IB Economics 4.9.2 Economic Barriers Notes

The Ten Economic Barriers

1. Economic barriers are structural features that hold growth and development back and are hard to shift.
2. There are ten to know.
   1. Rising inequality.
   2. Weak infrastructure and technology.
   3. Low human capital.
   4. Dependence on primary exports.
   5. Limited access to international markets.
   6. A large informal economy.
   7. Capital flight.
   8. Indebtedness.
   9. Unfavourable geography, such as being landlocked.
   10. Tropical climate and endemic disease.
3. They rarely come alone: barriers stack and reinforce each other, so low human capital cuts productivity, which deters the investment that would raise it.

Dependence on Primary Exports

1. Many developing economies depend on the primary sector, exporting unprocessed raw materials like oil, cocoa, or copper.
2. Commodity prices swing wildly and raw materials add little value, so income is unstable and profits too thin to reinvest.
3. Most value sits higher up the chain, in processing and branding, but tariff escalation walls processed exports out of rich markets.
4. Weak infrastructure locks this in, as poor roads and congested ports keep firms from reaching bigger markets.

Human Capital and Inequality

1. Low human capital, from weak schooling and healthcare, leaves workers less skilled and less productive.
2. High inequality compounds it: when wealth stays with a small elite, the poor cannot afford the education or enterprise that would lift them.
3. A large informal economy locks in low productivity: unregistered work means no job security, no bank loans, and no tax revenue.

Capital Flight and Debt

1. Capital flight, money fleeing abroad faster than it arrives, starves firms of funds, so output and incomes slow.
2. Indebtedness drains investment too: when borrowing does not fund enough growth to repay it, debt service crowds out social spending.

Geography and Climate

1. Geography bites before any policy: landlocked countries pay more to trade through their neighbours, which deters investment.
2. Climate and disease drag too: tropical illness like malaria weakens the workforce and raises health costs, and disasters destroy infrastructure.