead to development of other sectors
through linkages.
. The leading sectors are the key sectors of the economy with backward and forward linkages e.g.
developing agriculture first it would later lead to industrialisation as the agriculture sector provides raw
materials to the industrial sector.
Advantages of unbalanced growth strategy
1. It requires less capital and therefore can be pursued using few resources hence it is suitable for
developing countries with limited capital
2. It has sectoral linkages as it makes use of the forward and backward linkages and thus is able to result
into a self-sustaining and integrated economy in the long run
3. The strategy makes use of the locally available resources therefore foreign exchange expenditure
abroad on imported inputs is limited
4. It suits countries with limited markets because what is produced locally by the leading sector will
easily find market
5. The strategy recognises the crucial role played by international trade in the development of countries.
Thus resources should be concentrated in areas where countries have comparative advantage to
maximize gains
6. The strategy is appropriate for developing countries because it maximises shortage of skilled
manpower rampant in these countries
7. There is less wastage since the country produces according to demand

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8. Presence of poor socio- economic infrastructure cannot sustain balanced growth means this strategy
is appropriate for developing countries that have poor infrastructure in form of roads, railways, etc.
9. It is appropriate for developing countries with poor planning machinery so that the little manpower is
committed to the leading sector with the balanced growth strategy since one sector is involved.

10.The existence of limited technology can effectively support unbalanced growth. This is because some
sectors may require complicated technology that does not exist in LDCS e.g. mining.
11.It preserves resources for the future. The strategy limits over exploitation of resources in different
sectors

DISADVANTANGES OF UN BALANCED GROWTH STRATEGY

1. It encourages economics dualism as one sector is developed at the expense of other sector. This
delays the rate of development.
2. The collapse of the priority sector will bring severe hardship and stagnation in the economy.
3. It emphasizes specialization producing according to comparative advantages which has disadvantages
like lack of sufficient market fluctuation of price that lead to the instability in the economy
4. It promotes unemployment because the leading sector cannot fully absorb most of the resources
most especially labour.
5. It may lead to shortages as one sector may not be enough to provide what is demanded before other
sectors have been developed. This creates scarcity in the economy resulting in inflation.
6. It perpetuates dependency syndrome since the country cannot meet all her needs it has to depend on
imports making the economy valuable to domination by other economics
7. In most cases priority is given to industrial development with the industries being urban based hence
leading to rural migration.
8. The strategy promotes income inequity because those engaged in the leading sector will receive more
income while those engaged in non-priority sectors will receive less earnings hence income inequality.
9. Increased output in the key sector may fail to get market resulting in sever losses for the producers in
the economy.
10. The strategy worsens BOP position of the country as it has to depend on other countries for survival
i.e. importing commodities from other countries.
11. It promotes regional imbalance as it emphases industries that are mainly urban based with well-
developed infrastructure at the expense of rural areas.
12. Limited variety of goods and services hence limiting people’s choices.
13. Creates less government revenue. This is especially in the short run when some sectors of the
economy are ignored
THE BIG PUSH STRATEGY
The big push theory of economic growth states that for a backward economy to take off into a self-
sustaining growth, massive investment programs are required in industry and economic infrastructure.
Critical minimum effort is the minimum investment or sacrifice required to attain massive capital
stock necessary for a country to take- off
Arguments for the Big Push Strategy
1. Economic growth is faster and rapid and an economy develops in a short time.

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2. It generates employment opportunities on wider scale. This is because several industries and
infrastructure provided jobs hence improvement in people’s welfare.
3. It promotes quick industrialization of the economy. This is achieved through massive investment in
industry and infrastructure.
4. It widens market for goods and services. As many firms are set up many people are employed
increasing their purchasing power.
5. There is establishment of infrastructure through construction which leads to the overall development
of the economy. This because it eases transportation of goods and services.
6. It increases the volume of exports and reduces the volume of imports hence solving the bop problems
of a country.
7. The strategy reduces income inequalities since many people are able to get employment.
8. It encourages massive use of the locally available resources reducing dependence on external
resources or borrowing.
9. It widens the tax base enabling the government earn revenue.
10. The strategy helps in skills acquisition since labour is trained in various skills to manage the different
sectors. This improves the efficiency of labour.

