Limitations of Growth Essay (30 marks)
Evaluate four major barriers to growth and development experience by LEDCs 
Many developing countries find they are caught in the poverty trap for a number of reasons. They are ‘trapped’ in poverty cycle due to a constant cycle of low level of education, health care and human capital, which leads to low productivity, income, savings, investment and finally, economic growth. See diagram below;
This essay will discuss the following four limitation of growth; lack of infrastructure, human capital inadequacies, primary productive dependence and corruption.
Many LEDCs have a lack of infrastructure, such as electricity, a reliable water supply and tele-communications. Poor infrastructure may be due to a lack of government spending due to various reasons, such as corruption or civil war - another limitation of growth in itself. A lack of infrastructure impacts growth because it means no one will want to invest in the country due to the extra costs incurred (i.e. transportation costs). Lack of FDI means the circular flow of income cannot be improved from overseas investment. As a result, AD cannot expand, and in the long-term will decrease (AD1-AD2) - which limits economic growth.
Even in the UK, infrastructure needs to be constantly improved in order to maintain productivity and competitiveness. India has one of the worst infrastructures in the world (86th of out 139 for overall quality). Unless this is improved, India cannot reach growth above 9%. Infrastructure is extremely expensive and requires large amounts of capital. The government would need to be prepared/able to invest large amounts. Countries with a savings gap (difference between planned saving and planned investment) won’t be able to do this. However, a lack of infrastructure doesn’t limit growth in all countries. Afghanistan for example is rich in raw materials. Oil TNCs will not be put off from the lack of infrastructure due to the...
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