22 Less Developed Countries

What do we mean when we say a country is “developed”? The United Nations uses three measures: life expectancy, education and real individual income. If we use these measures to describe the world, we understand that only a privileged few live in developed countries. Poverty, for instance, causes the deaths of about 30,000 children every day. Over a billion people cannot read or write. Half the world earns less than $2 a day. Clearly, most of the world’s population live in less developed countries. Why is development so difficult for these nations?

There are many reasons. Some countries lack the raw materials and capital needed for growth. Others regularly suffer from natural disasters such as droughts and floods. Diseases such as cholera and AIDS are widespread in many less developed countries. Lack of education also holds back development. Without quality human capital, these economies cannot grow.

Political instability is another reason for underdevelopment. Political corruption makes development difficult too. Foreign companies do not want to invest in a country which suffers from corruption. However, there are other more complex issues which hamper development. They are debt and unfair trading.

All of these problems make it very difficult for less developed countries to improve their economies. (1136)

23 Factors of Production

The factors of production are: land, labour and capital. The factors of production are the starting point of all economies. No economy can exist without them. The most basic of the factors is land. Land means everything that nature provides and we can use for production. The land factor includes raw materials like coal, metals, oil and timber. It also includes things like water, fish and salt. Land also means the sea.

The second factor is labour. Labour can mean the physical effort such as lifting, digging and building. This is called manual work. Labour also includes mental work like thinking, writing, communicating and designing. Industries that need many workers who work long hours are called labour intensive industries. However, the quality of labour is as important as the quantity. An educated, skilled and fit workforce is more productive than an uneducated, unskilled and unhealthy workforce. This characteristic of the labour factor is called human capital.

The third factor is capital. Capital includes buildings such as factories and warehouses. It also includes the tools and equipment that workers use in the manufacturing process such as machinery and mechanical equipment or computers and complex laboratory apparatus.

Land, labour and capital are the three factors of production identified by Adam Smith and the classical economists. However, more recent economists have identified one more factor: entrepreneurship. This means people with great business ideas that set the economy in motion. (1302)