The real problem is the lack of capital.Īccording to Prof. Hirschaman, the basic problem of economic development in these countries is the lack of decision making ability. Numerous economists do not consider vicious circle of poverty as an obstacle in the path of economic development. Transportation and communication should be developed. In these countries health facilities should be enhanced which may increase the efficiency of the workers. For instance, in these countries, education, technical knowledge and administrative training should be enlarged. Many suggestion can be made to increase the skill of human power. In underdeveloped countries, the main obstacle in economic growth is the backwardness of human power. Other Solution to vicious Circle of Poverty: These countries endeavor to widen the size of foreign market by increasing their exports.Ĭ. Due to increase in monitory income, size of the market get widen. Majority of UDCs have adopted the policy of planned development.Īccordingly, due to more investment in public sector, supply of money increases. In’ UDCs, there is every possibility of increase in demand and there is the need of increase in monetary income. According to them, the policy of unbalanced growth would be more useful. On the other hand, economists like Hirschman, Singer, Fleming do not consider the policy of balanced growth practically fair. Thus, an increase in demand will lead to wider extent of the market and so the inducement to invest. According to the principle of balanced growth, investment should be done in every sphere of an economy so that demand of one sector can be fulfilled by another sector. Nurkse advocated the doctrine of balanced growth. In UDCs to resolve the demand side vicious circle, extent of the market should be widened so that people may get inducement to invest. In UDCs, proper monetary and banking policies should be adopted which may provide facilities and encouragement to small savings.ī. Moreover, along with short period investment, investment in the establishment of multipurpose projects, iron, chemical fertilizers should be properly encouraged. By short period investment, people can get the necessary goods at fair rates, which will have favourable impact on their skill. The policies of short run and long run investment should be co-ordinated. To break the vicious circle of poverty apart from increasing savings investment of saving in productive channels is also of immense use. can curtail consumption by doing alterations in tax system. Moreover, it can increase the role of direct taxes. can impose heavy taxes on luxurious goods. can increase saving by altering its fiscal policy.
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