Answer in Brief
How would you break the vicious circle of poverty?
Breaking the Vicious Circle of Poverty :
- The vicious circle of poverty is associated with the low rate of saving and investment on the supply side.
- In UDCs the rate of investment and capital formation can be stepped up without a reduction in consumption. For this, the marginal rate of savings is to be greater than the average rate of savings.
- To break the vicious circle on the demand side, Nurkse suggested the strategy of balanced growth.
- If the investment is made in several industries simultaneously the workers employed in various industries will become consumers of each other’s products and will create demand for one another.
- The balanced growth i.e. simultaneous investment in a large number of industries creates mutual demand. Thus, through the strategy of balanced growth, a vicious circle of poverty operating on the demand side of capital formation can be broken.
Concept: Vicious Circle of Poverty
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