WHY GROWTH MAY NOT BENEFIT DEVELOPING

COUNTRY

OUTLINES• GROWTH• WHY ECONOMIC GROWTH DOES NOT ALWAYS BENEFIT DEVELOPING

COUNTRIES • FACTORS THAT CAN PREVENT DEVELOPING COUNTRIES

EXPERIENCING ECONOMIC GROWTH• SUGGESTIONS• CONCLUSION

GROWTH

Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another.

How is economic growth measured?

Economic growth in country is measured by the countries gross domestic product (GDP) in one year.

GDP = the total amount of final goods and services produced in one year within a country

WHY ECONOMIC GROWTH DOES NOT ALWAYS BENEFIT DEVELOPING COUNTRIES

Many countries unable benefit from global economic growth. This means that the economy expands at a slower rate, in fact output may fall causing contraction in the economy

FACTORS THAT CAN PREVENT DEVELOPING COUNTRIES EXPERIENCING ECONOMIC GROWTH

1. Specialization in one Commodity• focus on production of one primary product, • the prices of commodities can easily fall due to excess global supply,• rely on this product see a fall in revenue, this is important because

demand is very inelastic for these goods

2. Structural weakness• Not having sufficient transport and infrastructure,• low levels of human capital, • the cheap labor costs.

3. Agricultural based economy Countries who rely on agricultural output may suffer from adverse weather conditions. E.g., a prolonged drought , can lead to loss of farming income and therefore lower growth.

4.Internal ConflictInternal conflict or mismanagement can lead to declining living standards for many.

5. Corruption and MismanagementGovernment in many of the poorest developing countries misuse Aid and the proceeds of growth.

6. Social Barriers Whether or not a society has a sufficient number of entrepreneurs to foster modern economic growth may depend on the society's values and structure.

7. Political and Governmental Barriers• Play an important role• If a government is unable or unwilling to play an active

role , then the government itself is considered an obstacle.

8.Unequal Distribution of Wealth • between the rich and the poor,• become rich due to increased manufacturing at lower costs due to

new technologies,• the wage rates didn't grow much.9. Population Growth• Robs us of most of the gains in national income made from

higher investment,• nullifies our investment efforts to raise the living standards of our

people,• per capita income or living standards of the people do not rise

much.

SUGGESTIONS

1. Removal of Inequality:• by imposing progressive rates of taxation• by redistribution of wealth• Imposing higher rates of taxation on the richer sections

2. Containing the Growth of Population:• by adopting a rational population policy, • by popularizing the family planning programmers

3. Structural adjustment policies (SAPS)Encourage developing economies to put greater emphasis on : • market forces• market reforms• closely associated with free market economics

4. Economic stabilization • Cope with globalization and external shocks• Liberalizing trade by removing barriers• Sound fiscal policies• Improvement in education • An export orientation

5. Commodity AgreementsCommodity agreements are arrangements between producing and consuming countries to stabilize markets

CONCLUSION

As the benefit of economic growth are increased consumption, improve public services reduce unemployment and poverty. The development of infrastructure ,better governance, public health improvement, trade reform, and financial market development –these and others will be needed as well.