To what extent is reducing the number of people living in absolute poverty sufficient to achieve economic growth and development?

1222 WordsJan 20, 20145 Pages
To what extent is reducing the number of people living in absolute poverty sufficient to achieve economic growth and development? Absolute poverty measures the number of people living below a certain income threshold or the number of households unable to afford certain basic goods and services. Much of the poverty in developing countries, such as South Africa, tends to be absolute poverty. Economic growth can be defined as steady growth in the productive capacity of the economy. Short term growth is measured by the annual percentage change in real national output, which is affected by shifts in short run aggregate supply curve (SRAS), whilst long term growth is shown by the increased in potential growth can is illustrated by an…show more content…
Governments need a stable and effective legal framework to collect taxes to pay for public services. However, in order to reduce the number of people living in absolute poverty, corruption would have be to decreased, thus resulting in economic development. Many poor countries have governments which are not democratically elected. Countries such as South Africa tend to spend money raised through taxation unwisely leading to government failure and thus find it difficult to attract FDI. However, a correction in corruption and poor governance would mean that South Africa may be able attract FDI, thus increasing the real GDP and resulting in economic development. South Africa is a primary-sector economy, which produces gold and agricultural goods and is therefore primarily product dependent. Primary product dependency is a constraint on economic development. The dependency makes South Africa very vulnerable in the event of natural disasters. Furthermore, downward price fluctuations caused by exchange rate movements or variable harvests can have a devastating impact due to the low price elasticity of demand for primary products. Moreover, the Prebisch-Singer hypothesis claims that countries that specialise in primary products, such as South Africa, face declining

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