Economic Development:Lower Levels of Living - Case Study

Challenges of Economic Development in Developing Countries

The majority of the developing countries grapple with lower levels of living, productivity, industrialization, manufacture exports, and human capital, as well as higher rates of absolute poverty, inequality, and population growth rates. Besides, social fractionalization, larger rural populations, and underdeveloped financial and security markets are common (Todaro & Smith, 2014). Similarly, the large informal sector, poor governance, and inefficient government institutions, inadequate scientific/technological research, and development capabilities, in addition to entrenched colonial legacy and external dependence, contribute towards economic adversity. Therefore, poverty reduction and improvement in the quality of life can be achieved by focusing on rapid and sustained economic growth and development (DFID, 2008). Attainment of Millennium Development Goals will help emancipate people from living on less than $1 a day and generating virtuous cycles of opportunities and wealth (Todaro & Smith, 2014).

Citizens must be actively involved in facilitating economic growth to promote the sharing of economic benefits, eliminating inequalities, and improving the labor market. As an advisor to a developing country government, I urge them to formulate policies that concentrate on revitalizing economic institutions to support the market economy, contract enforcement and respect of property rights, and constrain the power of the elites (Todaro & Smith, 2014). The institutions can also be used to limit the anti-competitive behavior and corruption to ensure the population has equal access to economic opportunities. Furthermore, the government must formulate policies aimed at reducing high population growth and high fertility rate. A huge population has constraining effects on education, health, food security, and the environment (Todaro & Smith, 2014). Available evidence indicates that uncontrolled population growth leads to underdevelopment, low quality of life, market failures, and numerous negative social externalities (Spence, 2008). The government needs to support family planningprograms to control the high fertility rate in developing countries, as shown in figure 1 below, in addition to improving the socioeconomic status of women.

Economic growth and development can also be accelerated by reducing absolute or extreme poverty levels by focusing on increasing the average income or per capita income. Low-quality education, health, and nutrition lower people's productivity and life expectancy, which ultimately slows economic growth and development (Robinson et al., 2003). Additionally, they must access credit to enable them to invest and earn income. The policies must also focus on fighting social injustice or exclusion linked to poverty since it impedes the formulation of meaningful policies, which ultimately impedes economic growth.

Policy Recommendations to Achieve Sustainable Growth

Besides, financial incentives must be provided to vulnerable people to improve their standards of living, ensure they are not dependent on labor income, and provide opportunities for them to accumulate more assets which can be used as collateral to expand their access to financial markets (Todaro & Smith, 2014). The move will help to increase gross national income per capita, which is low in developing countries, as shown in Figure 2.

The government can also implement workfare (Food for Work Program) that seeks to ensure individuals are productivity to enable them to avoid national safety nets or welfare assistance programs. Such initiatives can help reduce the level of income inequality and reduce the proportion of people living in poverty (Milanovic, 2018). Equal distribution of income can be achieved through implementing progressive income, redistribution of asset ownership, transfer payments, and provision of public goods and services. In addition, the government needs to ensure the citizenry has access to sufficient social and human capital by supporting the microfinance sector, agricultural extension, and conditional cash transfers.

Similarly, the government needs to reduce unemployment rates, particularly among the youths, to deliver higher economic growth. There is a need to promote foreign direct investment, increase the real wages for low-skilled jobs, lower payroll-related taxes, adopt an export-oriented trade model, and ensure labor-intensive industries absorb the unemployed people (Todaro & Smith, 2014).fosters entrepreneurship. Restrictions in the labor markets must be abolished to reduce the cost of employment to encourage more companies to hire both skilled, semi-skilled, and unskilled workers. Higher incomes lead to improved quality of life in terms of reduction of infant mortality and increase in school enrollment, which can increase the country’s GDP (Gross Domestic Product) as well as higher levels of per capita income, respectively.

Despite the increasing pace of economic growth and development in developing countries, millions of people still live in abject poverty, which limits their access to resources that are critical for survival and prosperity. The policies aimed at reducing poverty must also aim at eliminating all forms of inequalities since they generate socioeconomic challenges. The government needs to strengthen its domestic resource mobilization capabilities via taxation to ensure the achievement of sustainable development goals (SDGs). Economic growth can be achieved by focusing on improving health and education, minimizing income and asset inequality, regulating population growth, reducing unemployment rates, eliminating poverty through economic and social programs, and empowering government institutions to enhance governance and the public good.