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DETERMINANTS OF

ECONOMIC
DEVELOPMENT

Chapter 3
DETERMINANTS OF ECONOMIC
DEVELOPMENT
ECONOMIC DEVELOPMENT:
 Not determined by economic factors
alone.
 There are non-economic factors that
affect economic development and
have greater influence an economic
ones.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
1. CAPITAL
 Refers to finished goods which are
being used to produce other
goods. These are the machines,
buildings, tools, equipment, etc.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
1. CAPITAL
 Types of Capital:
a) Physical capital (materials)
b) Financial capital (money)
c) Human capital (people)
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
1. CAPITAL
 Machines
• Accelerate the production and
distribution of goods.
• Work is done in lesser time
and effort.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
1. CAPITAL
 Machines
• Reduces unit cost.
• During ancient times people relied
on men and animals for production
and construction. For example,
temples and pyramids were built by
thousands of workers, mostly slaves.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
1. CAPITAL
 Machines
• There are still many parts of the
world which are using primitive
methods of production.
• Rich countries like USA, Japan, and
Western Europe have been using
modern machines.
DETERMINANTS OF ECONOMIC
DEVELOPMENT

The Convenience of Machines


DETERMINANTS OF
ECONOMIC DEVELOPMENT
The Convenience of Machines
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Convenience of Machines
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
1. CAPITAL
 Machines
• On the other hand, less
developed countries do not
have enough funds for vital
projects for economic
development.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
1. CAPITAL
 Machines
• In Latin America, most of the
imposing buildings and
impressive machines are
owned and managed by
foreign corporations.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
 Generally refers to better
techniques or methods of
production.
 However, it can be applied in other
fields like public administration,
education, or social work.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
a) Social Technology is concerned
with the improvement of attitudes
and values of people.
b) Public Administration
Technology deals with the
improvement of social goods in
order to maximize e satisfaction of
social wants.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
 RESEARCH has contributed much to
the development of technology.
 INVENTION is the discovery of a new
technique.
 INNOVATION is the practical
application of an invention to
production for the market.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
 However, not all innovation are for
the markets.
 Example 1: POLITICAL
INNOVATIONS are intended for
improving conditions in the
government.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
 Example 2: SOCIAL
INNOVATIONS are intended for
improving conditions in the
society.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
 Some Principles of Technology.
a. Research and development
requires big funds.
b. Better ways of doing things or
producing goods are discovered.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
 Some Principles of Technology.
c. Rich countries can afford to
undertake necessary and
expensive research and
development projects.
d. Such are given high priority
because their future economy
greatly depends on them.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
2. TECHNOLOGY
 Some Principles of Technology.
e. Both the government and the business
sector are actively engaged in
research and development.
f. On the other hand, the less developed
countries merely copy or imitate
Western technology because it’s
cheaper.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
1. Actually. There is nothing wrong
with the importation of technology.
It saves both money and time.
2. However, such technology should
be suitable to local conditions
(localization).
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
3. The economic, social, cultural,
political, and managerial aspects
have to be taken into
consideration in the application
of a foreign technology.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
 Many years ago, JAPAN was a
notorious imitator of Western
technology.
 After eliminating its feudal
economy, Japan completely copied
the agricultural technology of the
USA and England and applied this
in its farms.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Technology for the Less-Developed
Countries:
 The result was a dismal failure
because individual farm units are
small and the imported
machineries were inappropriate.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Technology for the Less-Developed
Countries:
 A poor country bought a giant
machine from Russia used in
constructing a huge dam, while the
machine was in the process of
excavation, thousands of
unemployed people watch in
misery.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Technology for the Less-Developed
Countries:
4. A poor country with a very large
population of unemployed should
be given first priority to labor-
intensive technology.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Technology for the Less-Developed
Countries:
 Industrial countries use
machines (capital intensive)
because labor is scarce and
therefore expensive so it’s more
economical to use machines than
employ workers.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Technology for the Less-Developed
Countries:
 Poor countries have an
oversupply of unemployed and
underemployed so should use
labor-intensive technology.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
 Poor countries have an
oversupply of unemployed and
underemployed so should use
labor-intensive technology.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
 Gunnar Myrdal said that “Western
technology has been adopted in
Southeast Asia without proper
consideration of the local climate
and soil conditions which resulted
to adverse effect on production.”
