Employment Problems in Developing Countries

As a result of our experience and increased knowledge of the facts acquired during the 1960s, the conviction has emerged that much more attention needs to be paid to the human factor in the theory of economic development. Until recently the Keynesian or neo-Keynesian approach has dominated the theory of development. In the Keynesian model, the problem of development is identified with the growth of per capita GDP or national income. This growth is explained as the combined result of the rate of saving and the resultant physical capital accumulation on the one hand, and of the capital/output ratio (the productivity of new capital investment in terms of physical output), on the other. This picture of growth or development leads to the identification of certain capital requirements, and helps to identify deficiencies or bottlenecks in terms of foreign exchange requirements, domestic savings and capital inflows. The resulting aggregate growth rate is then transformed into a per capita growth rate by the simple expedient of deducting the net rate of population increase (excess of births over deaths) from the aggregate growth rate of production.