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    What Is Vicious Circle of Poverty

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    Ibrahim Vanjara
    The document discusses the vicious circle of poverty in underdeveloped economies. It describes two main circular mechanisms - from the supply side and demand side - that perpetuate poverty. On the supply side, low incomes lead to low savings and capital formation, resulting in low productivity and incomes. On the demand side, lack of industrialization causes overpopulation in agriculture, lowering agricultural productivity and surplus, which limits demand for industrial products and the potential for development. These mutually reinforcing factors create a self-sustaining cycle of underdevelopment and poverty that is difficult to escape without intervention.

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    What Is Vicious Circle of Poverty

    Uploaded by

    Ibrahim Vanjara
    16K views5 pages
    The document discusses the vicious circle of poverty in underdeveloped economies. It describes two main circular mechanisms - from the supply side and demand side - that perpetuate poverty. On the supply side, low incomes lead to low savings and capital formation, resulting in low productivity and incomes. On the demand side, lack of industrialization causes overpopulation in agriculture, lowering agricultural productivity and surplus, which limits demand for industrial products and the potential for development. These mutually reinforcing factors create a self-sustaining cycle of underdevelopment and poverty that is difficult to escape without intervention.

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    What is Vicious Circle of Poverty

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    The document discusses the vicious circle of poverty in underdeveloped economies. It describes two main circular mechanisms - from the supply side and demand side - that perpetuate poverty. On the supply side, low incomes lead to low savings and capital formation, resulting in low productivity and incomes. On the demand side, lack of industrialization causes overpopulation in agriculture, lowering agricultural productivity and surplus, which limits demand for industrial products and the potential for development. These mutually reinforcing factors create a self-sustaining cycle of underdevelopment and poverty that is difficult to escape without intervention.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    16K views5 pages

    What Is Vicious Circle of Poverty

    Uploaded by

    Ibrahim Vanjara
    The document discusses the vicious circle of poverty in underdeveloped economies. It describes two main circular mechanisms - from the supply side and demand side - that perpetuate poverty. On the supply side, low incomes lead to low savings and capital formation, resulting in low productivity and incomes. On the demand side, lack of industrialization causes overpopulation in agriculture, lowering agricultural productivity and surplus, which limits demand for industrial products and the potential for development. These mutually reinforcing factors create a self-sustaining cycle of underdevelopment and poverty that is difficult to escape without intervention.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    Vicious circle of poverty

     What is vicious circle of poverty?


    The basic idea underlying the concept of the vicious circle of
    poverty can be aptly summed up in trite proposition,” A COUNTRY
    IS POOR BECAUSE IT POOR”. According to the definition given by
    Ragnar Nurkse, the vicious circle of poverty “implies a circular
    constellation of forces tending to act and react upon one another
    in such a way as to keep a poor country in a state of poverty”.

    2. Supply and demand analysis from the point view of vcp.


    Below given circle or cycle is for underdeveloped countries.
    Underdeveloped countries are invariably caught in the vicious circles of
    economics underdevelopment or poverty. The basic vicious circles of
    economic underdevelopment in the form of the self-feeding circular
    mechanisms operating in an underdeveloped economy. The upper half
    and the lower half of the figure represent the basic vicious circles that
    stem from the demand side and the supply side respectively.

    The lower half of the figure a circular mechanism. An


    underdeveloped economy suffers from a low level of per capital income.
    The low level of income leads to a low rate of savings. The low savings
    rate implies a low rate of capital formation which in turn, means
    insufficient or negligible growth of real capital stock and perpetuations
    of low availability of capital per worker. This low level of real capital per
    worker leads to low output per worker, which in turn, leads to low level
    of per capital income. This completes the circle from the supply side.

    Similarly the vicious circle viewed from the demand side which is
    depicted in the upper half of figure, involves a circular mechanism. An
    1 SUBMITTED BY:TAHJIB PATEL ISBE-A –FROM PRINCIPAL OF MACRO ECONOMICS BY
    B.H.DHOLAKIA
    Vicious circle of poverty
    underdeveloped economy suffers from lack of industrialization. This
    implies lack of employment opportunities in the non-agriculture sector
    which leads to a heavy concentration of population in agricultural.
    Overpopulation in agricultures means adverse man-land ratios which
    leads to low productivity in agriculture. The low agriculture productivity
    implies low agriculture output in relation to total population that
    depends on it. This further implies that a larger part of the agriculture
    output gets used up in meeting the subsistence requirements of the
    agriculture population. Very little surplus is, therefore, generated by the
    agriculture sector. This in turn, means that there is very little effective
    demand for non-agriculture products. This obviously limits the scope
    for diversification of economy activity and leads to a low ledge of
    industrialization which in turn, perpetuates economic
    underdevelopment.

    2 SUBMITTED BY:TAHJIB PATEL ISBE-A –FROM PRINCIPAL OF MACRO ECONOMICS BY


    B.H.DHOLAKIA
    Vicious circle of poverty
    VICIOUS CIRCLES OF ECONOMIC UNDERDEVELOPMENT (figure1.1)

    LOW AGRICULTURAL
    LOW PRODUCTIVITY IN SURPLUS
    AGRICULTURE

    OVER POPULATION IN LOW DEMAND FOR


    AGRICULTURE INDUSTRIAL PRODUCTS

    LACK OF INDUSTRIALIZA-
    TION

    ECONOMIC UNDERDEVELOPMENT

    LOW PRODUCTIVITY LOW SAVINGS

    LOW CAPITAL PER WORKER LOW CAOITAL FORMULATION

    3 SUBMITTED BY:TAHJIB PATEL ISBE-A –FROM PRINCIPAL OF MACRO ECONOMICS BY


    B.H.DHOLAKIA
    Vicious circle of poverty
    CONCULSION: The lower half of the figure. Here low productivity is the
    results not only of low capital per worker but also of primitive and
    traditional methods of production in agriculture, backward technology
    in other sectors, lack of skilled labor, low efficiency of labor due to poor
    health and nutrition standard and so on. These additional forces
    constitute the peripheral vicious circles that reinforce the basic circular
    mechanism depicted in the figure.

    Upper half of the figure, overpopulation in agriculture result, not


    only from lack of industrialization but also from high rates of population
    growth. Again low agriculture productivity is the consequence not only
    of overcrowding in agricultural but also of unscientific farming, lack of
    irrigation facilities and a defective agrarian system. In the same way,
    lack of industrialization is due not only to deficiency but also to lack of
    capable entrepreneurship and the necessary and other facilities.

    3. DRAWBACK OF VICIOUS CIRCLE OF POVERTY?


     Prevalence of primitive and traditional methods of production and
    general technologies backwards
     Low productivity in most sectors of the economy
     Rudimentary education, high degree of illiteracy among people,
    and poor quality of human capital.
     Dearth of innovative entrepreneurship and poor economics
    organization
     Inadequacy of efficient communication and transport facilities and
    lack of economic infrastructure and social overheads.
     Low degree of urbanization

    4 SUBMITTED BY:TAHJIB PATEL ISBE-A –FROM PRINCIPAL OF MACRO ECONOMICS BY


    B.H.DHOLAKIA
    Vicious circle of poverty
     Extreme inequality and wealth, and feudal or semi-feudal
    structure of the society.

    5 SUBMITTED BY:TAHJIB PATEL ISBE-A –FROM PRINCIPAL OF MACRO ECONOMICS BY


    B.H.DHOLAKIA

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