Product Dependency a Constraint on Economic Growth and Development in Developing Countries

Product Dependency a Constraint on Economic Growth and Development in Developing Countries

Primary product is a good found in its natural composition and the products has not been developed into any form. Primary product dependency occurs when a country relies on primary products, such as iron ore, wheat, copper, tin, fruits, palm oil and rice. The reliance on such products often faces economic issues since their prices are often sensitive to any slight change in demand and supply. This study will focus on answering the question to what extent is primary product dependency a constraint on economic growth and development in developing countries.

Primary product dependency might not be a constrain to the economic growth of developed countries since at times it causes the foreign currency of the state to fluctuate. This is evident when the income of the farmers or producers fluctuates, as a result of the demand of such products becomes inelastic causing a fall in the cost of the goods in form of imports. This action will increase the price of revenue in a developed country since the foreign currency expense will reduce because the imports will be less expensive. The developed country will utilise the excess income to invest in other areas of the economy or import numerous primary products.

The unpredictable price of the primary products causes problems with forecasting in relation to planning. A sign that numerous people in the developed countries find it difficult to plan on the areas of invest effectively. Reliance on primary products causes an individual to face uncertainties that might not be suitable in investing. It is evident that the developed nations have a reduced reliance on the primary product, which is an indication that they have strategies to overcome the mild fluctuations that might arise in the investment industry throughout the seasons. This is an indication that the developed countries will have limited constrains on both economic growth and development.

It is vital to note that in some cases the primary products in developed nations often undergo uncontrollable disasters, for example, bad weather, and pest infection. This situation cause’s destruction of soft products that could have boosted the economic growth of the country an indication that the severe damage is an extreme constrain to the economic development and growth of the developing country. This circumstances often results to loss of huge amount of investment since the developed countries invest highly in their firm assuming they will yield superior products from their farms.

Regardless of the harsh economic times and bad weather, the government in the developing countries support individuals to have the primary products at their disposal. The state provides the farmers with huge amount of subsidies that make them invest in the most sophisticated method of farming that lead to high yields. This is an indication that the reliance on primary product has little or no constrains to the development of the economic growth of the developed countries.

It is difficult for other countries to match the standard of farming eh primary products in the developed countries since they have effortless and affordable means of producing primary products. In summary, the reliance on primary products in the developed countries is lower than in the less developed nations. The presence of varieties and effective substitutes make the primary products to be less desired than in the less developed counties where they have to rely on the primary products for their survival.

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