An idea of the characteristics of a developing economy must have been gathered from the

above analysis of the definitions of an underdeveloped economy. Various developing

countries differ a good deal from each other. Some countries such as countries of Africa do
not face problem of rapid population growth, others have to cope with the consequences of
rapid population growth. Some developing countries are largely dependent on exports of
primary products, others do not show such dependence, and others do not show such
dependence. Therefore, this write up will further analyse these characteristics of the
contemporary global system.

The first important feature of the developing countries is their low per capita income.
According to the World Bank estimates for the year 1995, average per capita income of the
low-income countries is $ 430 as compared to $ 24,930 of the high-income countries
including U.S.A., U.K., France and Japan. According to these estimates for the year 1995, per
capita income was $340 in India, $ 620 in China, $240 in Bangladesh, $ 700 in Sri Lanka. As
against these, for the year 1995 per capita income was $ 26,980 in USA, $ 23,750 in Sweden,
$ 39,640 in Japan and 40,630 in Switzerland.

It may however be noted that the extent of poverty prevailing in the developing countries is
not fully reflected in the per capita income which is only an average income and also includes
the incomes of the rich also. Large inequalities in income distribution prevailing in these
economies have made the lives of the people more miserable. A large bulk of population of
these countries lives below the poverty line. For example, the recent estimates reveal that
about 28 per cent of India’s population (i.e. about 260 million people) lives below the poverty
line, that is, they are unable to get even sufficient calories of food needed for minimum
subsistence, not to speak of minimum clothing and housing facilities. The situation in other
developing countries is no better.

The low levels of per capital income and poverty in developing countries is due to low levels
of productivity in various fields of production. The low levels of productivity in the
developing economies has been caused by dominance of low-productivity agriculture and
informal sectors in their economies, low levels of capital formation – both physical and
human (education, health), lack of technological progress, rapid population growth which are
in fact the very characteristics of the underdeveloped nature of the developing economies. By
utilising their natural resources accelerating rate of capital formation and making progress in
technology they can increase their levels of productivity and income and break the vicious
circle of poverty operating in them. It may however be noted that after the Second World
War and with getting political freedom from colonial rule, in a good number of the
underdeveloped countries the process of growth has been started and their gross domestic
product (GDP) and per capita income are increasing.
According to…..,another characteristic that can be noted is excessive dependence on
agriculture. A developing country for example Zimbabwe is generally predominantly
agricultural. About 60 to 75 per cent of its population depends on agriculture and its allied
activities for its livelihood. Further, about 30 to 50 per cent of national income of these
countries is obtained from agriculture alone. This excessive dependence on agriculture is the
result of low productivity and backwardness of their agriculture and lack of modern industrial
growth.

In the present-day developed countries, the modern industrial growth brought about structural
transformation with the proportion of working population engaged in agriculture falling
drastically and that employed in the modern industrial and services sectors rising enormously.
This occurred due to the rapid growth of the modern sector on the one hand and tremendous
rise in productivity in agriculture on the other. The dominance of agriculture in developing
countries can be known from the distribution of their workforce by sectors. According to
estimates made by ILO given in Table 4.1 on an average 61 per cent of workforce of low-
income developing countries was employed in agriculture whereas only 19 per cent in
industry and 20 per cent in services. On the contrary, in high income, that is, developed
countries only 4 per cent of their workforce is employed in agriculture, while 26 per cent of
their workforce is employed in industry and 70 per cent in services.

In India at the time of independence about 60 per cent of population was employed in
agriculture and with six decades of development the percentage of population engaged in
agriculture has fallen to around 50 per cent in 2011-12. However, it is significance to note
that the increase in population in non-agriculture sector has found employment not in
organised industry and services sector but in informal sector where labour productivity is as
low as in agriculture. Besides, it is important to note though at present (2011-12) agriculture
employees 50 per cent of workforce, it contributes only 13 per cent to its GDP. This shows
labour productivity in agriculture and informal sector in the Indian economy, as in other
developing economies, is due to the fact that the employment in organised industrial and
services sector has not grown at a rate commensurate with the increase in population despite
recording a higher growth rate in output.

……states that Rapid Population Growth and Disguised Unemployment is another

characteristic that can be seen in contemporary global system. He says that, the diversity
among developing economies is perhaps nowhere to be seen so much in evidence as in
respect of the facts of their population in respect of its size, density and growth. While we
have examples of India, Pakistan and Bangladesh with their teeming millions and galloping
rates of population growth, there are the Latin American countries which are very sparsely
populated and whose total population in some cases numbers less than a single metropolitan
city in India and China. In several newly emerging countries of Africa too and in some of the
Middle Eastern countries the size of their population cannot be regarded as excessive,
considering their large expanse. The South- East and Eastern Asia, on the other hand, have
large populations.

