ANÁLISIS INTERNO

(a) Colonization

Most of the poor countries were at one time or the other under colonial rule.

Colonization implies both political and economic domination of a country by another and most of the under-developed countries were under colonial rule for a long time. Colonial domination has great implications for the direction of growth and economic development of the colonized regions. The colonies were seen as the producers of foodstuff and raw materials for use in the industries of the imperial countries. This is why the posture was towards agricultural development of the colonies. Industrialization was never encouraged for the fear of developing competitive industries in the colonies. The colonies were reserved as markets for industrial products of the imperial countries. For instance, Nigeria under colonial rule could not import from or export to the countries of her own choice. The directives had to come from Britain.

The imperial countries also dictate the price of both imports and exports. This means that the colonies were losers to the whole world. Even if the colonies can buy much more cheaply from other countries or sell at higher prices, they could not do so. Resources of the colonies were also used to finance development programmes and projects in the imperial countries. The colonies were powerless and all their movements were regulated by the desires of the colonial masters. The poor countries were used to developed the advanced countries while they under-developed the poor countries.

7.5.2 Neo-Colonization

Even after independence have been granted to the colonies, their attachment to and dependence on their former masters did not cease. They continue to be economically dependent although were politically independent. Exploitation came in other forms and the resources of the former colonies still continued to be used to develop the developed countries.

The new forms of exploitation are unsatisfactory trade arrangement, direct foreign investment and foreign aid.

7.5.3 Trade Arrangement

Trading relationships between poor and rich countries have had negative influences on the development of the former with the possible exception of some oil-rich countries.

Agricultural products are the most important exports of most developing countries. Over the years, agric products have not received favorable treatment in the international market. There has been a sustained fall in the prices of these products, and worst still commodity prices dictated by consumer nations i.e. the developed countries. Problems of export fluctuation coupled with falling prices led to instability in the export earnings in under-developed

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countries. In the face of decreasing export earnings, import process and demand for import have been increasing. This has resulted in widening the trade gap and balance of payment deficit. Foreign exchange constraint i.e. inability to earn export surplus has serious implications on the pattern of the rate of development in the poor countries. This has led to the mobility on the part of many poor countries to implement their development programme e.g.

the National development plan 1962-68 failed to achieve the desired results substantially because foreign exchange gap of 19.4% could not be realized.

7.5.4 Foreign Aid

When import requirement exceed export potentials, a method must be found to bridge this gap to make it possible for the assumed rate of development to be achieved. Foreign aid is one of the methods for bridging this gap. Foreign aid has the potential effect of transferring real resource from developed to the less developed countries. The transfer of course is through export or through non-monetary transfers such as technical assistance. Foreign aids have not been able to achieve the desired results as a result of the tight nature of such aid and the stringent measures attached to the foreign aid. In most cases, aids are given through bilateral agreements. In many cases, aids are attached to specific projects other than to programmes.

Hence, the recipient country has no free hands in using aids. Developed countries also often specify that all materials for the project must be procured from them. Even when the recipient country wants to buy at a cheaper price from different countries, it could not do so. Again, the technical staffs necessary for the execution of the projects are to be imported from the donor country with the result that part of the aid goes back to the donor country in terms of salaries and allowances to its nationals. Moreover, the interest rates charged on such loans are usually too high with the result that poor countries are faced with potential debt-servicing burden. It has also been argued that the rate at which foreign aids flow from the developed to the less developed countries is too low to satisfy their development aspirations. It has been suggested that the rate be accelerated, the terms be liberalized and should be channelled through multilateral arrangements.

7.5.5 Direct Private Foreign Investment

Another method of transferring real resources to the led developed countries is through direct foreign investment in the less developed countries. Doubts about foreign aids are giving rise to foreign interest in the contribution of direct foreign investment to development in developing countries. Some people believe that in the absence of foreign aids, private investment can bridge the gap that constrains development in the third world. These are balance of payment gap, the resource gap, the savings gap, and hence in the long run the per capita income gap. Foreign direct investment involves transfer of a whole productive and organizational complex embracing a bundle of factors of production not merely capital but also knowledge, technology, management, know-how and marketing skills. However, the ability of private overseas investment to transfer real resources to poor countries has been controversial because of its double-edge sword.

