1. The document discusses various barriers that can prevent or restrict economic growth and development in some countries. 2. Some key barriers mentioned include insufficient provision of education and healthcare, political instability and corruption, ineffective tax structures, trade barriers, and overdependence on certain exports which can lead to issues when export prices fluctuate. 3. Overdependence on a small number of exports and falling terms of trade is highlighted as a major barrier faced by several African nations, as it can worsen their current account balances, increase debt burdens, and reduce ability to afford imports.

1. +
Development
Topic 5.3
Barriers to economic growth and
development

2. +
Key concepts for Topic 5.3
Barriers prevent or restrict development in some
1.
countries.
Some things are barriers to Economic growth
2.
Some things are barriers to Economic
3.
Development
Change and the process of development is a multi-
4.
generational process.
Be careful when answering questions about Development. Is the question
asking about Economic Growth / and / or Economic Development?
Be sure to adapt you knowledge to the question.
Economic Growth ≠ Economic Development

3. Poverty Trap and Cycle
+
Barriers to Economic Growth
How do we get these people out of the poverty trap?

4. +
Poverty Cycle
Growth Development
Low economic Low levels of
growth education and
healthcare
Low levels of Low levels of
Low incomes
investment human capital
Low level of Low
savings productivity

5. Institutional and Political
+
Barriers to Economic Growth
Poor healthcare
Insufficient provision and
systems
investment in education
Weak institutional
framework, law and
finance
Political instability and
corruption
Ineffective tax structure
and formal and informal
markets

6. + Insufficient provision of education

7. + Insufficient provision of healthcare

8. + Political instability and corruption
 Rule of Law and appropriate enforcement
 Democratic institutions
 Legal Institutions
Corruption – people acting in an official capacity of trust

and responsibility misuse their position for private gain.
Discourages investment

Increases tax evasion

Increased ‘tax burdens’ on the poor

Distortion of government policies and can reshape government

spending patterns

9. + Ineffective tax structures
 Mixture of market and non market activity
 Informal markets - importing
 Taxevasion by multinational companies in
developing countries. Growth of tax havens such as
Bermuda, Monaco
 Too many tax incentives offered to attract increased
Foreign Direct Investment.

10. International and Financial
+
Barriers to Economic Growth
Indebtedness
issues
Capital Flight
Non convertible
currencies
Trade Barriers and
Protectionism
Social and cultural
barriers

11. Trade Barriers and Overdependence
+
Chile
1975 - 1986
Widespread economic reform
Exporter of primary products

Copper

Wine

Fruit

Large shift away from

mineral export to a wider
range of export.
Different products, different

markets, different prices.

12. 2008
+ 40% of exports
are mineral
related
1975
70% of exports
are mineral
related
1975 – 1986 Economic reform, less state involvement, floating exchange rates

13. +
Over-dependence creates issues when prices of export fluctuate

One export product generates 80% of all agricultural exports !!

http://www.fao.org/docrep/005/y3733E/y3733e0d.htm


14. +
Changes in the terms of trade
 Developing nations need to ensure that the average
export price remains relative to the average price of
imported products. Constant terms of trade
 A fallin the price of exports relative to imports; if a
country is over-dependent can have severe flow on
effects. A fall in terms of trade.

15. + Flow on effects
Value of Imports Value of Exports
(Imports Price Index) (Export Price Index)
Terms of Trade Index
(worsens)
Current Acc Balance
deteroriates
(X – M)
Balance of Payments
worsens

16. +
Consequences of an adverse terms
of trade?
High costs of debt servicing; as a greater quantity of export are

required to pay back the same amount of foreign debt.
Falling export receipts can cause current account deficits, which

could lead to increased borrowing.
Reduces the countries ability to afford much needed

imports, which are comparatively more expensive.
Illegal crops can seem attractive to growers, such as coca leaves

(cocaine) in South America.
Incentive to export more primary products to compensate for

lower export prices. This can lead to long term depletion of
resources.

17. +
Adverse cycle of falling terms of trade
Price of exports
Terms of Trade
Exchange Rate
Low Price elasticity of
Current Account
demand for exports
Export Revenue

18. +
Tariff’s and the effect
on free trade

19. +
Summary points
Barriers prevent or restrict development in some
1.
countries.
Each nation has a unique set of barriers, these
2.
could be institutional or trade barriers
Over-dependence and falling terms of trade is a
3.
strong barrier to economic development that
several African nations face.
Be careful when answering questions about Development. Is the question
asking about Economic Growth / and / or Economic Development?
Be sure to adapt you knowledge to the question.
Economic Growth ≠ Economic Development

20. Differences between Countries
+
Balance of Payments Balance of Payments
surplus deficits
United Arab Emirates USA
 
Brazil New Zealand
 
Singapore Australia
 
China France, Spain,UK
 
Net Exporters Net Importers
Oil and Resources Oil Dependent
Net Foreign Investors Net Foreign Borrowers

21. +

22. +
Losing Traction - 3 mark questions
how can the tigers get back their bounce?
What makes South Korea, Singapore, Taiwan and Hong Kong
1.
unique? Describe their key economic characteristics
Draw a fully labeled graph of your choice to show the effects of the
2.
sudden downturn in economic activity, on one of the countries.
Draw a diagram to show the flow-on effects of this situation for one of
3.
the four countries
Explain how the downturn in 2008 is different than other downturns?
4.
Why may this situation be good for the long term development and
5.
growth of these four nations?
What, if any, are the lessons for other developing nations?
6.