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Ba llb economics notes 1st semester

Ba llb economics notes 1st semester

Q.5. What is meant by technological change ?’ Give its significance in the economic development of an underdeveloped country.

Discuss. the problems of change of technology from developed countries to underdeveloped countries. Give necessary. suggestions.

Ans. According to Frankel, “Technological change is not a mere improvement in the technical know-how. It means much more than this. I should be preceded by sociological charge also, a willingness and desire on the part o the community to modify their social, political and administrative institutions so as to make them fit with new techniques of production and faster tempo of economic activity.” But the absence of technological change means the end of growth after a point. In the words of Homri Bhabba, What the developed countries underdeveloped lack is modern science and an economy based on modern technology. The problem of developing the underdeveloped countries is, therefore, the problem of establishing modern science in them, and transforming the economies to one based on modern science and technology.”

However, modern technology is changing rapidly and today no country can hope to maintain steady advancement unless it keeps pace with modern technological advancement or change. Today, the main problems. of underdeveloped and developing countries are :

(i) low production,
(ii) low productivity,
(iii) high cost of production,
(iv) existence of traditional technology, and
(v) increase in demand.
The solution to all the above problems lies in the adoption of technological change or technological advancement. The economic development of a country lies in technological change because both are closely related to each other.

Role/importance/Need/Advantages of Technological Change in Underdeveloped and Developing countries
(1) To Overcome Economic Backwardness : Underdeveloped countries are in the backward state of technology. Technological backwardness leads to their economic backwardness which is reflected in a vicious circle of poverty, inequalities, and unemployment. The technological change brings advanced production techniques, improved machines, innovation in products, skilled personnel, modern marketing techniques, increased demand, reduced cost of production, increased production, higher standard of living, and economic prosperity, etc.

(2) To Increase Productivity : Technical change increases the productivity of an economy. This it does by producing more with the existing amount of available resources along with producing better quality of products of higher value at lower cost. Larger and faster the technical

changes, higher. is the economic growth. The productivity of land, labor, capital, and other factors of production is increased considerably on account of technological change. Traditional technology is replaced by modern technology.

(3) To Increase in Economic Growth Rate: Technology change is also needed to increase the economic growth rate of underdeveloped and developing countries. Technological change leads to inventions and innovations. These inventions and innovations change the process concerning the transformation of inputs into outputs, including the production of new goods, which affects favourably the economic growth of an economy. Now a variety of goods enter the market which increases the demand. It encourages and improved goods.

(4) To Fill Technological Gap: Technological change is also needed to fill technological gap. As a matter of fact, there exists’ a wide technological gap between backward countries and developed countries. The underdeveloped countries are dependent on indigenous technology which is the root cause of their backwardness. They require modern technology for faster economic growth. As such, the gap between backward countries and developed countries can be bridged by the technological change from developed countries to backward countries. Modern technology supplements the available indigenous technology and also helps in modifying and adapting advanced technology.

(5) To Overcome Scarcity of Natural Resources : Technological change is also needed to overcome the scarcity of natural resources. As a matter of fact, technological change has enabled mankind to overcome the constraints of natural resources. Primarily, this has been achieved in the following ‘three ways (i) by an increase in the productivity of natural resources, (ii) natural inputs have to a significant extent, been replaced by man-made industrial inputs like machinery, fertilizers, tools, and implements, insecticides, etc. are being used in place of traditional inputs, (iii) substitutes of a number of natural resources have been developed. For example, glass has been substituted for tin in many uses and is being manufactured from apparently unlimited available sand.

(6) To Reduce Poverty, Inequalities and Unemployment : Technological change are also needed for reducing poverty, inequalities, and unemployment, underdeveloped and developing countries is the vicious circle of poverty, inequalities, and mass unemployment. For example, in India about 95 lakh persons are unemployed. Similarly, about 20% of India’s population is living below the poverty line. Further, there exist gross inequalities, as there 5 a wide gap between the rich and the poor. There exist lakhs of families who have to fight hard so as to earn even both times bread. These problems can be solved by raising the income of the people through technological change.

(7) To Develop Infrastructure : Underdeveloped countries lack basic infrastructure, such as, communications, transport, power, roads, bridges etc. Technological change can play a vital role in the development of infrastructure.

