ECONOMIC GROWTH AND INCIDENCE OF POVERTY

1. PAD 390 DEVELOPMENT ADMINISTRATION

2. Rostow’s Theory on
Economic Growth
3rd Stage
2nd Stage
Take-Off
1st Stage
Pre Take-Off
• Traditional Societies
• Preconditions to
Take-off
Post Take-Off
• The Drive to
Maturity
• Age of Mass
Consumption

3. FIRST STAGE: Pre Take-Off

4. Traditional Societies
 The traditional society is one whose structure is
developed within limited production functions.
 These societies believe that gods or spirits help the
acquirement of goods not man and his own cleverness.
 Newton is a symbol for a turning point in history when
men started believe widely that the external world was
subject to a few knowable laws and was systematically
capable of productive manipulation.
 Family and clan are the ones who play an important role
in social organization.
 In conclusion, this stage is characterized by the
inheritance of agricultural based economy, with intensive
labour and low levels of trading, and a population that
does not have a scientific perspective on the world and
technology.

5. Preconditions to Take-off
 Exposed societies to the process of transforming the
traditional society.
 It takes time because it gradually employed technology
and modern science to prevent loss and enjoy the
innovation.
 Education started to be an important and changes to suit
the needs of modern economy activity.
 Various types of enterprise spring up in private and public
sector. Entrepreneurs are willing to take risk and chance
to increase profit or getting modernization.
 Also, mobilizing capital appears especially for banks and
other institutions.
 The scope of commerce widens internal and external.
Modern manufacturing enterprise appears, using the new
methods.

6. SECOND STAGE: Take-Off
 The pre-conditions to take-off are the rate of effective
investment and savings may rise from, for example, 5 %
or less to more than 10% or of the national income or net
national product.
 At this point, new industries or modern economic sector
expand rapidly.
 The new class entrepreneurs expand and direct
investment in private sectors.
 The public enterprises also help in the economic growing.
 The rural urban areas are developing and experience
rapid changes in their lifestyle, politics and culture.
 In a decade or two both the basic structure of the
economy and the social and political structure of the
society are transformed in such a way that a steady rate
of growth can be regularly sustained.

7. THIRD STAGE: Post Take-Off

8. The Drive to Maturity
 After take-off, a long interval of sustained of rise and fall
progress as the regular growing economy leads to modern
technology.
 Some 10-20% of the national income is steadily invested,
producing output regularly to exceed the increase in
population.
 The technique improves, new industries accelerate, older
industries level off made the economy changes non-stop.
 The economy finds its place in the international economy.
 This is the stage in which an economy demonstrates that
it has the technological and entrepreneurial skills to
produce anything that it chooses to produce.

9. Age of High Mass Consumption
 Here, a country's economy flourishes in a capitalist
system, characterized by mass production and
consumerism.
 A real income per head rose to a point where many
persons gained a control over consumption
 While the structure of the working force changed
 The society ceased to accept the further extension of
modern technology as a predominant objective.
 The emergence of the welfare state is one expression of a
society's moving beyond technical maturity
 The society love and support the economic development
because it increased the position in society.
 Politically, it is the building of an effective centralized
national state.

10. INCIDENCE OF POVERTY
Absolute and Hard Core Poverty
Relative poverty
Poverty Vicious Cycle
Poverty Line

11. ABSOLUTE AND HARD CORE POVERTY
 The absolute poverty is gross monthly income of
household is inadequate to purchase certain minimum
necessities of life
 The absolute poverty line can be the relative poverty line
in long- terms.
 In Malaysia, the absolute poverty line is estimated by
Ministry of of Women, Family and Community
Development (Department of Social Welfare).
 NEP has been established which eventually brings the
country into Vision 2020 by which to be a higher income
nation.
 In the Government Transformation Programmes (GTP),
the low income households is also been focus besides the
other factors which are corruption, security, education,
urban public transport and rural basic infrastructure.

12. ABSOLUTE AND HARD CORE POVERTY
 In 2009, Ministry of Women, Family & Community Development
need to oversee the implementation of National Key Result Area
Low Income Households (NKRA LIH).
 Many initiatives has been taken by government to reduce the
rate of poverty in our country. The initiative is provide skills
training and income generation opportunities.
 In e- Kasih, 44 643 cases has been currently registered.
 Then, 4 939 poor households and 1 810 hardcore poor
households in 2009 has get focused by government to increase
their gross monthly income.
 The highest poverty incidence in this region are Laos and
Cambodia at 38.6 % in 1997 and 35.9 % in 1999.
 In Bangladesh, 20 to 30 million people are still very poor that
has been highlighted by the economist. There are many
challenges that has been faced by the policy makers at that
country.

13. RELATIVE POVERTY
 Refers to the situation that a person lacks the necessary
resources to enable them to participate in the normal and
desirable patterns of life that exist within a given society
at a given time.
 Relative poverty is also the condition of having fewer
resources or less income than others within a society or
country or compared to worldwide averages.
 The relative poverty is the states that the poor are those
living on less than 50% of median income.
 Measures of relative poverty are almost the same as
measuring income inequality.
 However, some argue that the term relative poverty itself
is misleading and that income inequality should be used
instead.
 Likewise in the reverse direction, it is possible to reduce
absolute poverty while increasing relative poverty.

14. POVERTY VICIOUS CYCLE
 The cycle of poverty can be defined as a phenomenon
where poor families become trapped in poverty for
generations.
 This occurs when they have no or limited access to the
resources necessary to get out of poverty, such as
financial capital, education, or connections to improve
their standards of living.
 Situational poverty can generally be traced to a specific
incident within the lifetimes of the person or family
members in poverty, and generational poverty, which is a
cycle that passes from generation to generation, and goes
on to argue that generational poverty has its own distinct
culture and belief patterns.
 Economic growth can be seen as a virtuous circle. It
might start with a factor like technological innovation.

15. POVERTY VICIOUS CYCLE
 The effects of poverty vicious cycle are the low level of
income will prevent savings, retards capital growth,
slower the productivity growth, and keeps income low.
 Successful economic planning and development is
required to break up the chain at many points.
 To break the vicious cycle, the country has stepped to
invest more, improve health and education, develop
labour skills, and curb population growth.
 For example, the government implemented 1AZAM
programme to create opportunities, raising income level
and changing lives of Malaysians throughout the country.
 The programme attempts to strike a balance between
providing direct aid and economic opportunities to its
participants to ensure that these individuals become
financially self-sustaining.

16. POVERTY LINE
 Poverty line income (PLI) is an income sufficient to
purchase a minimum basket of food to maintain
household in good nutritional health and other basic
needs such as clothing and footwear, rent, fuel, transport,
health care and education.
 The minimum level of income is necessary to achieved an
adequate standard living.
 The poverty line is higher in developed countries than in
developing countries.
 Government define those living below this income level
as living in poverty.
 Poverty line is a cut off point separating the poor from
the non poor.
 The level of poverty also depend on how income and
resources are distributed.