J.S. Mill clearly analysed the problems of UDC. He went deep in search of the real cause of poverty in these countries and found that under development was not purely a economic problem, but basically a socio-cultural programme.
The real cause of poverty is insecurity. The cultivators in an UDC do not produce more than what is necessary for subsistence because the surplus will be taken by government.
Land is limited in an UDC and there is absence of technical improvements on land and the law of diminishing returns operates with full force and productivity of land is low. He also advocated technological improvements on land for increasing its productivity which is accepted as cardinal principles for economic development in such countries.
The rate of capital accumulation can be increased by raising the net produce of industry and by strengthening the disposition to save and these are highly practical solutions for increasing rate of capital accumulation in an UDC. The experience of UDC proves that the Malthusian theory is applicable and that population can be controlled only by adopting birth control, as recommended by J.S. Mill.
Prof. Mill believed in the policy of Laissez faire and assigned minimum role to state. But, whatever, Mill wanted that is applicable to UDC. He recommended reforms in the redistribution of ownership of the means of production through such measures as ceiling on inheritance, peasant proprietorship, profit sharing and co-operation and these are very relevant in UDC because there are inequalities of income and wealth. Since UDC are characterised by market imperfection, reform in institutional set up is necessary.
According to Prof. Mill, “two essential conditions must be satisfied before initiating the economic development in UDC”. These are the spirit of industry and the effective desire for capital accumulation. The fulfillment of these conditions requires a better government, complete security of property, a permanent and more advantageous texture of land, improvement of public intelligence, the decay of usages and superstitions which interfere the effective employment of industry, the introduction of foreign arts and the importance of foreign capital.