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The agricultural, industrial and international economic policies that were prevalent during the early periods of development hindered the growth of the developing countries.

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Introduction

By Oytun Pakcan The agricultural, industrial and international economic policies that were prevalent during the early periods of development hindered the growth of the developing countries. Extension, taxation and pricing policies used in agricultural policy, use of capital-intensive technology and import-substitution method as the dominant strategy of industrialization in industrial sector and the heavy external debt that was induced by the international economic policies at that time stifled the economic development and growth of the Third World countries. The model of economic development that was perceived by the economists of early development period resulted in the establishment of economic policies that concentrated only on per capital growth of GDP rather than the development of the rural and urban areas as well as the all sectors of the economy as a whole. This resulted in an artificial and temporary growth of few sectors of the economy while all the other remaining sectors were faced with severe poverty. During this period, agriculture was merely viewed as a source of surplus production that supported industrialization rather than a source of growth and employment. The agricultural policies of the early development period encouraged urban bias; and concentration on urban development, harsh agricultural policies geared towards agricultural sector and neglect of rural areas have pushed resources away from activities which could help the growth of the rural sector of the economy. ...read more.

Middle

The lack of support towards the traditional agricultural sector slowed the growth of the economy as a whole as well as increasing the rural poverty. Harrod-Domar theory of economic growth states that the rate of growth of GNP is determined jointly by the national savings ratio and the national capital-output ratio. In the developing countries, the voluntary savings are small since the average income of an individual is low. The wages of the workers were kept low in order to ensure that the industries made maximum profits. Savings are needed in the economy, which can in turn be used to finance the growth of industries. Hence, the governments had to induce "forced" savings through taxation. The economic policies of the governments encouraged capital-intensive technology where the amount of labor involved was also low. This has lead to a high rate of unemployment among the labor force. This has resulted in the expansion of the informal sector; yet the government policies were so biased towards large-scale industries, this informal sector has had no incentives to establish themselves. On the other had, most of the 3Rd World Governments has encouraged industrialization via import substitution, the production of consumer goods in domestic markets in order to substitute for imports. ...read more.

Conclusion

The high inflation that occurred in many of the developing countries also reduced incentives for the productive use of investable funds, and incentives for productive investment were damaged by the decline in economic activity. Consequently, all the mentioned factors above have impeded the growth of the developing economies and delayed the economic development of 3rd World Countries. The agricultural and industrialization policies of the early development era slowed-down the growth of the developing economies and increased both rural and urban poverty while the international economic policies that were prevalent during that time increased foreign debt which has led to further problems of growth and scarcity. Capital-intensive, import-substituting and urban-biased growth that has been induced by the government policies has only resulted in increasing the rural poverty. The destruction of the traditional industries and over-emphasis on modernization of industries within a short period of time has disrupted the growth of the developing economies. The ever-increasing foreign debt due to deteriorating TOT has been a major consequence of inadequate international economic policies of the developing countries. As a result, during the early periods of development, the growth of the developing economies has suffered while the foreign debt and poverty of the populations got out of control and increased significantly in the 3rd World Countries. 4 1 ...read more.

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