4.3.2 Factors Influencing Growth and Development (Edexcel)

This Edexcel study note covers Factors Influencing Growth and Development

A) Impact of Economic Factors in Different Countries:

1. Primary Product Dependency:
   • Some countries heavily rely on the export of primary products (e.g., minerals, agricultural goods).
   • Vulnerable to price fluctuations, as demand and prices for primary products can be volatile.
2. Volatility of Commodity Prices:
   • Commodity-dependent economies face instability due to price swings.
   • Price fluctuations can impact government revenues, economic stability, and development plans.
3. Savings Gap (Harrod-Domar Model):
   • The Harrod-Domar model explains the relationship between savings, investment, and economic growth.
   • A savings gap occurs when domestic savings are insufficient to support desired investment levels, hindering growth.
4. Foreign Currency Gap:
   • A foreign currency gap arises when a country's imports exceed its foreign exchange reserves.
   • It can lead to trade deficits, currency depreciation, and economic instability.
5. Capital Flight:
   • Capital flight occurs when investors move assets out of a country due to economic instability or unfavorable conditions.
   • It depletes a country's resources and can lead to financial crises.
6. Demographic Factors:
   • Population growth, age distribution, and workforce skills impact economic development.
   • A youthful population can be a demographic dividend if properly harnessed for economic growth.
7. Debt:
   • High levels of public or external debt can lead to debt servicing burdens, reducing resources for development.
8. Access to Credit and Banking:
   • Limited access to credit and banking services can hinder investment, entrepreneurship, and economic growth.
9. Infrastructure:
   • Infrastructure development (transport, energy, telecommunications) is vital for economic growth and competitiveness.
10. Education/Skills:
    • A skilled and educated workforce is crucial for innovation, productivity, and economic diversification.
11. Absence of Property Rights:
    • Weak property rights can deter investment, as individuals and businesses lack security over their assets.

B) Impact of Non-Economic Factors in Different Countries:

1. Political Stability:
   • Political stability and the rule of law are essential for attracting investment and fostering economic growth.
2. Governance and Corruption:
   • Transparent and accountable governance promotes economic development, while corruption hampers it.
3. Conflict and Security:
   • Conflict and security issues can devastate economies, disrupt trade, and displace populations.
4. Health and Education:
   • Access to healthcare and quality education influences labor productivity and overall well-being.
5. Cultural Factors:
   • Cultural norms and values can influence entrepreneurship, innovation, and economic activities.
6. Geography and Climate:
   • Geographic location and climate conditions can impact agriculture, trade, and vulnerability to natural disasters.
7. Social Cohesion:
   • Social harmony and inclusivity contribute to economic stability and social progress.
8. Technological Readiness:
   • Technological advancement and digital infrastructure enable innovation and economic competitiveness.
9. Environmental Sustainability:
   • Environmental policies and practices can affect long-term sustainability and economic resilience.
10. Human Rights:
    • Respect for human rights and freedoms is closely tied to social progress and economic development.

In conclusion, both economic and non-economic factors play significant roles in shaping the economic development and prospects of countries. Understanding these factors is essential for analyzing the diverse challenges and opportunities faced by nations around the world.