How can the Developing Countries Develop Economically? (Part 1)

This article was not written to analyze why some countries are still poor, instead, I would like to ask my readers to discuss some possible hypotheses for economic development in developing countries. I divide the article into two separated posts, so it is not looked so long. We can begin by making a causal relationship between policy prescriptions suggested by those hypotheses and economic development.

Human Capital Accumulation Hypothesis (Education)
As we exactly know education is the most important single variable for economic development, thus the more people are educated, the better they are. This hypothesis emphasizes on the importance of the allocation of parental resource and national budgetary to education. According to the data provided by the United Nations, 99,9% of developed countries’ population completed their primary education, while the percentage is only around 60% in least developed countries.
In addition, only 31,2% of least developed countries’ population completed their secondary education and above. In most part of the Europe, citizens are freed from paying tuition fee. In contrary, as we have evidenced in Indonesia, we have to pay huge amount of money for tuition fee. The problem of this hypothesis is the unwillingness of the government and the parents in developing countries to invest financial resources in education.

Let's continue reading this post!!

Empowerment of Women Hypothesis
In developing countries, difficult access to education has created a gender gap between men and women, especially in terms of income. However, some people believe that women can achieve high economic performance as well as man if they are given a chance. Besides striving for gender equality, a policy prescription of this hypothesis is giving an access to education for women. Uneducated women will have no opportunity of getting a job in their future life, thus having no job makes opportunity cost of women’s work is very low and since bearing child has high economic value, they tend to have more children and again this will be resulted in poverty.

This endless vicious cycle actually can be solved by providing access to education for them, thus their economy and social status will increase. As opportunity cost of time increases, bearing child has low economic value, thus low fertility rate and significant economic output can be reached.

Moreover, implementing micro-credit programs like the one initiated by Muhammad Yunus through Grameen Bank in Bangladesh can be an alternative solution. It extends small loans to very poor people for self-employment projects that generate income and allow them to take care of themselves and their family.

The obstacles to this hypothesis are resistance from men and the parents of poor family who prioritize the education for their sons because of lacking money.

Political Stability Hypothesis
Political and social stability breeds economic stability. Prerequisites of this hypothesis are no international war, no civil war (i.e in Iraq, Sierra Leone, Afghanistan), and no political turnover like in Japan, when one Prime Minister only held the office for a very short period of time. For instance, we can see the number of refugees increase dramatically in 21st century because of two world wars. Policy prescriptions of this hypothesis are simply not to go to war and establish strong and stable government. The problem is that only political stability is not enough, thus we have to mingle the implementation of this hypothesis with others.

Because of limited spaces, I have not covered some other reasonable hypotheses like:

• Less Military Expenditure Hypothesis
• Industrial Policy Hypothesis
• Foreign Direct Investment Hypothesis
• Other Assistance Hypothesis

which will be covered later. I welcome any comments from you, and if you have any other thinkable hypothesis, please tell me!!