7/25/2019 Factors Limiting Development in Developing Countries

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Assess the signifcance o three actors which might limit economic

development in developing countries

Corruption and war bribery, and diversion o resources by government this

is an inecient allocation o resources and restrains development. Government

ocials embezzle money rather than spend it on public services or investment.

This will deter aid. ivil war means government resources are diverted towards

arms, e.g. !udan, thereore disrupting growth and development and destroying

the inrastructure and people. "ar and corruption also deter investment.

#owever, political instability may not be an inherent component o all developing

countries and even i political instability does e$ist, the e$tent to which it is a

problem would vary amongst the developing countries. %or e$ample there is

much less corruption in &razil than there is in &angladesh thereore &angladesh's

development is li(ely to be much more limited in comparison to &razil's, despite

the act that corruption may persist within both countries.

Primary product dependency

) omparative advantage means e$ports one g*s, imports everything else,

so very dependent on one commodity, e.g. &otswana almost +- dependent on

diamond e$ports. A natural disaster could ruin the whole crop.

) rice /uctuations deter investment and mean armers cannot invest and

plan or the uture, to get the best o their harvest. 0ery inelastic supply and

demand curves mean that prices are very volatile

) apital1intensive arming this is to provide or the world mar(et, oten by

23s. 4$port prices rise so locals cannot a5ord ood, leading to unemployment

and alling living standards. !hould enorce redistribution o land, and encourage

labour intensive arming to ma(e distribution o income e6ual.

#owever, the e$tent to which primary product dependency may inhibit economic

development is somewhat limited. %or e$ample, i the price o a country's

primary product is rising, then this would encourage development. !ome

countries have even developed on the basis o primary products, or e$ample

&otswana7 diamonds8 9however, in the case o &otswana, its development may

also be due to its political stability, thus allowing or resources to be allocatedeciently:.

Education1 a huge investment in human capital through education has allowed

hina to shit out its %. ountries with little education investment and low

school enrolment are li(ely to have low productivity and little economic growth. ;t

will mean more oreign direct investment in the uture as frms will not have to

train wor(ers.