4.3.2 Factors Influencing Growth and Devlopment Flashcards
What are the 4 main factors affecting growth in other countries?
- Primary Product Dependency
- Volatility of commodity prices
- Savings gap
- Foreign currency gap
What is a primary product?
Raw materials from industries such as agriculture, mining and forestry.
What % does mining account for of South Africas exports?
60%
How does the volatility of prices and primary product dependency affect growth in developing nations?
Most developing countries rely on primary products. If their price is volatile it makes it harder for firms to plan for the future, if the price falls, job losses e.c.t.
Primary products can run out
What is a ‘savings gap’?
Occurs in developing countries whereby firms and consumers only plan for the short run on items such as housing, clothing water e.c.t. This means limited money is saved in banks leading to inadequate capital accumulation. Banks therefore cannot lend out money, leading to under-investment
What is Africas saving %?
17%
What is the savings % for middle income countries?
31%
What does the Harrod-Domar model state?
States that investment, saving and technological change is needed for economic growth and development. The rate of growth increases if the savings ratio increases
How is the rate of growth calculated in the Harrod-Domar model?
savings ratio / capital output ratio
What is a foreign currency gap?
It exists when the country is not attracting sufficient capital flows to make up for the deficit in the capital account of the balance of payments
What is ‘capital flight’ and how does it affect development in developing countries?
This is when capital and money leaves the economy through investment elsewhere. It is triggered by an economic threat such as hyperinflation and leads to economic recession and a depreciation in the currency
What are the 3 main institutional factors affecting growth and development?
- education
- healthcare
- infrastructure
What are the benefits of education to a growth and devlopment?
Increase in productivity, skilled workers. More skilled people leads to higher incomes and a higher standard of living. Education provides social and economic choice. If women are educated, it will promote more gender equality but also by empowering women it will reduce the total fertility rate, less children less poverty. Those that do have children will educate children more, sanitation e.c.t. Will also increase health of nation (HIV and malaria). Will also lead to innovation in technology.
THE CAN ALSO LINK TO INEQUALITY BETWEEN COUNTRIES
Problems with education for growth and devlopment?
Funding. Developing countries often have no money and if private sector become involved, it is right to exclude people?
There may be some underlying problems, such as thought processes, children becoming workers for example rather than staying in full time education
What are the benefits of healthcare to growth and development?
Good healthcare will increase productivity. More high skilled jobs = GPs and Dentists. A healthier nature is a more happy one. May also imply that sanitation is improving as well which may attract skilled foreign workers.
