Development barriers Notes

Why Do Development Barriers Persist as Interlocking Systems?

1. Development isn't about producing more goods and services.
2. It's about improving standards of living, including health, education, safety, and access to opportunities.
3. Many places face development barriers (obstacles that slow or prevent improvements in living standards).
4. These barriers interact and reinforce each other, which creates a cycle of underdevelopment.

How Do International Goals Highlight Where Barriers Remain?

1. Global targets can reveal which barriers are most persistent. The Millennium Development Goals (MDGs) ran until 2015.
2. After they expired, UN member states adopted the Sustainable Development Goals (SDGs) in 2015, with 17 goals and 169 targets (tracked by over 230 indicators) to measure progress by 2030.

Why Do Economic Barriers Reduce Investment, Productivity, and Jobs?

1. Economic systems in many developing countries struggle to generate rising incomes because businesses face high risks and high costs.
2. Three common barriers exist.

Underdeveloped banking and finance sectors limit capital

1. A functioning banking and finance sector helps businesses borrow to start up, expand, buy machinery, and survive temporary setbacks.
2. Where banks are small, scarce, or poorly regulated, firms cannot access startup capital or investment capital, so industrial growth and productivity remain low.

Inability to compete internationally keeps earnings low

1. If local firms can't compete in international markets, export earnings remain limited.
2. This may be due to:
   1. Low productivity
   2. Weak infrastructure
   3. Limited skills, or
   4. Dependence on a narrow range of raw materials.
3. Low exports reduce foreign currency inflows, which can restrict imports of machinery, medicines, or energy.

Example

• Ghana produces a huge portion of the world's cocoa, but Switzerland makes the most money from chocolate.
• This is because:
  • Ghana often lacks the reliable electricity and factories to process the beans into finished bars.
  • They're forced to sell raw beans (low value) to Europe.
• This results in:
  • Switzerland adding the value (processing, branding, packaging) and selling the final product for a massive markup.
  • Ghana stays poor because it is stuck at the bottom of the supply chain, while the "value-added" profits go to the country with better infrastructure.

Currency instability raises risk for everyone

1. When a currency's value changes rapidly, prices of imported goods can jump, and profits become unpredictable.
2. Currency instability discourages entrepreneurship and makes foreign companies less likely to trade or invest.

Example

• In recent years, the Turkish Lira has fluctuated wildly in value.
• To help you picture this:
  • Consider a foreign investor plans to build a car factory in Turkey.
  • They calculate a 10% profit margin.
  • But if the Lira suddenly drops 20% in value against the Dollar (which has happened repeatedly), their "profit" becomes a loss when they convert it back to their own currency.

How Does Low Income and Poverty Trap Households and Governments?

• Low income is both a barrier and an outcome of underdevelopment.
• Many households earn only enough, or not enough, to cover basic needs such as food and shelter.

Absolute poverty sets a minimum survival threshold

1. A widely used international benchmark defines absolute poverty as living on less than \$2.15 per day (updated in 2022).
2. Low incomes matter for development because they restrict choices.
3. Families may delay healthcare, keep children out of school to work, or avoid risks like starting a business.

Low tax revenue weakens public services

1. When incomes are low and much work is informal, governments collect less tax.
2. That reduces spending on teachers, clinics, roads, clean water systems, and safety nets.
3. Weak services then reinforce low productivity and low incomes.

How Do Education and Health Barriers Reduce Human Capital?

A population's skills and health affect how productively it can work and innovate.

Low literacy and schooling limit opportunities

• The literacy rate is the share of people who can read, but development analysis increasingly uses schooling measures such as expected years of schooling and mean years of schooling.
• When schooling is limited, workers struggle to access skilled jobs, adopt new technologies, or participate effectively in civic life.

Shortage of doctors increases preventable harm

1. Without enough doctors and trained health workers, people have less access to health information, treatment when ill, and supervision during childbirth.
2. Poor health reduces attendance at school and work, lowering productivity and income.

Why Does Rural-Urban Migration Strain Cities and Leave Rural Areas Behind?

1. Many less economically developed countries have large rural populations working in informal sectors such as subsistence farming.
2. As development begins, cities (often near ports or transport corridors) change faster, attracting workers.
3. Rapid migration can support growth by supplying labour, but it can also create barriers:
   1. Housing shortages and informal settlements
   2. Overloaded water, sanitation, transport, and schools
   3. Urban unemployment if job creation is slower than population growth
   4. Reduced labor and investment in rural regions

How Does Low Access to Technology Limit Productivity and Market Information?

1. Technology can raise productivity by reducing production costs and improving access to information.
2. However, technology is only effective if it is appropriate technology (suited to local needs, skills, and infrastructure).

Infrastructure makes technology usable

1. Internet access can help producers and consumers compare prices, find suppliers, and access training.
2. In many places, mobile phone masts have expanded connectivity more cheaply than landlines, especially since the early 2000s.

In What Ways Do Corruption and Political Instability Undermine Long-Term Planning?

1. Many developing countries gained independence only in the last century, and colonial rule often extracted resources and disrupted institutions, leaving long-term challenges.
2. Today, corruption and political instability can prevent development even when resources exist.

How corruption becomes a development barrier

1. Corruption can:
   1. Divert funds away from healthcare, education, and infrastructure
   2. Increase costs for businesses (bribes, delays, uncertainty)
   3. Reduce trust in government and tax systems
   4. Discourage foreign investment

Instability raises risk and destroys capacity

1. When governments change frequently, face conflict, or lack legitimacy, policies become inconsistent.
2. Investors avoid long-term projects, skilled workers may migrate, and public services can collapse.

Why Does Weak Infrastructure and Limited Welfare Systems Leave People Vulnerable?

1. Infrastructure such as roads, power grids, ports, and water systems is expensive and often requires government involvement funded by tax revenues.
2. For governments with small budgets, this becomes a major hurdle.
3. Without welfare support, households can fall deeper into poverty after shocks such as illness, crop failure, or job loss.
4. That makes long-term investments in education or business riskier.

Why Must Barriers Be Understood As Connected Systems?

1. Barriers reinforce each other but policy choices matter:
   1. Economic barriers reduce business activity and employment.
   2. Low income and poverty restrict household choices and government budgets.
   3. Education and health barriers reduce human capital.
   4. Technology and infrastructure gaps keep productivity low.
   5. Corruption and instability raise risk and weaken institutions.
   6. Rapid urbanization can overwhelm services without planning.
2. Because barriers interact, solutions often need a balanced mix of market-based approaches (encouraging private enterprise and trade) and interventionist approaches (public investment, regulation, and welfare).
3. The right mix always depends on local conditions.