Why does a developing country want to develop?

• Increase & widen availability of life sustaining goods: food, shelter, health and security
• Raise living standards: higher incomes, employment, education & cultural development
• Expand range of economic and social choice to individuals

Economic growth needs to be sustainable:

·        Competition can help by providing incentives to become efficient and profit-making

·        Use supply-side policies & use labour more efficiently

·        Large budget deficits should be avoided & sound fiscal policies needed

·        Allow exchange rate to be determined by market forces

·        Encourage free trade (possibly together with protectionist policies)

·        Attract FDI (Foreign Direct Investment) e.g. by MNCs/TNCs  -this may bring a large multiplier effect

·        Through industrialisation,

o       import substitution should occur. Rather than using another country's product, own materials and labour should be used

o       export-orientation should give even faster economic growth

o       cut costs, boost employment & productivity

·        Invest in health, infrastructure and education.  This results in a highly educated, motivated, healthy and mobile workforce

Appropriate technology should be used:

• Step-by-step, structured growth, e.g., hi-tech industries not developed until foundations (e.g. skills and technology) in place
• Ensure efficiency and allocative-efficiency
• Reliable power supply is needed first - needed by all industry
• Replacement parts need to be readily available e.g. after an 'aid project', a developing country should not become reliant on                     highly priced parts from the developed country that gave 'aid'

Aid could be used to stimulate economic growth:

• debt cancellation - would leave more money to spend on infrastructure and people
• relevant schemes to encourage the country and its people to increase the size of its   economy

Determinants of Growth:

• Structural adjustment can be used
• Imports of capital goods - machinery etc. to build up industry
• Exports, initially of primary products
• Improvements of the country's infrastructure
• Inward Investment, determined by

-         Interest rates - high = low investment

·        - low   = high investment and high borrowing

-         Incomes - determinant of induced investment

-         high income = high spending = long term work contracts            = good outlook = firms (esp. TNCs) will invest