Limitations of the balanced growth strategy in developing countries
- Inadequate capital. There is limited capital necessary to massively invest in all sectors of the economy. This limits the implementation of the balanced growth strategy.
- Low levels of technology. The use of poor technology by various sectors increases the production costs and leads to the production of poor quality goods and services hence limiting the strategy.
- Unfavorable government policies in form of high taxes, and lack of clear policy guidelines concerning investment in developing countries. This makes it difficult to carry out various economic activities due to high costs of operation hence limiting the strategy.
- Economic instabilities. For example high levels of inflation, exchange rate fluctuations, fluctuations in the supply of raw materials, etc. Such instabilities limit the implementation of the balanced growth strategy in developing countries.
- Poor and inadequate social and economic infrastructure. This is reflected in form of poor transport network, poor storage facilities, shortage of power supply and limited financial institutions. This makes it difficult to carry out economic activities hence limiting the strategy.
- Limited entrepreneurship skills. This is due to limited skilled manpower required to invest in various sectors of the economy making it difficult to implement the strategy
- High levels of corruption and embezzling of public funds. This leads to misuse of funds meant for investment in various sectors hence limiting the strategy
- Limited domestic and foreign markets. This is due to low aggregate demand resulting from high levels of poverty in developing countries. This makes it difficult to sustain large scale production hence limiting the strategy.
- Poor investment climate in form of rampant political instabilities. This discourages potential investors from investing in a number of sectors due to fear of losing life and property.
- Limited basic natural resources. The short supply of natural resources like oil and coal makes it difficult to carry out large scale investment in various sectors hence limiting the strategy.
- Limited foreign exchange earnings due to the trade barriers and poor quality exports from developing countries. This makes it difficult to import machinery and other raw materials required for the balanced growth strategy.
CATEGORIES Economics
TAGS Dr. Bbosa Science
