Developing Countries: Obstacles to Development - Online Tutor, Practice Problems & Exam Prep

Developing countries face significant economic growth challenges due to limited natural resources, underutilized human capital, and insufficient capital goods. High unemployment and low education levels hinder productivity, while trained workers often migrate to advanced economies. Additionally, technological advancements require investment, which is often diverted to safer markets. Socio-cultural factors, such as tribal allegiances and religious practices, can further impede economic progress. Corruption and inadequate government institutions exacerbate these issues, creating a complex web of obstacles that stifle development and economic stability.

Developing Countries: Obstacles to Development

Now, let's discuss why these developing countries tend to have difficulty growing economically. They have obstacles to their development, mainly those that we have listed here. So we have the availability of natural resources. Many developing countries lack the natural resources necessary for production and growth. They might be countries with a lot of desert land or land that just doesn't have much to offer. And, in some cases, when they do have natural resources, they are owned by multinational corporations from industrially advanced countries. So even if they have natural resources, they might not even own them because they are owned by outside countries. That's an obstacle for their development.

Next is human resources that are not properly utilized. Firstly, they have large populations, high unemployment, and low human capital, right? Because education is not as available in developing countries. What tends to happen as well is when they have trained and motivated workers, they tend to leave the developing country to go to industrially advanced countries to find better opportunities. So their human resources just aren't doing their best there either.

Next is capital goods. The availability of goods, with capital goods being things like factories and equipment. More capital goods mean more production, more productivity. That's the whole idea. If there's more capital per worker available, then they are able to be more productive on the job. Think about a person sewing a T-shirt by hand or a person running a machine that sews a hundred T-shirts an hour. In that case, the more capital that's available leads to more productivity. So, when there's low capital available, it leads to low productivity. What ends up happening is that the investment in capital proves to be difficult because those that would invest in the capital, maybe those who have more money to invest in these developing countries, let's say the rich citizens, might just tend to invest in industrially advanced countries as well because it's a safer investment. There's less risk to invest in an industrially advanced country than a developing country.

Next is technological advancement and this has to do with the same thing as capital. More technology means more productivity as well. If you have more technology available. However, a lot of times in these developing countries, they don't have the technology available. And when they do want to apply new technology, it requires investment. So it's the same problem as with capital. It requires investment in infrastructure and new capital goods as well to apply these new technologies.

Another problem is sociocultural factors. So in some of these developing countries, they have tribal allegiances where they have tribes set up throughout the country rather than national allegiance. The tribes aren't so concerned with the economy of the nation as a whole. They just want to make sure that their tribe is okay, right? They have this tribal allegiance. This happens mainly in Africa. Also, religious beliefs can get in the way, right? They can limit the length of a workday or they can just take up time in the day where maybe you have to do some sort of ceremony, you have to go pray throughout the day, and it takes away from productivity. Moreover, in a very religious country, instead of using resources for productivity and economic growth, they use those resources for the religion, and growing the religion.

Finally, the last one here is institutional factors. So this involves problems with the government. Many of these developing countries have corruption in the government, where the government is basically just funneling funds to their own private accounts, taking bribes, and such. The public schools tend to be inadequately staffed leading to low human capital when there are not good schools, and tax systems can just not be good. They can be unjust, they can be arbitrary, and they are not collecting taxes in an efficient manner. These are all problems that occur in developing countries. Each one has its own unique set of problems that basically gets in the way of their economic growth, alright? Let's pause here and move on to the next video.

Here’s what students ask on this topic:

What are the main obstacles to economic development in developing countries?

Developing countries face several obstacles to economic development. These include limited natural resources, which are often owned by multinational corporations. Human resources are underutilized due to high unemployment and low education levels, leading to low productivity. Capital goods, such as factories and equipment, are scarce, making it difficult to increase production. Technological advancements require significant investment, which is often diverted to safer markets. Socio-cultural factors, such as tribal allegiances and religious practices, can also impede economic progress. Additionally, corruption and inadequate government institutions exacerbate these issues, creating a complex web of obstacles that stifle development and economic stability.

How does the lack of natural resources affect the economic growth of developing countries?

The lack of natural resources significantly hampers the economic growth of developing countries. Natural resources are essential for production and industrial activities. When a country lacks these resources, it cannot produce goods efficiently or at a competitive scale. Even when resources are available, they are often owned by multinational corporations from industrially advanced countries, limiting the benefits to the local economy. This dependency on external entities for resource exploitation can lead to economic instability and reduced national income, further hindering development efforts.

Why is human capital underutilized in developing countries?

Human capital is underutilized in developing countries due to several factors. High unemployment rates mean that a significant portion of the population is not engaged in productive activities. Additionally, low education levels result in a workforce that lacks the necessary skills and knowledge to contribute effectively to the economy. Even when there are trained and motivated workers, they often migrate to industrially advanced countries in search of better opportunities, a phenomenon known as 'brain drain.' This further depletes the available human capital, making it difficult for developing countries to achieve sustainable economic growth.

How do socio-cultural factors impede economic development in developing countries?

Socio-cultural factors can significantly impede economic development in developing countries. Tribal allegiances, prevalent in many African countries, prioritize the welfare of individual tribes over national economic interests, leading to fragmented efforts and inefficiencies. Religious practices can also limit productivity by imposing restrictions on work hours or diverting resources towards religious activities instead of economic growth. These socio-cultural dynamics create an environment where collective national progress is challenging to achieve, further complicating efforts to improve economic stability and development.

What role does government corruption play in hindering the development of developing countries?

Government corruption plays a significant role in hindering the development of developing countries. Corrupt officials often divert public funds into private accounts, reducing the resources available for essential services like education, healthcare, and infrastructure. This misallocation of funds leads to inadequate public services, which in turn lowers human capital and productivity. Corruption also creates an unstable business environment, deterring both domestic and foreign investment. Additionally, inefficient tax systems and arbitrary regulations further complicate economic activities, making it difficult for these countries to achieve sustainable growth and development.