Economic Barriers to Economic Growth and Development

Question 1

Poverty Cycle/Trap

Answer 1

A poverty trap is a cycle where poor communities, lacking savings, cannot invest in capital –> poverty across generations without intervention.

Question 2

Types of barriers to development

Answer 2

Economic barriers
Political and social barriers

Question 3

Economic Barriers to economic growth and development

Answer 3

• Rising economic inequality
• Lack of access to infrastructure and appropriate technology
• Low levels of human capital - lack of access to healthcare and education
• Dependence on primary sector production
• Lack of access to international markets
• Informal economy
• Capital flight
• Indebtedness
• Geography including landlocked countries
• Tropical climates and endemic diseases

Question 4

What is Infrastructure?

Answer 4

• the facilities essential for economic activity to take place
• (e.g. legal system, financial system, tax structure, transport, public utilities, public services, communication system)

Question 5

Poverty and the distribution of income

Answer 5

• Poverty in developing countries is concentrated in the rural areas.
• Women, who often have little work prospects are most times the poorest of the poor.
• Income dispartiy in MIC > LIC & HIC

Question 6

SDG 10: Reduce inequality within and among countries (offer solutions)

Answer 6

• Fiscal policy - spending and direct tax changes
• Increasing education - increasing skills to deal with technological changes and increasing earning power
• Financial inclusion - increasing awareness of low income groups
• Improve labour market efficiencies - making jobs available to those on low earning
• Equal opportunity and removing discriminator laws
• Increase FDI and small scale investment

Question 7

How can the use of APPROPRIATE TECHNOLOGY lead to development?

Answer 7

• Appropriate technology offers an alternative to technology transfer from MEDCs to LEDCs.
• Examples: Hand-powered pumps, mini pedal washing machines, solar lamps, GravityLight, open-source tech, cloud fishing, plastic bowl electricity, passive solar designs.
• Key aspects: Uses local materials and labor, respects culture, fulfills local needs, fosters mutual growth through collaboration.

Question 8

Low levels of human capital - lack of access to healthcare and education

Answer 8

• Education provides external benefits and improves both the educated themselves and society as a whole.
• Life expectancy, while influenced by many factors, strongly correlates with healthcare.

Question 9

Lack of Education as a Barrier to Development

Answer 9

• Insufficient funding for education, disparities in funding (especially urban vs. rural)
• Insufficient teachers or untrained teachers
• Insufficient classrooms and basic facilities
• Lack of teaching materials
• Children with disabilities are excluded
• Gender discrimination
• Conflict or risk of conflict
• Distance of school from home
• Hunger and malnutrition
• Families’ economic situation: Inability to pay for education (books, uniforms, pens, exam fees, and ‘informal fees
• Low priority secondary education

Question 10

Lack of Health care as a Barrier to Development

Answer 10

• Insufficient funding for health care
• Insufficient access to health care services
• Costly public health services; Private payments for health care
• Geographical access
• Insufficient numbers of trained medical practitioners; poor training of doctors and nurses
• Insufficient medical facilities and medical supplies; insufficient clinics/hospitals,
• Acceptability of modern medical practices
• Insufficient access to clean water and sanitation
• Lack of immunizations/vaccines
• Poor maternal health care

Question 11

Dependence on primary sector production - Barriers to Development

Answer 11

• Over-specialization on a narrow range of products
• Price volatility of primary products
• Adverse Terms of Trade or long term changes in the terms of trade
• Uncertainty and vulnerability of the market
• Over-protectionism by other (developed) producers of the same products

Question 12

Appropriate Technology

Answer 12

• Appropriate, sustainable and small scale technology.
• (Decentralised, labour intensive, energy-efficient, environmentally sound, locally autonomous, off-the-grid)

Question 13

Why are prices falling? (for LICs/MICs that are locked into the production of primary goods)

Question 14

Lack of access to international markets

Answer 14

• LDCs are unable to use comparative advantage
• Inability to access international markets (Protectionism in International Trade)
• Adverse Terms of Trade or long term changes in the terms of trade
• Tariff escalation

Question 15

To what extent can LICs and MICs develop through trade?

Question 16

Tariff escalation

Answer 16

Higher tariffs apply to more processed goods

Question 17

Terms of Trade

Answer 17

The index of prices a country earns for its exports compared to the index of prices spent on imports

Question 18

Informal economy

Answer 18

• Lower productivity
• No tax revenue
• Poor pay/benefits for workers
• No protection for workers
• No job security or social care

Question 19

Foreign trade policies aiming to raise or stabilize commodity prices:

Answer 19

Quota restrictions (e.g., OPEC) limit output to raise prices.

Problems: Cheating, non-members boosting supply, substitute development.

Buffer stocks: Governments or organizations stabilize prices by buying, storing, and selling goods.

Question 20

Capital flight

Answer 20

Large sums of money or assets flow out of a country to seek a ‘safe haven’

Because:

• Lack of safety of domestic financial institutions
• Corruption
• Currency instability
• Danger of hyperinflation
• Threat of government compulsory purchase of assets/confiscation of assets

Question 21

Brain drain

Answer 21

Emigration of highly trained or qualified people from a particular country

Question 22

Effects of Brain Drain

Answer 22

• No returns on the investments in education
• Fewer people to promote growth
• Less government tax revenue
• No one left to train future generations

Question 23

Effects of Capital Flight

Answer 23

• It is not being used or invested so cannot help the circular flow or increase GDP
• It cannot be taxed, so government tax revenue is lower
• It can give more power to corrupt officials as they have a ‘safety net’
• Can cause a depreciation of the currency as the supply increases on the international money market

Question 24

Indebtedness

Question 25

Costs/problems with debt

Question 26

Geography including landlocked countries

Answer 26

• Insufficient resources
• High mountain ranges
• Lack navigable rivers, long coastlines
• Environmental instability (tsunamis, earthquake, typhoon)
• Agriculture productivity
• Access to water

Question 27

Disadvantages of Landlocked countries

Answer 27

• lack of seaports, coastal trading points
• considerable transport costs
• decrease their competitive edge
• isolation from international trade

Question 28

Tropical climates and endemic diseases

Answer 28

• productivity of major crops in temperate zone > tropical zone
• poor nutrition from poor producitvity of major crops
• burden of disease in tropics > temperate
• lagged behind technology
• deterioration of capital in the tropics > temperate