Transcript Constraints-on-Development

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Sectoral Imbalances: over-specialisation in
primary products (eg. agriculture, mining, oil)
may leave economy vulnerable
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Demographic Transition Thresholds:
- as development takes place, death rates fall
faster than birth rates – population soars –
slightly ↑ GDP may ↓ GDP/head
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Lack of Finance & Burden of Debt
Repayments: many countries can’t get on
the path of ↑ incomes, ↑ tax revenues, ↑
public sector investment
- efforts to repay debt may ↓ public sector
investment → ↓ FDI – a cycle of ↑
degradation of resources & ↓ economic
potential
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Capital flight: funds may leave the country
when accumulated due to higher returns
elsewhere
Foreign currency gap: not enough foreign
currency to import necessary commodities to
stimulate growth (not enough exports)
Savings gap: inadequate gathering of funds
means not enough for investment
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Poor infrastructure – health, transport,
education, attracting MNC’s
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Human capital deficiencies – education,
health, experience
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Poor governance – weak decision making, no
enforcement power, civil wars, etc
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Corruption: corrosive to an economy
- money intended for public sector may be siphoned
off to individuals
- money spent maintaining political structure
against the general will
- contracts may be awarded on basis of non-market
criteria
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However: corruption exists everywhere – it may just
be more invisible in developed countries
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Volatile commodity & primary product prices:
traditionally the main export of developing
countries
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Low levels of FDI
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Global recession / fear of terrorism
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Uneven access to world markets owing to
tariffs, subsidies, etc.