Disadvantages (Demerits) of unbalanced growth strategy in developing country
- It worsens the unemployment problem. This is because the strategy ignores some sectors of the economy which limits production and other economic activities hence low levels of employment.
- It encourages economic dependence of the economy. The concentration of the economy on a few sectors forces the economy to highly depend on other economies in terms of imports. This undermines the country’s need to be self-reliant and independent.
- It undermines economic diversification. Concentrating on a few sectors limits the production of a variety goods and services in the economy. This narrows the choice of consumers hence low standards of living.
- The strategy is prone to many uncertainties. For example falling world market commodity prices due to over production of a particular commodity. This leads to poor terms of trade in the economy.
- It promotes uneven sectoral and regional development in economy. This is due to concentration of most of the investments within a particular sector or region. This leads to imbalance in distribution of economic opportunities and incomes.
- It leads to underutilization of resources in the economy. This is because the strategy ignores investment in other sectors and this hinders productive capacities in the various sectors of the economy hence low levels of economic growth and development.
- It leads to inflationary tendencies in the economy. This is due to shortage and high prices of some commodities which would be supplied by those sectors which are neglected.
- It reduces government revenue. This is due to a narrow tax base created as a result of few production and economic activities undertaken hence low tax revenue to the government. This makes it difficult to construct social and economic infrastructure like hospitals, roads, schools, power plants, roads etc.
- It worsens the balance of payment position of the country. This is due to increased importation of goods and services yet there is no corresponding increase in the exports. This increases foreign exchange expenditure hence balance of payment problems.
- It limits inter sectoral linkages in the economy. Leading sectors may not result in the establishment of other sectors because of high levels of factor immobility which limits resource transfer from one sector to another.
- It encourages rural-urban migration. This is due to concentration of resources in urban areas hence undermining the development of rural areas. This leads to development of slums, open urban unemployment increase crime rate and poor living conditions in urban areas.
- It leads to wastage of resources in the economy. The strategy emphasizes specialization which leads to over production of a particular commodity in the presence of limited markets in developing countries. Therefore the surplus output is wasted due to inadequate markets.
- It is not suitable in the private sector led economy. The private investors may not be ready to invest in the leading sector suggested by government. This is very true where the private sector is mainly comprised of foreign investors who aim at maximizing profits.
CATEGORIES Economics
TAGS Dr. Bbosa Science
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