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Level 12

Limits to Growth and Development


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Primary product dependency
The over-dependence on income from one or a small number of primary products leading to major problems for an economy when such incomes fail or fluctuate
Natural disasters
Droughts, hurricanes, floods etc. which can disproportionately affect economics which are over-dependent on primary products
Protectionism
Developed countries using subsidies and other forms of protection meaning that LEDCs cannot compete e.g. cotton subsidies for US farmers making Indian cotton farmers unable to compete on US markets
Poor human capital
Poor health and education leading to low productivity rates
Poor infrastructure
Lack or good roads as well as broadband etc. limiting or increasing the costs of entrepeneurial activity
Low tax base
A lack of taxable work (black markets, subsistence work etc.) as well as a lack of comprehensive revenue collection meaning tax revenues are low.
Savings gap
A lack of savings meaning investment levels are similarly low.
Capital flight
When firms and wealthy domestic individuals place savings or buy shares overseas, thus increasing the savings gap
Foreign exchange gap
Countries lacking the foreign currencies necessary to buy imports
Debt servicing
Paying the interest on debt. Many countries spend much of their tax revenue on debt interest payments.
Government failure
This can include corruption and civil wars as well as simply poor policy.
Population problems
A rapidly rising population can provide a resource to exploit but can also place strain on inadequate infrastructure and lower GDP per capita
Commodity price fluctuation
Commodity prices have both inelastic supply and demand meaning they can often suffer form particularly sharp price fluctuations. This can make planning investment and output extremely difficult for fi