Economic barriers are features of an economy that stop real GDP growing and living standards rising.
Five barriers inside the economy
| Barrier | How it holds the economy back |
|---|---|
| Rising inequality | The poor cannot afford school or health care; demand stays low |
| Poor infrastructure and technology | No roads, power or internet: high costs, low output |
| Low human capital | Weak schooling and poor health: low productivity |
| A large informal economy | Untaxed, unprotected work: little revenue, no loans |
| Geography, climate and disease | Landlocked, droughts, malaria: high costs, lost work days |
The points to remember
- Name the barrier, then the link to growth: lower investment, productivity or demand.
- Development questions need the link to health, education and income too.
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Many low-income countries rely on a few primary products: coffee, cocoa, copper, oil.
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The points to remember
- Low PED and PES: a small change in supply swings the price a lot.
- Low YED: world demand for food and raw materials grows slowly.
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Three more barriers are about money and markets.
Money and markets
Capital flight
Savers move money abroad: less to invest at home, and the currency depreciates.
Indebtedness
Interest on debt (debt servicing) takes money that could build schools and roads.
No access to markets
Tariffs and rich countries' farm subsidies keep exports out.
The points to remember
- Debt: the opportunity cost of interest payments.
- Capital flight: less to invest, and a weaker currency.
Paper 1 asked this five times from 2023 to 2026, as part (a) for 10 marks.
Explain how dependence on primary sector production may act as a barrier to economic growth.
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How the 10 marks are given
| Marks | What your answer needs |
|---|---|
| 9–10 | Theory fully explained, terms used correctly all the way through, the diagram included and fully explained |
| 7–8 | Theory explained, terms mostly right, the diagram included and explained |
| 5–6 | Theory partly explained, some terms, the diagram included |
| 1–4 | Theory only described or stated; few relevant terms |
Infrastructure
The basic physical capital an economy needs: roads, ports, power, water, internet.
Human capital
The skills, knowledge and health of workers, which raise their productivity.
Primary sector
Production that takes natural resources: farming, fishing, forestry, mining.
Debt servicing
Paying the interest and repayments due on a loan.