Disadvantages of Big Push Strategy

1. It assumes abundance of capital to invest in all sectors of the economy which is not the case for
developing countries where capital is not adequate. This results into incomplete projects.
2. Lack of sufficient market to absorb all that is produced because of the low purchasing power of
individuals leads to wastage of resources.
3. The strategy underrates the structural and institutional problems evident in developing countries e.g.
poor land tenure system, negative attitudes to work, etc. These limit the capacity to produce goods and
services.
4. The strategy emphasizes the industrial sector at the expense of the agricultural sector thus it
promotes dualism.
5. In developing countries there is shortage of entrepreneurs who can undertake risks invest due to poor
investment climate.
6. Limited capital in Ldcs necessitates borrowing which has some strings attached that may not be in line
with the countries development programmes.
7. Inefficient administration, corruption and embezzlement are common in developing may not permit
proper use of resources
8. There is limited control of the economy by government which may leave some sectors and parts of
the country unattended to.
9. Existence of poor infrastructure limits the smooth operation of the sectors. It limits the movement of
factors of production and finished goods which increases the cost of production.
10. Poor technology.

Factors that limit application of big push strategy

1. Limited capital. This causes inability to purchase the required in puts hence a low level of production.
2. Limited skills. There is inefficiency in production hence wastage of resources

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3. Small market. This causes low level of production since there are low profits.
4. Limited entrepreneurial skills. There is limited establishment of enterprises hence a low level of
production.
5. Limited basic infrastructure. This causes inability to access inputs markets and markets of final goods
hence high cost of production.
6. Political instability. It destroys projects and causes wastage of resources.
7. Conservatism.
8. Poor land tenure system. This makes acquisition of land expensive and this limits production
9. Corruption. It reduces the funds for establishment of projects and thus collapse of projects.
10. Weak policy implementation machinery.

DEVELOPMENT GOAL
A development goal is an economic, social, or political target / objective to be achieved in a specific
period of time.

ECONOMIC DEVELOPMENT GOALS IN MY COUNTRY

. To achieve high economic growth rates and development.

2. To achieve fair income distribution i.e. narrow the gap between the rich and the poor so that sol of
the people can be raised by increasing demand for commodities and eradicating poverty
3. To achieve full employment of resources/to reduce the level of unemployment.
4. To ensure political stability i.e. ensure a peaceful atmosphere conducive for growth which gives
confidence to investors/ to ensure security for life and property.
5. To ensure domestic stability i.e. reducing the rate of inflation which is macroeconomic problem
6. To achieve stable/favourable BOP position.
7. To eliminate illiteracy/to attain large pool of highly skilled labour.
8. To control population growth rates.
9. To reduce economic dependence/attain self-sufficiency.
Development
Development refers to multi-dimensional process that aims at improvement in the quality of life,
involving progress in the political, economic, social, and cultural spheres of a country.
Sustainable development
Refers to the development that meets the needs of the present without compromising the ability of the
future generations to meet their own needs. Sustainable development has three dimensions i.e.
environmental, economic and social dimensions.
UNDER DEVELOPMENT
It is a situation where a country‘s resources are underutilized and there is low level of productivity and
has low levels of structural development.
FEATURES / CHARACTERISTIC OF UNDER DEVELOPMENT IN MY COUNTRY.
 High population growth rates. Most LDCS are characterized by high population growth rate. This
is due to the desire to have many children.

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  The existence of large subsistence sector. The majority of people in LDCS continue to produce for
their home use hence limiting volume of exports.
 High levels of economic dependence. There is over dependence on foreign aid.
 Poor infrastructure. The infrastructure such as roads, railways, power plants are generally poor
and under developed.
 Predominance of agriculture/Small industrial sector. Most LDCS continue to depend on primary
sector like agriculture.
 Political instability. Most poor countries are associated with political instabilities due to weak
democratic institutions.
 High illiteracy rates. There is abundant supply of skilled man power due to high rates of
illiteracy.
 High levels of income inequality. The majority of people in poor countries have low levels of
income which is unevenly distributed.
 Low standards of living. The existence of poor quality products, low incomes and poor medical
facilities make people to live poor quality of life.
 Low levels of life expectancy. This is due to poor feeding, poor housing facilities.
 High levels of conservatism. In most LDCS, people strongly believe in traditional values.
 High infant mortality rate. There is existence of high infant mortality rate due to lack of medical
facilities.
 Existence of high levels of unemployment. Most poor countries are characterized by high levels
of unemployment due to limited investments.
 Use of poor technology. There is low level of technology used during the production process and
this decreases output as well as the quality of goods.
REASONS FOR LOW LEVELS OF DEVELOPMENT.
 High population growth rate. Rapid population growth rate imply heavy dependence burden,
unemployment and low standards of living.
 Poor land tenure system. Land is concentrated in the hands of very few leaving others landless
and this discourages production as well as development.
 Limited supply of strategic natural resources. Most LDCS lack strategic natural resources like
minerals where they exist are in small amounts hence economically unviable to exploit them.
 Poor managerial skills. Most LDCS lack skilled entrepreneurs to undertake risks and to organize
other factors of production.
 Limited market size. Existence of wide spread poverty limits the size of the market and this
discourages the levels of investment and production in an economy.
 Low levels of technology. Poor technology like the use of primitive tools discourages large scale
production which limits the amount of exports to increase government revenue.
 Political instabilities. Insecurity leads to destruction of infrastructure, business firms and scare off
investors.
 Limited capital. Most LDCS are characterized by high levels of poverty there fore unable to
mobilize savings for meaning full investments.

