3.6.2 Reducing poverty



    Economic growth increases total income in society, creating more jobs and income which can be redistributed. However, it increases inequality (through relative poverty) because it benefits the highly skilled and wealthy classes more than those at the bottom who will likely have to depend on the trickle-down effect. If the wealthy do not reinvest, there is little positive change.

    Economic development will mean that there is an educated and healthy workforce who are more productive, leading to further economic growth. Improvements in healthcare will also mean there is an increased supply of labour as employees can work for longer. However, changes in education will only occur slowly sue to lack of trained teachers and tax is required to finance schools and hospitals which may be difficult in developing countries.



    Action from NGOs are largely positive as they often work with local communities and emphasise education to enact long-term economic development. The only downside is that they rely on donations for funding so their help may not always ne reliable.


    International aid can be between governments or from an agency to another government which has both positives and negatives:


                Foreign Direct Investment:

    It can help create employment, encourage the innovation of technology and help promote long-term sustainable growth. It provides developing countries with funds to invest.


    Microfinance schemes

    This involves small loans for businesses which allows them to finance enterprise. It usually goes to people otherwise unable to get loans and allows them to break away from dependency on aid.


                Trade barriers

    This protects new (infant) industries from overseas competition which allows them to charge higher prices for goods.


                Development of human capital

    This allows skilled labour within the economy to increase, improves productivity and allows technology to advance. Economies move up the supply chain from primary goods to produced goods and services.


    Infrastructure development

    This includes transport, communications, energy and water. By improving these it reduces business costs and improves mobility of labour, may increase investment.

    There are two main types of policies:

    Market-based à trade liberalisation, FDI, joint ventures and privatisation

    Interventionist à education and training, infrastructure improvement (gov. policy)


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