(8) To Solve Balance of Payments Position : Most of the underdeveloped and developing countries are in the grip of the balance of payments position, Due to traditional methods of production they suffer from the problems of quality and quantity in the field of production, i.e., their production is low and the quality too is poor. Thereby, the imports exceed exports leading to a grave balance of payments position. The technological change increases both production and productivity along with a sharp reduction in the cost of production. It tends to increase exports and reduce imports, thereby improving the balance of payments position of underdeveloped and developing countries.

(9) To Increase Welfare: Technological change also increases welfare by (i) increasing national and per capita income; (ii) providing mass employment opportunities; (iii) offering a large number of goods along with large varieties of consumption goods at low prices; (iv) increasing the level of standard of living; (v) improved diet; (vi). mass and cheap means of entertainment; (vii) availability of cheap means of transport and communications; (viii) mass shelter; (ix) human mastery over the physical environment, etc.

(10) To Solve Socio-Economic Problems: Technological change is also needed for solving many of the pressing social and economic problems of the backward countries which retard their economic growth. For example, the green revolution has shown how the use of modern technology can boost foodgrains production and put an end to malnutrition and famine in overpopulated underdeveloped countries and even make them self-sufficient in the production of foodgrains.

Problems Criticisms/Demerits of Technological Change
(1) High Costs : Change of technology from developed countries to underdeveloped countries leads to high costs. Further, in most the cases it is tied to specific projects or products only.The buyer is.compelled to pay high prices which becomes uneconomic at a later stage and thereby a burden on the importing country.

(2) Undue Dependence The change of technology tends to undue dependence on the exporting country. The exporting country restricts, the right to use or change or transfer the technology. It leads to undue dependence of the technology of importing country on the exporting country.

(3) Lack of Proper Environment: There is lack of proper environment in the underdeveloped countries. People are not enthusiastic to adopt new technology. as they are in the habit of using old and traditional technology.

(4) Capital-Intensive Technology: The type of technology used in load countries is highly capital-intensive and thereby only the rich countries can make use of it. Since the underdeveloped countries are poor and their economy is labor-intensive, they cannot afford to purchase the same.

(5) Unskilled Human Resources : Modern technology requires a skilled and trained labor force in abundance. On the contrary, underdeveloped countries possess unskilled and untrained labor forces in abundance. Hence they fail to use the modern sophisticated imported technology.

(6) Destructive Effects : Quite a number of new technologies have proved anti-life in more than one way. For example, they have done great harm and in some respects irreversible damage to the natural environment of the importing country. This is evident from the pollution of air and water, as also from the deterioration of soils, forests, wildlife, etc. All these have been caused by the use of hitherto unknown agents as chemical fertilizers, insecticides, radiation, and industrial poisonous water, etc. As a result, the natural environment has been poisoned, and its capacity for maintaining life in terms of rainfall, oxygen, soil productivity, etc. has been drastically reduced.

(7) Outdated Technology : According to .critics, most of the developed countries export outdated and discarded technology to the underdeveloped countries. Such technology is somewhat cheap, less capital-intensive. However, it entails high costs in terms of repeated breakdowns and constant repairs. In the absence of availability of spare parts in the exporting country, such technologies become useless and bring huge losses to the importing country. For example, India has a bitter experience in the import of defense equipment from Russia.

(8) Foreign Exchange Crists: Import of new technology leads to the repatriation of large sums in the form of costs, profits, fees, royalties, etc. to exporting country. It causes severe foreign exchange crists and adversely affects the other development programs in the importing country.

(9) Adversely Affects Local Entrepreneurship : Import of new technology requires ‘enlightened, managerial and skilled experts and huge risk-bearing entrepreneurship which lacks the local entrepreneurship. As such, the exporter brings its own team of skilled, enlightened managerial experts. It adversely affects the development of local entrepreneurship.

(10) Aggregate Unemployment at the Initial Stage: Import of modern technology aggravates unemployment at the initial stage because it is capital-intensive and less labor-using. This is particularly so in the case of underdeveloped countries. These countries are already in the grip of severe unemployment. As such, it aggravates the situation. Illiterate and middle-aged workers, both male, and female suffer more.

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