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  Unfavorable natural factors like pests and diseases, drought, floods, landslides, etc which
destroys farmland hence limiting economic growth.
 High levels of corruption. Funds budgeted for development purposes most of end in individual’s
private interests.
 High rates of inflation. This affects investments and our export earnings.
 Poor attitudes towards work. Most LDCS are characterized by individuals who are lazy and not
willing to work. This limits production as well as growth and development.
 High debt burden. Most developing countries are faced with high debts and there fore there is a
problem of debts serving which limits funds that would be used for developmental purposes.
REVISION QUESTION.
1. To what extent are the causes of under development in LDCS due to external factors?
2a) What are the indicators of economic development in Uganda?
b) Discuss the measures that have been taken to increase the level of economic development in
Uganda.
Solution

a) Indicators of economic dvt

 Reduced level of illiteracy /increased supply of skilled labour.
 Increased incomes.
 Increased investments.
 Increased economic growth/output.
 Increased utilization of the available resources.
 Improvement in the techniques of production.
 Improvement in quality of goods.
 Increased market size/increased consumption.
 Reduced economic dependence.
 Improved technology.
 Improved infrastructural development.
 Rise in industrialization.
 Increased monetization of the economy/ reduction in subsistence sector.
 Expansion of employment opportunities.
 Increased life expectancy.
 Improvement in political atmosphere.
 Increased life expectancy.
 Rising levels of urbanization.
 Increased levels of savings.
 Decline in conservatism .
b) Measures that have been taken to increase the level of economic devt;
We use the present perfect tense while answering such as has/ have.
 Labour has been trained to increase efficiency.
 Technological transfer has been undertaken.

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  The land tenure system has been reformed.
 Infrastructure has been developed and improved.
 Political stability has been ensured.
 Investment incentives have been provided to producers by the government.
 Further privatization of public enterprises has been adopted.
 The economy has been further liberalized.
 etc

POVERTY
It is defined as the state where an individual is having insufficient income/ resources and opportunities
to attain a minimum standard of living.
BASIC TERMS:
1. Absolute poverty. Refers to a situation where the individual’s income insufficient to enable him to
afford the basic needs of life.
2. A poverty line—is the minimum level of income stated in a standard currency where by individuals
whose income falls under or below that level, are considered to be poor.
Note: The poverty line is set in terms of a particular living standard and defined in a common/ standard
currency and held constant for all countries / regions. The UN measure is US$1 per day.
3. Relative poverty. Refers to a situation where one individual or country is considered poor by
comparing with other members of society or countries.
Causes of poverty in Uganda/ developing countries
1. High population growth rates
2. Income inequalities
3. High levels of unemployment and underemployment.
4. Limited skilled labour supply.
5. Cultural attitudes and conservatism.
6. Poor economic planning.
7. Low level of natural resource natural exploitation.
8. Immobility of labour.
9. Political instabilities in some parts of the country.
10. Limited market for commodities.
11. Corruption and embezzlement by government officials.
12. Natural calamities such as drought , diseases etc
13. The vicious circle of poverty
THE VICIOUS CIRCLE OF POVERTY
Refers to a situation where there is persistent poverty arising from low incomes which leads to low
savings, low investments, resulting into low capital accumulation and low output. In this case a set of
forces support each other to keep an individual or society in persistent state of poverty.
Measures for reducing poverty/ poverty alleviation
 Development of infrastructure
 Modernization of agriculture.
 Diversification of the economy..

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 Further liberalization of the economy.
 Carry out land reforms.
 Adopting population control policies through encouraging family planning.
 Attraction of more investors such as direct foreign investment through putting in place investment
incentives.
 Strengthen economic integration to widen market
 Ensure justice, public safety and political stability in all parts of the country.
 Improve governance and strengthen the fight against corruption. This transparency is to ensure
effective resource allocation .
 Extension of credit facilities.
 Carry out educational reforms. This is through emphasizing technical education to increase job
creation.

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