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Constraints of economic growth

 

Many of the early growth models based most of their attention upon the physical  economic contributions necessary for growth; the need to save more, invest more and increase GNP. However whilst these conditions are necessary, they are by no means sufficient to ensure growth.

Specific targets such as improvements in variables, which include savings and investment, are objectives, which just can not be ignored.

 

It is also important for institutions and their attitudes to improve and become more flexible. In other words willing to change, mainly within developing countries.

 

It is important to recognise that many of the conditions facing today's LDC's are different from pre-industrial conditions of the high-income countries. The is especially true of the poorest of the LDC's.

 

Political stability is essential for political growth, however with change must come conflicting views and those who are reluctant to change. During change, power may shift between group's e.g. from landowners to tenant farmers.

Tension can lead to political instability, which may lead to wars and ruin any chance of growth they had.

 

Many countries have been scarred by wars e.g. WWII. Countries have not had enough time to develop a national identity allied with popular development policies.

 

The key aim for countries was to modernise the way they ran their country and rapidly introduce industrialisation. We do of course have the problem of corruption within governments and this means growth is limited due to lack of funds. Vested interests industrial countries may equally hold back change and growth in LDC's. In dealings between the institutions of LDC's and developed countries, power lies with the rich. 

 

A major problem with LDC's is the debt they have built up over the years, which is a great constraint on further growth.

 

Many third world economists believe this to be a major constraint and argue that the political dependency of colonisation has merely been replaced by an economic dependency.

 

There are many barriers to economic growth especially for LDC's; these include the problems with objectives such as tourism (structural change). For example a country may be landlocked and so it is hard for them to create seaside resorts, which are very popular.

 

Training is seen to be a big factor when talking about constraints. Without training, people find it hard to find unemployment and therefore growth is not possible.

 

Investment plays a major part in growth. If foreign investors decide not to invest in a certain country then that country looses out a great deal.

  • Low levels of savings leading to low level of investment.
  • Insecurity may lead to over investment in the military instead of consumer goods.
  • Over reliance on one or more sectors- this occurs a lot in the agricultural industry.

 

 

E-mail Steve Margetts