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20THE IMPORTANCE OF SOCIAL AND INSTITUTIONAL FACTORS IN ECONOMIC DEVELOPMENT Allayarov S.F.
Allayarov Sardor Frunzeyevich — Student, TOURISM AND ECONOMICS FACULTY, URGENCHSTATE UNIVERSITY, URGENCH, REPUBLIC OF UZBEKISTAN
Abstract: this article analyzes the factors that directly and indirectly affect economic development. In addition, the importance of social and institutional factors in economic development is highlighted. Keywords: growth, development, GDP (Gross Domestic Product), developing country, social and institutional factors.
Achieving sustainable economic growth under the market economy is one of the most pressing issues facing all countries (developed and developing countries). Satisfy the needs of population maximally with the efficient use of scarce resources available; eliminating unemployment; minimizing the poverty rate within the country; increasing the living standards of the population and the goals of social development can be achieved by ensuring sustainable economic development. If we look at the statistics of global domestic product growth, the global economy in 2019 grew by about 3.01 percent compared to the previous year. It is forecasted that the global economy is expected to grow by 3.62% in 2024 (Fig. 1).
4,5 -
3,81
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3,5 3,
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3,56 3,56 3,61 3,62
3,41
3,01
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2014 2015 2016 2017 2018 2019 2020* 2021* 2022* 2023* 2024*
Fig. 1. Growth of the global gross domestic product (GDP) from 2014 to 2024 [5] (in percentage)
In many Eastern economic textbooks, economic growth and economic development are interpreted as the same economic categories or synonyms. The results of the analysis show that there is a big difference between the categories of economic growth and economic development. Economic growth is defined as the growth of the country's absolute GDP and per capita GDP over a period of time [1], economic development is the growth of living standards, the transition from a low-income (poor) economy to a high-income (rich) economy [2]. While economic growth is associated with an increase in output, economic development is associated with an increase in output along with an improvement in the social and political well-being of the population, that is to say, economic development includes both growth and prosperity.
Uzbek economist, prof Sh.Sh.Shodmonov divides the factors that directly affect economic growth into two groups:
1) Supply factors;
2) Distribution factors.
Accordingly, the growth of real output can be achieved by attracting more resources and using them more efficiently in the production process. The author does not take into account the impact of social and institutional factors on economic growth [4].
According to Mcconnell, Brue, Flynn, there are 6 factors that directly affect the quantity and quality of economic growth: 4 supply factors, one demand factor and efficiency factor, and economic growth is considered as a dynamic process that supply, demand and efficiency factors all interact [3].
To summarize from the above, economic development is not only a quantitative increase in the physical capacity of a society but also a change in the way of thinking and lifestyle of the population, there must be a desire for development in the population.
Economists have identified particular institutional structures that promote economic growth. These growth-promoting institutional structures are the followings:
❖ Efficient financial institutions. The effective operation of financial institutions creates the basis for the conversion of savings generated by households into investments.
❖ Patents and copyrights. Other things equal, there is no incentive to create and invent the new and useful process, the machine, or product, in other words, without exclusive rights inventors and authors may see usually their ideas stolen before they could profit from them.
❖ Literacy and widespread education. The availability of a skilled workforce in the country plays an important role in the rational use of resources in the production process and in increasing production efficiency.
❖ Strong property rights. The individual will not engage in investment activities if there is a threat to steal their investment or their expected rate of return.
Based on the results of the research, in developing countries, a number of institutional barriers hinder economic development. These are the followings:
- Relatively low level of literacy in the country;
- Presence of political corruption and bribery in the country;
- Improper management of the education system and public service agencies, weakening of their activities due to irrational policies;
- Existence and operation of an incorrect tax system;
- The implementation of political decisions is not to improve the situation in the country but to enhance the country's prestige in the world arena.
As an example of an improper tax system, excessive tax rates on corporate income weaken their motivation to work and do business, delay scientific and technological progress, reduce state budget revenues, and slow down economic growth. In general, the above problems (barriers) lead to wrong decisions in the management of the country's economy and this causes the existence of economic imbalances in the country, the inability to eliminate imbalances leads to slowdown or negative growth of the country's economy. The country's continued negative economic growth may put the country's economy in crisis.
All things considered, in order to achieve economic development, countries must pay special attention not only to economic factors but also to social and institutional factors that implementation and control of these factors in the development of economic development programs will ensure sustainable economic growth in the long run.
References
1. Mankiw N.G. Principles of Economics, 5th edition. South-Western Cengage Learning, 2011. 519
p.
2. Deardorff Alan. Economic development, Deardorff s Glossary of International Economics.
3. McConnell C.R., Brue S.L. & Flynn S.M., 2009. Economics: principles, problems, and policies.
Boston, McGraw-Hill Irwin. 916 p.
4. Shodmonov Sh.Sh., Mamaraximov B.E. Economic theory (textbook). T.: "Iqtisod-Moliya", 2016.
495 p.
5. The data from the official website of World Bank Group. [Electronic Resource]. URL:
www.worldbank.org/ (date of access: 20.05.2020).
