Vicious Cycles to Virtuous Circles

We have emphasized that poor countries face great obstacles in combining the four .elements of progress=-Iabor, capital, resources, and innovation. In addition, countries find that the difficulties reinforce each other in a vicious ·cycle’of pove1’ty. Figure 28-3 illustrates how one hurdle raises yet other hurdles. Low incomes lead to low saving; low saving retards the growth of capital; inadequate ~apital prevents introduction of new machinery and rapid growth in productivity; low productivity leads to low incomes. Other elements in-poverty are also self-reinforcing. Poverty is accompanied by low levels of education, literacy, and skill; these in turn prevent the adoption of new and improved technologies and lead to rapid population growth, which eats away.

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