CHAPTER 1

Real Concept of
Development
Objectives

▪ Discuss the basic problems of an economy;

▪ Differentiate development from growth;
▪ Discuss the different stages of growth;

2
Basic Economic Problems

▪ Economic problems do exist because of two fundamental

facts: resources are limited and human wants are
unlimited.
▪ Human as they are, are not ultimately satisfied with the
consumption of basic goods only. Naturally, they aspire
for a higher standard of living. And it is the
responsibility of the economic system to help the people
acquire it.
3
Basic Economic Problems

▪ What goods are to be produce and in what

quantities?
▪ How are the goods produced?
▪ For whom are the goods produced?

4
WHAT GOODS ARE TO BE PRODUCED?

To remedy such problem, a system of priorities has to be

established. Clearly, basic needs of the people are given priority.
Unfortunately, in the less developed countries even the most
basic needs or goods cannot be produced in sufficient quantities
for every poor family.
The decision on the problem of production priorities depends on
the types of economic system.

5
WHAT GOODS ARE TO BE PRODUCED?

▪ CAPITALISM- the goods which command the highest prices

or profits are produced first
▪ COMMUNISM- is for service and not for profit, goods are
produced according to the needs of the people
▪ SOCIALISM- it is a combination of capitalism and
communism
Therefore, production of goods is based on needs and profits.

6
HOW ARE THE GOODS PRODUCED?

The ideal situation is to produce the goods with the most efficient
method. This involves machines, technology, management and skills.
Many developing countries are deficient on these. They use primitive
methods of production - not much different from those during the ancient
times. Thus, their productivity is extremely low and this contributes to
their poverty and under development.
On the other hand, the rich nation is have comparatively lesser problems
on production methods. Due to geographical limitations, it cannot
produce all the needs of its people. It is searching for a better
technology of producing products that are excellent substitutes for oil
and other imported products. 7
FOR WHOM ARE THE GOODS PRODUCED?

▪ CAPITALISM- goods are allocated in the markets. Those who

have money, and they are willing to buy, get the goods.
Obviously, the rich acquire more goods and services than the
poor.
▪ COMMUNISM- goods are distributed according to the needs
of the people. If such country is poor, it cannot adequately
meet the needs of its people. But the available scarce goods
are fairly distributed so that no member of society is extremely
rich or extremely poor. In fact, communism is a classless
society. There is equality. 8
FOR WHOM ARE THE GOODS PRODUCED?

▪ SOCIALISM- both market and state determine the

essential and strategic goods are being distribution of
goods allocated by the government at cost. Goods that
are given to the private are sold for profit.

9
Classification of Countries
 ▪ The economy of a country is measured by its

“
gross national product (GNP) or per capita
income
▪ If the GNP of a certain nation is near the GNP of
the rich countries, it is classified as intermediate.
Those that are far below are classified as less
developed. The rich ones are classified as highly
developed.
▪ In the past, poor countries were called backward
nations. This offended the sensibilities of the
countries concerned. So they were named as
developing nations which was more pleasant.
However, at present they are commonly called
less developed countries (LDC) or Third World
countries. 11
Two-thirds of the countries of the world are poor. Millions of people in
these places live on incomes averaging $70 a year. As of 1976, there
were 34 low-income countries in the world. Bhutan, country near India,
has a per capita income of $70 per annum. In the case of Israel which is
classified as a developed country, it had a per capita income of $10,500.
For the highly developed countries like the United States, and those in
Western Europe, their real per capita incomes are many times higher than
those of the poorest countries. In the United States, the per capita income
is one of the highest. In fact, the poverty line as of 1982 was $8,414 for a
family of four persons per annum.
12
HIGHLY DEVELOPED COUNTRIES

▪ United States ▪ West Germany

▪ Russia ▪ Denmark
▪ Japan ▪ Сanаda
▪ Sweden ▪ Australia
▪ France ▪ Israel

13
INTERMEDIATE COUNTRIES

▪ Argentina ▪ Singapore
▪ Austria ▪ Spain
▪ Cuba ▪ Poland
▪ Saudi Arabia ▪ South Africa
▪ Libya ▪ Venezuela

14
LESS DEVELOPED COUNTRIES

▪ Kenуa ▪ India
▪ Honduras ▪ Uganda
▪ Somalia ▪ Philippines
▪ Peru ▪ El Salvador
▪ Tanzania ▪ Vietnam

15
DEVELOPMENT AND
GROWTH

▪ Development is a progressive
and dynamic process.
▪ Growth is the result of a process.

16
OBJECTIVES OF
DEVELOPMENT

▪ Raising peoples’ living levels

▪ Creating conditions conducive to
the growth of peoples’ self-esteem
through the establishment of social,
political, and economic systems and
institutions which promote human
dignity and respect
▪ Increasing peoples’ freedom to
choose by enlarging the range of
their choice variables 17
PHILIPPINE DEVELOPMENT OBJECTIVES

According to former Prime Minister Cesar Virata, the government

has committed to attain the three basic objectives which are
concerned with:

1. The attainment of economic stability;

2. The equitable distribution of the fruits of economic
development; and
3. The achievement of total human development for every
Filipino.
18
OBSTACLES TO DEVELOPMENT

• Poor nations are deficient in capital,

• Population explosion,
• The greatest obstacle to economic development
is man himself.

19
STAGES OF DEVELOPMENT

Colin Clark there are stages involved:

▪ Stage 1 - Agriculture is the principal source of
employment and income in the agricultural countries.
▪ Stage 2 - Manufacturing industry becomes the major
economic activity as a country develops.
▪ Stage 3 - Service industries grow to be the dominant
feature of the economy as country develops further.

20
STAGES OF DEVELOPMENT

Professor W.W. Rostow, an American economic historian. He is the

author of the well-known book, stages of Economic Growth.
According to him, the transition of the economy of one country from
underdevelopment to development passes through several stages
such as:
▪ 1. Traditional society
▪ 2. Pre-conditions for take-off
▪ 3. Take-off
▪ 4. Drive to maturity
21
▪ 5. Age of high mass consumption
A GOOD ECONOMIC SYSTEM

The effectiveness of an economic system is measured by the

following criteria:

 Abundance
 Stability
 Security
 Economic freedoms
 Growth
 Efficiency
 Justice and equity 22
..THANKS! 23