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
 Cesar Virata said that “a Cadillac
technology is expensive and
imported.” He suggested that a
local technology be developed
which is more suitable and less
expensive.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Technology for the Less-Developed
Countries:
 Schumacher suggested an
intermediate technology for the
less developed countries
characterized by merging of
primitive and modern
technologies.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
 Schumacher suggested an
intermediate technology for the
less developed countries
characterized by merging of
primitive and modern
technologies.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Technology for the Less-Developed
Countries:
4. Intermediate technology is more
efficient than a primitive
technology and less expensive
than a modern technology. Such
technology is labor-intensive.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
3. MARKET
 The growth of markets reflects an
expanding economic development.
 For as long as the various sectors of
the economy are equitably benefited,
economic growth is real and
enduring.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
3. MARKET
 A flourishing market which
enriches only the foreigners and
the very few local elite only
aggravates the problems
emanating from the
maldistribution of wealth and
income.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
3. MARKET
 Transportation, communication, and
electricity greatly help in the growth
of markets.
 A market becomes bigger and when
people buy more goods. This
stimulates investments and
production.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
3. MARKET
 Obviously, it’s unfair for any
government agency to tell farmers
to improve their production
methods if there are no profitable
markets for their products.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
3. SOCIAL STRUCTURE
 A society which has a more
equitable distribution of wealth
and income, and economic
freedoms, provides a more fertile
environment for economic
development.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
3. SOCIAL STRUCTURE
 On the other hand, a society whose
wealth and income belong to very
few families does not encourage
economic development. Since the
fruits of development do not go to
the people, they have no enthusiasm
to participate in any government
development program.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
3. SOCIAL STRUCTURE
 Example: the CASTE System in
India, wherein there was a class
hierarchy among the people. The
poorest people are considered
untouchables. They have no way to
achieve economic development.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
4. FAMILY SYSTEM
 Western family members like the
USA are more individualistic and
self-reliant. Adult children are
financially independent from their
parents and are free to pursue
their economic inclinations
anywhere.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
4. FAMILY SYSTEM
 Considering the security of the
parents, their family obligations are
minimized. Unlike in the less-
developed countries, especially
among Asians, the children have to
take personal care of their poor old
parents.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
4. FAMILY SYSTEM
 An extended-family system,
(common in the Philippines) is good
in the sense that there is UNITY, and
the welfare of the old and young
members are protected by the
stronger adult members.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
4. FAMILY SYSTEM
 However, the non-favorable
dominant features not favorable to
economic development are:
a.Some married children live with
their parents losing their self-
reliance.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
4. FAMILY SYSTEM
b. Hampers labor mobility and choice of
better economic opportunities.
 Grandparents or parents do not like
their children to work in far places,
especially if they are women.
 However, there exceptions in the case of
ILOCANOS and VISAYANS – they are
courageous and adventurous willing to
work in any part of the world.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
4. FAMILY SYSTEM
c. The family obligations of the
older children to their parents
and younger brothers and sisters
have been a part of culture.
 In HDC, the governments take care of
the aged and the jobless. So children of
poor families are relieved of the burden
of supporting their close relatives.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
5. CULTURAL VALUES
 Some cultural values have negative
effects and retard the growth of the
economy.
For example in the Philippines,
BAHALA NA, MAÑANA HABIT,
NINGAS COGON, and other similar
values are not conducive to
economic development.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
5. CULTURAL VALUES
 According to MYRDAL –
“industrialization requires,
efficiency, mobility, discipline, and
punctuality.
 He observed that many Asians do
not have these.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
5. CULTURAL VALUES
 For example, FILIPINO TIME –
if the time of meeting is 8:00 AM,
it means 9:00 AM or even 9:30
AM.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
5. CULTURAL VALUES
 Another characteristic of the ASIAN is
to say “yes” when they really do not
mean it.
 The idea is to please or not to
embarrass the other person who
makes the request (opposite of
palabra de honor).
