7 Main Characteristics of Less Developed Countries (LDCs)

The following points highlight the seven main characteristics of Less Developed Countries (LDCs). Some of the characteristics are: 1. Low per capita income and widespread poverty 2. Shortage of capital 3. Population explosion and high dependency 4. Massive unemployment and Others.

Characteristic # 1. Low per capita income and widespread poverty:

The most important indicator of economic backwardness is per capita income. Per capita GNP of LDCs is very low.

That is why most people in such countries live under severe hardships. They do not get sufficient food to eat, adequate medical care and minimum educational opportunities.

About 40- 50 p.c. people in such countries live below the poverty line.

In terms of per capita income and living standards not only the gap between the developed and underdeveloped countries is large, but the gap is widening over the years. For example, in 2006, India’s per capita GNP (in U.S. dollars) was a modest $ 820 compared to $ 44,970 of the USA, $ 66,530 of Norway, and $ 57,230 of Switzerland, Norway. The average GNP per capita of low income countries in 2006 stood at $ 650 compared to $ 37,529 for high-income countries. (Data Source: World Development Report 2008).

Characteristic # 2. Shortage of capital:

In LDCs like India, there is a shortage of capital of all varieties. There is shortage of not only private capital like structure, factories, steel mills, etc., but also shortage of social overhead capital such as roads, highways, railroads, hospitals, schools, etc. This is largely due to low per capita income and widespread poverty. Since most people are poor they cannot save much.

In fact, poor people have a high propensity to consume (or a low propensity to save). Ragnar Nurkse has pointed out that most LDCs are caught in a vicious circle of poverty: A country is poor because it is poor. Low per capita income leads to low saving. Low saving leads to low growth and low growth, in turn, leads to low per capita income. In fact, low per capita income is both the cause and the consequence of poverty.

Characteristic # 3. Population explosion and high dependency:

Another major characteristic of LDCs is the high rate of growth of population. The population bomb has exploded in most such countries, as has been predicted by T. R. Malthus in 1798.

This is due to a two-fold reason:

(a) A sudden fall in the death rate, and

(b) Almost unchanged or constant birth rate.

As a result, population has virtually exploded.

Population in these countries is increasing annually at the rate of almost 2 p.c. On the contrary, supply of inputs is inelastic. Consequently, land-labour ratio has become unfavorable leading to a growth of an army of surplus labour. These labourers are unproductive in the sense that they depend on productive labourers. In fact, due to lack of adequate employment opportunities, the dependency burden is very high.

Characteristic # 4. Massive unemployment:

Another important characteristic of LDCs is the existence of a considerable amount of unemployment, underemployment, and disguised unemployment. Traditional agricultural sector cannot cope with the rising population.

As a result, the magnitude of disguised unemployment is mounting in these countries. Finding no alternative employment opportu­nities, rural people flock to the urban areas in order to survive. But, the rate of industrial growth is not encouraging to absorb rural masses. In addition to this, a large number of educated youth do not find employment in these countries.

Characteristic # 5. Predominance of agriculture:

An underdeveloped economy is predomi­nantly an agrarian economy. Predominance of agriculture is viewed from two angles—first is the contribution of this sector towards national income. In LDCs, agriculture contributes roughly 30-50 p.c. towards national income. On the other hand, in the developed countries, agriculture occupies a secondary position since 2 p.c. to 8 p.c. of national income comes from this sector.

Secondly, LDCs mainly depend upon agriculture and extractive industries like mining, fisheries and forests. This means that the bulk of the population is engaged in agriculture and allied pursuits. About 55-75 p.c. of the people are engaged in agriculture. Only 10 p.c. are employed in the secondary sector, and the rest in the tertiary sector.

In advanced countries, agriculture provides employment to a small fraction of the people (2 p.c. to 5 p.c.). All these explain the predominance of agriculture in LDCs. Though agriculture occupies a predominant position in LDCs, it is always in a backward condition leading to low productivity.

Characteristic # 6. Unproductive investment:

It is anybody’s knowledge that due to massive poverty people have very little power to save in LDCs. These countries are not capable of saving of more than 15 p.c. of GDP as compared to more than 35 p.c. of GDP saved by people of advanced countries.

The small amount, which is saved in LDCs is not invested properly. Some of it is used in hoarding, black marketing and other unsocial activities, like decorating ‘gods’ in temples by gold ornaments. A large part is used to buy unproductive assets like gold and jewellery. This sort of unproductive investments cannot promote economic growth.

Characteristic # 7. Low levels of productivity:

Another feature of an LDC is low productivity of land, labour and capital. The productivity of land is low for various reasons—institutional, technological, and natural. Productivity of labour is also low for various reasons.

Most workers are poor and do not get either sufficient food or adequate medical care. So they cannot work hard. They are most illiterate, unskilled and lack technical training. They do not have sufficient complementary resources such as land and capital to work with.

In short, low productivity of labour is both a cause and an effect of the low levels of overall productivity and living in these countries. Low levels of living and low productivity go hand in hand. It is really difficult, in practice, to identify the cause and the effect.