CHARACTERISTICS OF Under Developed ECONOMIES COUNTRIES (UDCs)
The general nature of an under-developed economy may be gathered from the common economic characteristics of such an economy. It may be too much to talk of common economic characteristics of underdeveloped countries in view of the wide diversity among under-developed countries, as revealed by the numerous case-studies that have been made. While it would be very difficult to locate a unrepresentative under-developed country, it is much easier to bring out some fundamental characteristics common to under-developed countries, which are considered below:
Deficiency of Capital. The insufficient amount of physical capital in existence is so characteristic a feature in all under-developed economics that they arc often called simply ‘capital-pour ‘ economics. One indication of the capital deficiency is the low amount of capital per head of population. Shortage of capital is reflected in the very low capital-labor ratio in the low-income countries. According to a survey by the United Nations Department of Economic Affairs in 1949 real capital per worker in Asia and Far East excluding Japan was only 10 per cent of the U.S.A.
The low level of capital formation in an underdeveloped country is due both to the weakness of the inducement to invest and to the low propensity and capacity to save. In such an economy, the low level of per capital income limits size of til demand for manufactured output. which weakens the inducement to invest, The low level of investment also arises as a result of the lack of dynamic entrepreneurship, which was regarded by Schumpeter as the focal point in the process of economic development.
capital remains relatively scarce and as long as the vast majority of the labor force is engaged in agriculture. it would appear Lobe reasonably safe to postulate that. under these circumstances and at least for the early stages of development, the system is operating under diminishing returns with respect turnabout
Inequalities incommode and Wealth, Another distinguishing characteristic of the under-developed economies is the disparities in income and wealth enjoyed by the rich aim poor sections of society. The lower national income of the economically backward countries is more in equitably distributed than in l f ~J’ the advanced countries. According to Colin Clark’s estimates, labor’s share of net income in the rich countries, like the U.S.A the U.K. Canada, Australia, New Zeal and and Switzerland was more than 70 per cent in 19 while in Chile and Mexico it was below 60 per cent. 7 According to a recent estimate the share of wages and income of self-employed persons in India is 24 per cent of the total national income.! In the under-developed countries. unearned income of landowners in the form of rent forms a very higher proportion as compared with the developed countries. But owing to a decline in the share of property income. there is tendency for the share of the incomes of the richest group in advanced countries to go down. On the other hand, the share of wages is gone up
(iv) Ritualistic Economy. The under-developed countries present sharp contrast in all walks of 6. Wallenstein, Harvey-Economic Backwardness and Economic Growth, 1950. p. 56. Clark, Colin. Condition/IS of Economic Progress, 1957. pp. 61ST-619. Musketeer, M., Papers on National Lincoln and Ali.Topics. ed. Dr. ·Y.K.R.Y. Ra, 1962.
(v) Lack of Entrepreneurial Ability and Skilled Technicians. In the under-developed countries generally, there arc very few people. who can be described as daring and dynamic entrepreneurs. There is also woeful lack of technical know-how
(vi) aquaculture Infrastructure. The under-developed countries are also characteristic by the lack of sufficient economic and social overheads. The means of transport and communication. irrigation and power. the banking system. the educational and medical facilities arc all imperfectly developed and they are utterly inadequate to serve the existing population.
A very apt and easily understandable description of an under-developed country is given by Paul Hoffman thus: “Every one knows an under-developed country when he sees one, It is a country characterized by poverty, with beggars ill the cities and villages eking out a bare subsistence in the rural areas. It is a country lacking in factories of its Usually with inadequate power and light It usually has insufficient roads and rail-roads.