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Many economies in Africa, South Asia, South America and Middle East are considered developing or underdeveloped. Not much attention has been paid to these economies. However, there are always reasons for these economies to be considered developing or underdeveloped. The purpose of this site is to share ideas and information about these economies and to find solutions to help them in their development. Developing countries are defined and listed on List of Developing Countries. Developed countries are defined and listed on List of Developed Countries

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There are many theories about economic development. Also, there are many organizations i.e. IMF, World Bank, and others that are trying to help these developing countries to achieve economic growth. However, most of these organizations have failed miserably.

Indicators of Economic Development

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Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting levels of taxation, government budgets, the money supply, and interest rates as well as the labor market, national ownership, and many other areas of government interventions into the economy. Macroeconomic models and their forecasts are used by governments to assist in the development and evaluation of economic policy.

The economic policy comprises government fiscal policy . . . and monetary policy (the means by which a government's central bank influences the supply and ``cost'' of money, which is reflected by the level of interest rates). Wikipedia

New government economic policies in the mid-1990s were developed and adopted, supported by the International Monetary Fund (IMF) and World Bank.
Rostow's Model- the Stages of Economic Development

Theories In 1960, the American Economic Historian, WW Rostow suggested that countries passed through five stages of economic development.
Stage 1 Traditional Society
The economy is dominated by subsistence activity where the output is consumed by producers rather than traded. Any trade is carried out by barter where goods are exchanged directly for other goods. Agriculture is the most important industry and production is labor intensive using only limited quantities of capital. Resource allocation is determined very much by traditional methods of production.
Stage 2 Transitional Stage (the preconditions for takeoff)
Increased specialization generates surpluses for trading. There is an emergence of a transport infrastructure to support trade. As incomes, savings and investment grow entrepreneurs emerge. External trade also occurs concentrating on primary products.
Stage 3 Take Off
Industrialisation increases, with workers switching from the agricultural sector to the manufacturing sector. Growth is concentrated in a few regions of the country and in one or two manufacturing industries. The level of investment reaches over 10% of GNP.
The economic transitions are accompanied by the evolution of new political and social institutions that support the industrialization. The growth is self-sustaining as investment leads to increasing incomes,in turn, generating more savings to finance further investment.
Stage 4 Drive to Maturity
The economy is diversifying into new areas. Technological innovation is providing a diverse range of investment opportunities. The economy is producing a wide range of goods and services and there is less reliance on imports.
Stage 5 High Mass Consumption
The economy is geared towards mass consumption. The consumer durable industries flourish. The service sector becomes increasingly dominant.
According to Rostow development requires substantial investment in capital. For the economies of LDCs to grow the right conditions for such investment would have to be created. If aid is given or foreign direct investment occurs at stage 3 the economy needs to have reached stage 2. If stage 2 has been reached then injections of investment may lead to rapid growth.
Limitations
Many development economists argue that Rostows's model was developed with Western cultures in mind and not applicable to LDCs. It addition, its generalized nature makes it somewhat limited. It does not set down the detailed nature of the pre-conditions for growth. In reality, policy makers are unable to clearly identify stages as they merge together. Thus as a predictive model, it is not very helpful. Perhaps its main use is to highlight the need for investment. Like many of the other models of economic developments, it is essentially a growth model and does not address the issue of development in the wider sense.

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