Critics of private overseas investment have argued that it is merely a refinement of the economic exploitation of the imperial power of the colonial days. Private overseas investment gives even greater foreign ownership of the capital stock. Foreign investors dominate the development of the market structures. They determine the allocation of resources and the pattern of distribution of income. By producing an increasing dependency of the under-developed countries upon the under-developed countries, private overseas investment is thought to stand in the way of national policy efforts of planned growth. Other considerations include structural and institutional factors such as the effect of continuing large scale foreign ownership on the pattern of wages and salaries on the distribution of the labour market of the recipient countries. Private overseas investment involves the payment of high wages and salaries not related to the productivity in the other sectors of the economy. In this way, it can

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destroy many jobs as it creates. It retards agricultural development and through trade unions, lead to rapidly rising wages and salaries in the public sector. Savings accumulated are seldom reinvested in other activities locally but some proportion may be reinvested in the same activities for expansion purposes. The truth however is that a large proportion is remitted to the head office in terms of capital, dividends, salaries and wages of expatriate staff. Hence, it is a constraint on national development. It can add to the problem of unemployment by introducing highly capital intensive technologies inappropriate to the labour surplus situation in the developing countries. Although it introduces some local personnel to Managerial Marketing Skills, these people are scarcely given the necessary marginal responsibility. They are in many cases at best described as glorified clerks who are put up for window dressing. As a result, the relevant technical know-how failed to be transferred. If care is not taken private overseas investment can reduce the long run capacity of the recipient economy to transform itself merely by its own efforts and thus achieved internationally propelled economic growth.

It is this doubled edged nature of private overseas investment that has led to the suggestion that foreign economic domination ought to be sharply reduced in the interest of creating a more soundly and broadly based pattern of economic development. Recent efforts at industrialization in Nigeria are meant to counteract the side effect of the private overseas investments which have gained strong hold.

(b) Internal Economic Factors (i) Capital Scarcity.

(ii) Scarcity of Trained Manpower.

(iii) Population expansion (iv) Rudimentary Technology.

(v) Low Level of Education and Mass Illiteracy.

(i) Capital Scarcity: Available capital scarcity is a pre-condition for investment. In many poor countries, the ability to draw off significant amount of savings from the domestic economy is limited by low level of income. Most of the countries are caught up in the vicious circle of poverty. Hence, it is always said that a country is poor because it is poor. The bulk of the populations are farmers and proceeds from this group of tax payers are very low. Worse still, most of the people who can easily be reached by taxation e.g. top civil servants and comparable employees of the private sector and also business men tend to be under-taxed because some of them failed to fill their assessment forms correctly. They may either inflate their responsibility or understate their income. One can see why a one-time cabinet minister paid N4 as his tax for the year. Most public enterprise failed to earn surplus so they cannot contribute to national savings. The private sector of the economy is also under-taxed because businessmen tend to inflate their cost and under-declare their profit. The effect of this is to limit economic activities via the investment process. Some of the third world countries that are blessed with oil wealth are already expending the constraint placed on their development by capital shortages. But the problems in some of this countries e.g.

Nigeria is that capital is often misapplied by directing it to less or non-productive sector of the economy- FESTAC, housing many international sports activities and conferences.

(ii) Shortage of Manpower: There is an acute shortage of both high level and mid-level manpower in most developing countries. Even in Nigeria that appears to be far advanced in manpower development compared with other African countries has not been able to break completely the constraints placed on development by manpower shortage. Manpower shortage implies that African governments lack the administrative ability to execute large and complex development programmes and projects. It also

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means that both the government and private firms must continue to import expensive foreign man power.

