Although their is no clearcut demarkation line between the two yet economists generally the following differenes between the two:
1. Per Capita Incom:
Underdeveloped economies are distinguished from developed economies on the basis of per capita income. In general, those countries which have real per capita incomes less than a quarter of the per capita income of the United States, or roughly less than 5000 dollars per year, are categorised as under-developed countries.
2. Lack of Capital
An underdeveloped economy, compared with an advanced economy, is underequipped with capital in relation to its population and natural resources. The rate of growth of employment and investment in such an economy lags behind the rate of growth of population. The resources are not only employed but also underemployed. In technical jargon, the production possibility frontier of a poor country is far ahead of the actual production curve, whereas the gap between the potentiality and actual utilisation of resources is narrow in a developed economy.
3.High rate of Growth of Population
High rate of growth of population is an important characteristic of most of the underdeveloped economies. Population growth in underdeveloped countries neutralises economic growth. In advanced economies, the case is different. As Prof. Hansen points out, one of the empirical tests of secular stagnation in advanced economies is the declining rate of population growth. The stagnation problem in a developed economy is a problem of population, natural resources and technology failing to keep pace with capital accumulation.
4. Poverty
The central problem of underdeveloped economies is the prevalence of mass poverty which is the cause as well as the consequence of their low level of development. Shortage and scarcity are the main economic problems in these economies, whereas the affluent societies of advanced countries have economic problems resulting from abundance.
5. Low income Vicious Circle
In an underdeveloped economy, the fundamental problem is that of output, real income or the standard of living, as these economies are characterised by low productivity, low income and a poor standard of living. A vast majority of people in an underdeveloped country are ill-clothed,
undernourished and without adequate shelter. To use Rostow's terminology, economies of poor countries similar to those of a traditional society, where modern science and technology are either not available or not regularly and systematically applied. On the other hand, most of the developed countries at present enjoy a high rate of mass-consumption. In their economies, per capita real income has risen to a level at which a large number of people can afford consumption transcending food, shelter and clothing.
6. Capital Deficiency
Capital deficiency is the main cause of poverty of a poor country, while affluent capital accumulation is the main cause of stagnation of an advanced country.
7. Under employment
In an underdeveloped economy, the problem of under-employment is more important than that of unemployment, whereas a developed economy may have a cyclical unemployment problem. There is chronic unemployment in an underdeveloped economy. An advanced economy may have unemployment occasionally due to business fluctuations and a low marginal propensity to consume. Whereas an under developed economy is confronted with the problem of disguised unemployment in the sense that even with unchanged techniques in agriculture could be removed without reducing agricultural output. Thus, in a developed economy, unemployment means waste of resources, while in an underdeveloped economy, it is of disguised type.
8. OldTechnology
Poor countries are poor in technology, advanced countries are advanced in technology. In fact, the level of technology attained in production is a reliable indication of the level of economic development. Employment of advanced technology goes along with large capital resources, high attainments in the fields of scientific research, greater availability of entrepreneurial skill and a good supply of efficient skilled labour.
Thus, development of technology is the basic objective of the backward economy whereas development of technology no longer remains the overriding objective of an affluent society.
1. Per Capita Incom:
Underdeveloped economies are distinguished from developed economies on the basis of per capita income. In general, those countries which have real per capita incomes less than a quarter of the per capita income of the United States, or roughly less than 5000 dollars per year, are categorised as under-developed countries.
2. Lack of Capital
An underdeveloped economy, compared with an advanced economy, is underequipped with capital in relation to its population and natural resources. The rate of growth of employment and investment in such an economy lags behind the rate of growth of population. The resources are not only employed but also underemployed. In technical jargon, the production possibility frontier of a poor country is far ahead of the actual production curve, whereas the gap between the potentiality and actual utilisation of resources is narrow in a developed economy.
3.High rate of Growth of Population
High rate of growth of population is an important characteristic of most of the underdeveloped economies. Population growth in underdeveloped countries neutralises economic growth. In advanced economies, the case is different. As Prof. Hansen points out, one of the empirical tests of secular stagnation in advanced economies is the declining rate of population growth. The stagnation problem in a developed economy is a problem of population, natural resources and technology failing to keep pace with capital accumulation.
4. Poverty
The central problem of underdeveloped economies is the prevalence of mass poverty which is the cause as well as the consequence of their low level of development. Shortage and scarcity are the main economic problems in these economies, whereas the affluent societies of advanced countries have economic problems resulting from abundance.
5. Low income Vicious Circle
In an underdeveloped economy, the fundamental problem is that of output, real income or the standard of living, as these economies are characterised by low productivity, low income and a poor standard of living. A vast majority of people in an underdeveloped country are ill-clothed,
undernourished and without adequate shelter. To use Rostow's terminology, economies of poor countries similar to those of a traditional society, where modern science and technology are either not available or not regularly and systematically applied. On the other hand, most of the developed countries at present enjoy a high rate of mass-consumption. In their economies, per capita real income has risen to a level at which a large number of people can afford consumption transcending food, shelter and clothing.
6. Capital Deficiency
Capital deficiency is the main cause of poverty of a poor country, while affluent capital accumulation is the main cause of stagnation of an advanced country.
7. Under employment
In an underdeveloped economy, the problem of under-employment is more important than that of unemployment, whereas a developed economy may have a cyclical unemployment problem. There is chronic unemployment in an underdeveloped economy. An advanced economy may have unemployment occasionally due to business fluctuations and a low marginal propensity to consume. Whereas an under developed economy is confronted with the problem of disguised unemployment in the sense that even with unchanged techniques in agriculture could be removed without reducing agricultural output. Thus, in a developed economy, unemployment means waste of resources, while in an underdeveloped economy, it is of disguised type.
8. OldTechnology
Poor countries are poor in technology, advanced countries are advanced in technology. In fact, the level of technology attained in production is a reliable indication of the level of economic development. Employment of advanced technology goes along with large capital resources, high attainments in the fields of scientific research, greater availability of entrepreneurial skill and a good supply of efficient skilled labour.
Thus, development of technology is the basic objective of the backward economy whereas development of technology no longer remains the overriding objective of an affluent society.
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