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
5. CULTURAL VALUES
 For instance, you ask them to
attend a meeting, and they say
“yes”. But they do not attend and
they have good excuses.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
5. CULTURAL VALUES
 Western culture are efficient, punctual, and
responsible.
 Can be observed in the Philippines
among AMERICAN offices.
 In contrast, FILIPINO offices, especially
those in the government are not as
efficient. Many offices are doing very
little between 8:00 Am and 9:00 AM. In
fact, even during office hours, some
employees are selling all sorts of
consumer goods.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Many peoples in the LDC admire
the consumption habits of the
Americans and Europeans.
 Take extreme pride in eating their
foods, wearing their clothes, and
using their appliances and tools.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
The Desire to Imitate:
 This is COLONIAL
MENTALITY, pure and simple..
 They love the products of their
former colonial masters.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Examples of colonial mentality:
 Local elite in the Caribbean
islands display their European
goods in order to enhance their
social status.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Examples of colonial mentality:
 Their houses were built in
Western architectural style.
 They wear Western clothes, use
Cadillac cars and even the
unschooled display their parker
pens.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Examples of colonial mentality:
 A few Filipinos imitate the diction
of the Americans, and other
American mannerisms.
 Imported goods are very
attractive to the Filipinos.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Examples of colonial mentality:
 Argentinians fervently emulate
the Europeans. Based on
Newsweek article, Argentinians
are a bunch of Italians who speak
Spanish but they wish they were
British and act like they were
French.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Examples of colonial mentality:
 Buenos Aires is proud of the five-
star hotel, Coleridge, Harrods
Department Sore, and a
temporary reproduction of Big
Ben.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Examples of colonial mentality:
 Argentine elite study in English
language schools and play polo.
 The laborers of Argentina
patronize soccer teams with
English names like River Plate and
Newell's Old Boys.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Such misplaced cultural values do not
encourage at all the production of
local goods.
 Do not help the development of local
industries.
 People do not take pride and
appreciation in their own products and
industries.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Japan, despite its adoption of Western
technology has never lost its own
culture and tradition.
 The Japanese love their own country,
its products and its institutions.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
The Desire to Imitate:
 Cultural lags form barriers to real
and meaningful economic
development.
 However, in spite of their physical
development, some societies practice
cannibalism, and considers as their
gods the big rivers, violent volcanoes,
the moon and the sun.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
6. POLITICAL CONDITIONS
 Political stability and fair
economic policies stimulate
economic development.
 Attracts both local and foreign
investments.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
6. POLITICAL CONDITIONS
 The major role of the government is
to provide a high standard of living
for its people.
 Attained thru higher levels of
investments which generate
employment and production.
 Equitable distribution of wealth
and income.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
6. POLITICAL CONDITIONS
 Can only operate efficiently
under a regime of good and
honest public administration.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
6. POLITICAL CONDITIONS
 But if governments keep on changing
very often, economic programs are
likely to suffer.
 Not a few countries in Africa and
Latin America have very unstable
government.
 Coup d'état has become a
common spectacle.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
6. POLITICAL CONDITIONS
 Singapore is a tiny state.
 In terms of natural resources it is very
poor, and yet very affluent and
progressive compared with most
Asian countries.
 Principal keys to its economic growth
is foreign investment and tourism.
 Successful because of political
stability and honest public
administration.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
6. CORRUPTION IN PUBLIC
ADMINISTRATION
 Number one obstacle to economic
development in Southeast Asia.
 Precious resources like money
are not appropriately utilized
for development.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
 Economic Factors:
6. CORRUPTION IN PUBLIC
ADMINISTRATION
 Government corruption is present in any
society but very rampant in LDC like
those in Asia.
 Most corrupt government offices:
 Public works department
 Collection of taxes
 Customs duties
 Export and import licenses
DETERMINANTS OF ECONOMIC
DEVELOPMENT
 Economic Factors:
6. CORRUPTION IN PUBLIC
ADMINISTRATION
 Bribery has been a common practice in
dealing with government offices:
 To expedite applications or approval.
 Use of middleman between
businessmen and government
officials.
