Economic Development (Research report)

INCREASE IN REAL PER CAPIT AINCOME AS A. METHOD OF

ECONOMIC DEVELOPMENT'

Some' economists are of the .view that if per capita income or real GNP per capita increases over a long period of time, it will be accorded as economic Development. As  Prof. Meir says, Economic Development is a process whereby the real per capital Income of a country Increases over a long penned of time". But this would occur only. When the growth of real national income is ,more than the growth of population. According to this <method, if the per Capital income of a. country increases each resident of the country will be able to attain more goods and services than before at average,' Consequently, the average poverty will came down and the life standard of the people <?f the country will improve.        ­

MERITS OF REAL GNPism AND PER CAPIT Aism

1.   Primarily the criterion GNP per capita is adopted to meas:1re economic development. It is because that the information regarding national income, price _el and population are mostly available in each country.       .

2. On me basis of statistics of GNP and population the per capita GNP can easily be ca1cu1ared. '

3. On the basis of GNP and the real GNP the international comparisons between countries can easily be mae, i.e. the country with higher GNP or GNP Per capita would be a developed country as compared with the country having low GNP or low per capita income.

4. The measure of GNR .per capita reflects the social and economic structure of societies.

DEMERITS OF REAL GNP AND PER CAPITA GNP METHOD

1. Standard of Living:

We told above that the per capita method of economic development reflects the living standard of the people. But perhaps it is not so, as Bronai—UI--- Salam and Kuwait have the higher per capita incomes but he average living standard of a US citizen is far above that of Baronai and Kuwait,

            Moreover, the per capita is obtained by dividing the total national income by the total population, but the national output and national population statistics may be misleading ___over –estimated or under-estimated. In such situation the per capita income which has been estimated will not be correct. again the per capita income is an average income which includes. Both the big incomes of industrialists and the minor incomes of unskilled daily wage earners. Accordingly the average or per capita income does not truly represent the standard of living of the people. Therefore, the level of distribution of income must be kept in view while giving some verdict about the level of development.

            Furthermore, it may also happen that GNP of a country increases but a minor masses remains obstructed. Such phenomenon may be given the name of economic growth ___not economic development. And in such situation the economic welfare of the masses will not improve; the economic growth and economic welfare will diverge.

2.     Increase in population.

       According to GNP per capital method, economic development will take place if real GNP exceeds population growth. But it has also been observed in case of poor countries that they are furnished with higher growth rate of population. If in such countries like Pakistan along with increase in GNP the population also increases there will be nominal increase in per capital income. According to per capital criterion this would be hardly any development. But it is not true. Such countries do witness certain rise in their GNP along with changes in productivity and efficiently. However, this situation will represent economic growth- not development with is furnished with the structural and institutional changes along with growth in output. Thus according to per capital method population in an obstacle in the attainment of economic development.     

3. International Comparison. '

According to GNP per capita method, development is characterized by the level of per capita incomes of different countries.. The countries having greater incomes per capita will be developed countries and vice versa. But the comparison of per capita incomes of different countries at into, relational level is furnished with the following problems:

.        1. As told earlier the statistics regarding per capita income is not reliable in case of developing countries. The are just guesses and approximates. While in case of developed countries, most of the statistics is accurate. Accordingly, in such situation, the comparison is difficult. In case of developed countries, there is the use of money and there is little barter' trade. The figure regarding outputs 'and incomes are mostly true. While in case of poor countries the is a barter trade, reduce use of money there is a trend to conceal the incomes and outputs on the part of earners and producers. In such situation; the statistics are not accurate in

             Case of developing countries. In such state of affairs, how the comparison, regarding per capita incomes of the poor and lich countries can be made.

2. The national income statistics obtained with and without the inclusion of self­ will yield different results. As in certain countries such services 'are'

Included while in certain other counties they are not included. Thus in such state of affairs, the international comparisons will be doubtful.

3.        Dual Economy                                                       -           .

                 the economy where a few developed cities go side by side along with the majority of the backward villages; unemployment along with capital intensive technology; and mass poverty along with a few rich families is given the name of dual. economy. Accordingly, if in any country, per capita income rises along with the existence of a dual economy -it will be the economic growth not the economic. Development because the rise in per capita income could not bring changes in the social economic life of the society.