Disadvantages (demerits) of balanced growth strategy
- It leads to over exploitation and quick depletion of nonrenewable resources. Such resources include minerals like copper, coal, etc. This lead to lack of long term sustainability.
- It leads to over production and hence wastage of resources. This is due to limited markets existing in developing countries.
- It discourages rapid growth and expansion of the various sectors. This is because, the strategy discourages specialization and resources are scattered in a number of sectors hence limited economies of large scale.
- The strategy requires huge capital investment in all economic activities which is in short supply in developing countries. This leads to the increases indebtedness as developing countries forced to borrow in order to raise money to invest in the various activities.
- It leads to balance of payment problems in the country. The strategy is expensive and costly to implement in terms of increased importation of expensive factor inputs in form of raw materials, intermediate goods and expatriates. This leads to increased expenditure on imports relative to the revenue from exports hence balance of payment problems.
- It increases economic dependence of the country. This is due to increased reliance on foreign capital and other imported raw materials from developed countries. This undermines the country’s need to be self-reliant and independent.
- It encourages profit repatriation. This is true in case most of the investments under the strategy are carried out by foreign investors. This promotes capital flight hence limited capital accumulation in the economy.
- It leads to technological unemployment. The strategy encourages the use of capital intensive techniques of production which in the long run replace labour hence technological unemployment. This is true especially with foreign investors who prefer to use capital intensive techniques of production.
- Environmental degradation. The balanced growth strategy leads to environmental degradation in due to excessive utilization of natural resources.
- It is not suitable in the country where there are political instabilities ill some parts of the country. This is because it requires simultaneous development of all sectors and regions of the country.
- It leads to heavy losses in case of project failure in some sectors. This is because a lot of capital investment is required by the strategy.
CATEGORIES Economics
TAGS Dr. Bbosa Science
