Limits To Growth and Development Pack by Komilla Chadha
Limits To Growth and Development Pack by Komilla Chadha
Limits To Growth and Development Pack by Komilla Chadha
development in
LDCs
A2 Economics Unit 4
Komilla Chadha
25 April 2011
www.a2withkomilla.blogspot.com
Page 1
Contents Page
1. Population issues..........................................Page 3
2. Poor Infrastructure......................................Page 4
3. Capital Flight.................................................Page 5
4. Human Capital Inadequacies......................Page 6
5. Poor governance..........................................Page 7
6. Foreign currency gap..................................Page 8
7. Civil Wars......................................................Page 9
8. Primary Product Dependency....................Page 10
9. Geography.....................................................Page 11
10.Savings gap and inadequate capital accumulation.............Page 12
11.Debt.............................................................Page 13
12.Corruption.................................................Page 14
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Page 2
1. Population Issues
What are the population issues in LDCs?
In the past you might have come across a population pyramid, particularly if
you have studied geography, they show the percentage of the population in
each age group and gender group. LDCs are characterized with high birth
rates (due to a belief that a large family can increase family income and the
lack of availability, education and belief in contraception) and high death
rates (due to lack of medical aid and information regarding healthy living).
This results in a convex population pyramid as you can see below. This can
have several issues, the most prominent one being there is a small
economically active population (by Western standards).
2010 info
Birth rate:41.28/1000 population (11th world
ranking)
Death rate 13.69/1000 population (21st world
ranking)
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Page 3
2. Poor Infrastructure
What are the infrastructure issues in LDCs?
LDCs lack infrastructure structure such as electricity, reliable water
supply, roads, training systems, monetary infrastructure, waste
disposal, telecommunications and many others. This lack of
infrastructure can be due to lack of government spending (for a variety
of reasons such corruption, political interest, civil war etc) and
international intervention e.g. from NGOs.
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Page 6
5. Poor Governance
What kinds of issues are associated with poor governance?
There are several issues associated with poor governance. These will be
discussed in the following bullet points:
★ Many LDCs have a dictatorial governance (this is obviously changing with
the revolution in the Middle East) and this means that not always does the
authority serve the people or is bothered about the economics impacts on
people. We will discuss some of these points further in the corruption section.
★ As a result, money is not spent wisely, they will spend it on whre their
political interests lie e.g. they may spend the money on implementing
regulations and laws which protect them and on the army. This means that
TNCs and other investors will be put off from investing in such nations
because of (i) ethics and more likely because (ii) they do not rust their
political system.
★This results in a misallocation of resources, so for example, education and
training we have seen is such a key player in terms of growth but the
government will spend money on the army and weapons resulting in a
misallocation of resources.
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Page 7
6. Foreign Currency Gap
What is the foreign currency gap?
The foreign currency gap is a pretty simple concept. Essentially what it
states is that many LDCs rely on the primary sector and we can se the
Clarke-Fisher model to explain this too! However, the income from this
sector is low because the have a low PED and are vulnerable to natural
disasters etc. This means that export revenue is fairly low and LDCs
cannot therefore finance imports.
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Page 8
7. Civil Wars
What is civil war?
A civil war is when one or more groups have a war with one another.
Quite often they can caused by political differences. In some senses the
current situation in Libya is an example of civil war - pro Gaddafi
supports fighting the rebels.
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Page 9
8. Primary Product
Dependency
What is PPD?
LDCs are known to rely on the primary sector and quite often
subsistence farming and as seen before one of the reason they are not
able to free from this is because of capital flight. The value of such
primary products is low therefore locals don’t make much money. This
has many implications.
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Page 10
9.Geography
What are some of the geographical elements that can impact
growth?
★ Natural disasters e.g. floods, droughts, earthquakes, tsunamis etc.
★ Brain Drain
★Access to raw materials
★Proximately to economic core
★Coastal issues e.g. coastal erosion
★Fertility of land and animals
★Is the country landlocked?
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Page 11
10. Savings gap and
inadequate capital
accumulation
What is the savings growth?
The savings gap in many LDCs starts off with the understanding that
many LDCs are reliant on low value primary sector production. This
starts of a negative wealth cycle as one can see below.
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Page 12
11. Debt
What are the issues surrounding debt?
Debt provides several problems for developing one the primary one
being financing the debt and debt interest. They borrow at times of low
interest to find that some years down the line the interest has increased
significantly. The other issues which branch of the problem of debt
include, not making as much money as projected (governments may
have invested the money into a type of export which at that time was a
high earned which by the time the moneys impact can be seen that
export is now not worth much), increase in oil prices (prices of
everything else rises but value of debt does not), fall in the value of
currency making imports expensive and exports cheap to trading
partners hence unable to source funding for debt and debt from money
being used on the military.
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Page 13
12. Corruption
What are the issues surrounding corruption?
When we talk about corruption we are talking about political parties or
beings who are not fulfilling their role to serve the people but in fact are
using the role to live lavish lifestyles and benefit themselves. Some of
the issues surrounding corruption are bribery, extortion (illegally
obtaining property, funds or other assets), inequality and fraud.
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