However, there appears to be a common feature, namely, a rapid rate of population growth.
This rate has been rising still more in recent years, thanks to the advances in medical sciences
which have greatly reduced the death rate due to epidemics and diseases. While the death rate
has fallen sharply, but there has been no commensurate decline in birth rate so that the natural
survival rate has become much larger. The great threat of this rapid population growth rate is
that it sets at nought all attempts at development in as much as much of the increased output
is swallowed up by the increased population. One important consequence of this rapid rate of
population growth is that it throws more and more people on land and into informal sector to
eke out their living from agriculture, since alternative occupations do not simultaneously
develop and thus are not there to absorb the increasing numbers seeking gainful employment.
The resultant pressure of population on land and in informal sector thus gives rise to what has
been called “disguised unemployment”.

Disguised unemployment means that there are more persons engaged in agriculture than are
actually needed so that the addition of such persons does not add to agricultural output, or
putting it alternatively, given the technology and organisation even if some of the persons are
withdrawn from land, no fall in production will follow from such withdrawal. As a result,
marginal productivity of a wide range of labourers employed in agriculture is zero.

Furthermore ……….critiques that lower levels of human capital are some of the common
characteristics of global system. Education, health and skills – are of crucial importance for
economic development. In our analysis of human development index (HDI) we noted that
there is great disparity in human capital among the developing and developed countries. The
developing countries lack in human capital that is responsible for low productivity of labour
and capital in them.

Lack of education manifests itself in lower enrolment rate in primary, secondary and tertiary
educational institutions which impact knowledge and skills of the people. Lower levels of
education and skills are not conducive for the development of new industries and for
absorbing new technologies to achieve higher levels of production. Besides, lack of education
and skills makes people less adaptable to change and lowers the ability to organise and
manage industrial enterprises. Further, in countries like India, advantage of demographic
dividend can be taken only if the younger persons can be educated, healthy and equipped
with appropriate skills so that they can be employed in productive activities. Likewise,
health, the other important human resource, is a key factor that determines efficiency or
productivity of the people. The people who are undernourished and malnourished often suffer
from sickness cannot be efficient and therefore cannot contribute much to the increase in
productivity.

Besides, health enjoyed by the people is good in itself as it directly increases the happiness
and welfare of the people, Lower health of the people of developing countries is manifested
lower life expectancy at birth, higher mortality rate of children under 5 years age,
undernourishment and malnourishment (i.e., underweight children) of the people and access
to improved sanitation facilities. Though health conditions in developing countries have
greatly improved in the last some decades of development, there are still important
differences between them and developed countries.

To add on, a dualistic structure of underdeveloped economies is another characteristic of

contemporary global system. An important feature of developing economies, especially those
which are marked by surplus labour is that they have a dualistic structure. This dualistic
character of these economies has been held to be the cause of unemployment and
underemployment existing in them. Keeping in view this dualistic structure of less developed
economies, important models of income and employment have been propounded. Famous
Lewis model of economic development with unlimited supplies of labour and Fei-Ranis
model of “Development in a Labour Surplus Economy” explain how in dualistic economies,
the unemployed and underemployed labour in the traditional sector is drawn into a modern
high productivity sector.

The concept of dualism was first of all introduced into the development analysis by Dr. J.H.
Boeke but he emphasised the social dualism, according to which there is sharp contrast
between the social systems characterising the two broad sectors of the economy, one in which
the original social system with its subsistence or pre-capitalist nature, limited wants, non-
economic behaviour and low level of economic and social welfare prevails, and the other
where imported capitalist system with its modern system of industrial organisation, wage
employment, unlimited wants and positive behaviour to economic incentives exists.

However, it is technological dualism rather than Boeke’s social dualism which has an
important bearing on the problem of economic growth and surplus labour in the developing
countries. According to the concept of technological dualism, the important difference
between the traditional and the modern sectors lies in the difference between the production
techniques or technologies used. In the small modern sector consisting of large-scale
manufacturing and mining which provides wage employment, highly capital-intensive
techniques imported from the developed countries are used.
On the other hand, in the large traditional sector covering agriculture, handicrafts and allied
activities, in which there exist extended family system and self-employment, labour-intensive
technology is generally used. As a result of the difference in technologies used, the labour
productivity and levels of earnings in the modern sector are much higher than those in the
traditional sector.

Moreover, since the technology used in the modern sector is highly capital-intensive, the
growth of this sector has not absorbed adequate amount of labour in high productivity and
high wage employment. With the explosive rate of growth of population and labour force and
the limited creation of employment opportunities in the modern sectors because of the highly
capital-intensive technology, surplus labour has emerged in the agriculture and services. It
has been possible for agriculture to contain the surplus labour because of the prevalence of
extended family system in which both work and income are shared by the family members.

In conclusion, the desire for development has followed the political freedom of the many
poor countries from foreign rule. It has now been realised that political freedom without
economic freedom and prosperity has no meaning. Political independence has naturally raised
expectations of the people in the economic sphere. No wonder that people of these countries
which have won freedom from the colonial rule aspire to develop economically and that in
the shortest possible times.