To overcome manpower constraints, African countries must devote substantial resources to education and the development of skills. Although the investment in education is productive, they involve reductions in investments in fixed capital.

Moreover, increase in output occasioned by investment in people is in the long run. In the short run, it yields a little in form of output to the society. At the same time, it has a great and growing budgetary burden in the form of teachers’ salaries, school maintenance and students’ maintenance allowances.

(iii) Population Expansion: Population expansion is not a bad thing in itself. Increasing population means an increasing supply of labour force which is a basic factor of production. Secondary, a growing population represents a potentially expanding market for the goods produced by the society. An expanding market can stimulate the society to high level of investment which will in turn increase employment opportunities. So in a sparsely populated region expanding population is likely to be a blessing. However, the problem with the developing countries is that population expansion is taking place in the face of acute shortage of critical factors of production and at a low level of income. The result is that almost all additional output of the society is used up in consumption. This is because while increasing population produce hands for production, it also produces more mouth to feed. Worse still a large proportion of the population is made up of children who do not take part in production and yet consume.

The high dependency burden on the working adult population tends to slow down the development process.

(iv) Rudimentary Technology: The level of technology is still very low especially in agriculture. This tends to limit productivity. Technological progress enables an economy to produces commodities at a reduced cost in terms of the amount of land, labour and capital devoted to production. Improved technology also constantly brings forth a flow of new products which no amount of efforts and resources could have produced in the past. Although technological progress has reached an advanced stage in the developed countries, meaningful technological transfer to the less developed countries has been rather slow. There is also the problem of adapting imported technology to the needs of the developing countries.

(v) Low Level of Education and Mass Literacy: It is increasing recognized that the acceleration of development may be thwarted by a deficiency in knowledge and skills embodied in human beings. Empirical studies of the role Education Economic Development have shown a strong correlation between development of education and economic development in their study of 75 countries. Herbison and Myers found the correlation co-efficient to be .89. Also E. Denison in the study of the U.S. economy found out that improvements accounted for about 23% of the growth of real income.

During the same period, the contribution of capital was 15%. Perhaps the most important aspect of external benefits of education lies in the ability to change social and cultural climate. The resulting benefit is not an automatic consequence of education as such but of the proper type, quality and quantity of education. Supply of professional people may readily become an external diseconomy and a source of disability. Since education is a major factor in the development of skills essential for executing development project, widespread illiteracy and low level of education in many less developed countries tends to constitute a bottleneck to development.

(c) Socio-Cultural and Institutional Factors

Economic development means not only changes in a nation’s physical environment (new transportation and communications facilities, new schools, new housing, new plants and equipment) but also changes in the way people think, behave, and associate with one another.

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Emancipation from custom and tradition is frequently a prerequisite of economic development.

Sociocultural impediments to growth are numerous and varied.

(i) Tribal and ethnic allegiances take precedence over national allegiance. Each tribe confines its economic activity to the tribal unit, eliminating any possibility for production-increasing specialization and trade. The desperate economic circumstances in Somalia, Sudan, Liberia, Zaire, Rwanda, and Afghanistan are due in no small measure to military and political conflicts among rival groups. In countries with a formal or informal caste system, labor is allocated to occupations on the basis of status or tradition rather than on the basis of skill or merit. The result is a misallocation of human resources.

(ii) Religious beliefs and observances may seriously restrict the length of the workday and divert to ceremonial uses resources that might have been used for investment.

Some religious and philosophical beliefs are dominated by the fatalistic view that the universe is capricious, the idea that there is little or no correlation between an individual’s activities and endeavors and the outcomes or experiences that person encounters.

(iii) Political corruption and bribery are common in many DVCs. School systems and public service agencies are often ineptly administered, and their functioning is frequently impaired by petty politics. Tax systems are frequently arbitrary, unjust, cumbersome, and detrimental to incentives to work and invest. Political decisions are often motivated by a desire to enhance the nation’s international prestige rather than to foster development