 Policemen and government clerks
accept bribes in full view of the
public.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
 Economic Factors:
6. CORRUPTION IN PUBLIC
ADMINISTRATION
 Various reforms have been made
but the task of cleaning the
government is a long difficult
process considering our Oriental
values and depressed economic
conditions.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
7. RELIGION
 During the Biblical times,
materialism and the pursuit of
wealth were despised and
discouraged.
 Similar attitudes shown by Greek
philosophers and Scholastics led
by Aquinas.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
7. RELIGION
 During the Biblical times,
materialism and the pursuit of
wealth were despised and
discouraged.
 Similar attitudes shown by Greek
philosophers and Scholastics led
by Aquinas.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
7. RELIGION
 The Bible contains many statements
against wealth and materialism:
 The poor are blessed for they shall
inherit the kingdom of heaven.
 It is harder for a rich man to enter
the gate of heaven than for a camel
to pass through the eye of a needle.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
7. RELIGION
 Such religious concepts and
teachings against materialism are
not favorable to economic
development.
 When people shy away from the
pursuit of wealth, economic
development tends to be slow.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
7. RELIGION
 Max Weber, author of the Protestant
Ethics and the Spirit of Capitalism:
 Claimed that Protestant countries
are more progressive.
 Dominant values include thrift,
industry, and entrepreneurial spirit.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
7. RELIGION
 Former colonies of Spain are
Catholics.
 Inherited their religion from their
former colonial master.
 Most are LDCs.
 Philippine religious values are
similar to Latin America.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
7. RELIGION
 There are Catholic practices which
are not consistent with the principles
of economic development.
 Expensive celebrations during
barrio and town fiestas in honor of a
patron saint.
 Expensive style of religious
celebrations such as marriages,
baptisms, etc.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
7. RELIGION
 Religion is only one of the factors of
economic development.
 Weber’s claim that capitalist was
responsible for the growth of
capitalism was not exactly correct.
 Countries like Spain, Japan, Israel,
Singapore, and Taiwan (not
Protestants) have shown great
strides.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
8. POPULATION
 Both an advantage and
disadvantage.
 Advantage if people are
productive and creative.
 Disadvantage if population
growth is higher than the rate of
production.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Overpopulation
DETERMINANTS OF ECONOMIC
DEVELOPMENT
World Population Map
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
8. POPULATION
 Effects of Overpopulation.
1. depletion of natural resources.
2. degradation of the environment.
3. conflicts and wars
4. rise of unemployment
5. higher cost of living
6. poverty and hunger
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 Refers to climate, soil, natural
resources, topography, and structure
of the land.
 Have considerable influence on
economic development.
 Countries endowed with abundant
natural resources have greater
potentials.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Map of the World
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 There are some countries with
barren land but are rich in oil
resources such as countries in the
Middle East.
 Construction projects in the
regions are funded by earning
from oil exports.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 In case of Africa:
 Only 7% of the land is arable and
only 50% of such land is used for
food production.
 The land is further compounded
by floods and droughts.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 There are countries with poor natural
resources but were able to achieve
remarkable economic growth.
 JAPAN – only 16% of arable land
but cannot be farmed during winter.
But through capital and technology,
it has achieved phenomenal
economic growth.
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Japan
DETERMINANTS OF
ECONOMIC DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 Israel – formerly a barren land. It
had a pastoral economy. Today
Israel has a developed economy
through modern agricultural
technology.
 It is now an exporter of farm
crops, aside from industrial
goods.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Israel
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 Transportation and communication
are likewise affected by
geographical structure.
 Presence of excellent harbors favor
both local and international trade.
 Great rivers accelerate economic
development.
DETERMINANTS OF ECONOMIC
DEVELOPMENT

Economic Factors:
9. GEOGRAPHY
 In fact, the first civilizations
emerged in great river valleys –
Tigris, Euphrates, and the Nile.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 Mountainous countries pose
obstacles to both transportation
and communication systems.
 Philippines – has more than
7,000 islands which do not
provide a good network of
transportation and
communication.
DETERMINANTS OF ECONOMIC
DEVELOPMENT
Economic Factors:
9. GEOGRAPHY
 Geographical disadvantage can be
eliminated or reduced through
proper use of technology and
capital.