The Task of Development: To Overcome Scarcity

If we look back at some of our economic crises in the 60’s, the most notable was the rice
problem. The rice problem was a big problem to three sectors of our economy the producers, the
consumers, and the government.
The rice problem was a big problem to our producers, the millions of farmers who till the
land. For them, the problem was brought about because of low productivity. It was common
during those times for farmers to harvest only 25 to 30 cavans per hectare. Low harvest means
low income; low income means low consumption; and all of these would mean economic
deprivation for millions of our farmers. Millions of farmers are caught in a vicious circle of
poverty; low production = low income = low consumption = low savings.

LOW
PRODUCTION

LOW SAVINGS LOW INCOME

LOW
CONSUMPTION

VICIOUS CIRCLE OF POVERTY

The rice problem was also a big problem to our consumers. In adequate rice supply
means shortage of the product. We know that whenever there are shortages, a price of these
commodities tends to rise. The price of rice at that time was relatively high. To make matter
worse, consumers were willing to pay high price for commodity, but there was not enough
supply. Since there was inadequate supply, rice to be rationed. Thus during those times, we see
long lines of consumers queuing to buy the precious commodity. It is possible that not all of the
consumers, who fall in line to buy rice, would be given the commodity. Many times, the line has
to disperse because the supply has run dry.
 The rice problem was also big problem to our government. It is the task of the
government to provide our people at least the basic needs of life like roads, bridges, police
protection, and a steady supply of basic commodities like rice, for example. A government which
fails to provide these basic needs of the people has no reason to exist. It has failed in its mission
of providing these basic needs. The government is answerable to the people for its inability to
provide these basic needs. Thus, the government had to resort to desperate measures to solve the
rice problem. The huge importation of rice was, thus, resorted to. Huge importation would, of
course, mean a big drain on our dollars to huge dollars importation, our imports for our other
needs that machines, transport equipment, and other needs that our industries had to suffer too.

Vicious Circle of Poverty

In economics, the cycle of poverty is the "set of factors or events by which poverty, once
started, is likely to continue unless there is outside intervention." The cycle of poverty has been
defined as a phenomenon where poor families become trapped in poverty for at least three
generations. These families have either limited or no resources.

There are many disadvantages that collectively work in a circular process making it
virtually impossible for individuals to break the cycle. This occurs when poor people do not have
the resources necessary to get out of poverty, such as financial capital, education, or connections.
In other words, poverty-stricken individuals experience disadvantages as a result of their poverty,
which in turn increases their poverty. This would mean that the poor remain poor throughout
their lives. This cycle has also been referred to as a "pattern" of behaviours and situations which
cannot easily be changed. The poverty cycle is usually called "development trap" when it is
applied to countries.

Economic growth can be seen as a virtuous circle. It might start technological innovation.
As people get familiar with the new technology, there could be learning curve effects and
economies of scale. This could lead to reduced costs and improved production efficiencies. In a
competitive market structure, this will probably result in lower average prices. As prices
decrease, consumption could increase and aggregate output also. Increased levels of output lead
to more learning and scale effects and a new cycle starts. However, pollution, natural resource
depletion and other externalities associated with uncontrolled economic growth can turn the
virtuous cycle into a vicious cycle.

Many developing countries are caught up in vicious cycle of poverty. Low level of
income prevents savings, retards capital growth, hinders productivity growth, and keeps income
low. Successful development may require taking steps to break up the chain at many points.

Other points in poverty are also self- reinforcing. Poverty is accompanied by low levels
of education, literacy and skill by which prevents adaptation to new and improved technologies
which can lead to rapid population growth. Overcoming the barriers of poverty often requires a
concentrated effort on many ways to which breaks the 'vicious cycle' into 'virtuous circle'.

If the country has stepped to invest more, improve health and education, develop labour
skills, and curb population growth, she can break vicious cycle of poverty and stimulate a
virtuous circle of rapid economic growth.