ABSTRACT
The low-income countries, at present, stress various social and economic indicators explaining their rapid economic development. But the objectives of development are changing over time to review economic factors like high national and per capita income, high saving, investment and capital formation to raise productivity: high total consumption is not sufficient to break the vicious cycles of poverty of these low-income economies. The ‘low level of equilibrium trap’ experienced by developing countries may be overcome, as the experiences of many countries suggest, by gaining high economic growth at the cost of inequality and mass poverty. Yet economic growth may not be the means for social sector development, e.g. health and education. It also may not generate capability of the people. First, the hypothesis that income inequality increases in the initial years of development but ultimately decreases (Fields 1995; Kuznets 1955) is also not found to be correct for many countries. Since 1820 global income inequality has increased steadily (United Nations 2006), while there has been economic growth in many countries. Income and consumption inequalities are found both in high-, upper middle-, lower middle- and low-income economies. Not only are income and consumption inequalities evident, but also inequalities in access to health and education, gender inequalities and uneven development of the regions are the problems in many countries. The analysis of these factors is quite problematic and leads to many critiques (see Nye et al. 2001). Inequality traps are the result of development at present.
