This paper focuses majorly on the causes and effects low economic growth and
developments in urban areas or communities. The research mainly embraces the major causes of
reduced growth and development of the economy. They include poor healthcare facilities,
political instability, flight on capital, and low levels of education. The effects associated with low
economic growth are also discussed in detail. They include raising the standards of living,
increasing government borrowing rates, and loss of employment opportunities. The paper also
explains how the government together with the individuals, can work together in ensuring an
improvement in the healthcare facilities and services, increasing the levels of education, avoiding
flight of capital as well as maintaining stable political stability so as to live in a stable economy
which will favor the development of the urban centers and communities within an economy.
Table of Contents
Abstract 2
Introduction 4
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 3
Lack of Economic Growth 4
Economic Growth Limiting Factors 5
Poor Health Care Facilities 5
Low Education Levels 6
Capital Flight 8
Political Instability 8
Lack of Proper Infrastructure 9
Effects of poor Economic Poor Economic Growth and Funding 10
Slow Increase in Living Standards 11
Increase in Government Borrowing 11
Increase in Unemployment Rates 12
Ways of Improving Economic Growth in Urban Areas 12
Conclusion 12
References 14
Introduction
Economic growth is referred to as the increase in the gross production within an
economy. This involves economic services and goods production increase from a specific period
to another. Economic growth is mainly measured considering the terns of increase in the value of
aggregate market on additional production of goods and services using Gross Domestic Product
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 4
(GDP) estimates. It can be contributed by the increase in the labor force, capital goods,
technology, and human capital. Economic growth plays a vital role in developing and expanding
many urban areas and communities in all corners of the world. Also, economic growth is a very
important aspect since it promotes the improvement of individuals' living standards. Economic
development promotes urbanization which in turn increases employment opportunities. The
ability of economic growth and development in promoting urbanization depends on the
institutional settings and the infrastructure conduciveness of the area. Another factor that can
promote economic development is rural-urban migration. Government policies should also seek
out various ways through which urbanization can be enabled to promote economic growth.
Recently, many developed countries have been experiencing and witnessing a relatively slow-
moving economic growth and development of their urban areas and communities caused by
various factors such as poor healthcare facilities, poor education levels, political instability, and
many more.
Lack of Economic Growth
Economic growth and development provide a pathway that many economies require to
follow to achieve higher living standards. This includes the utilization of goods and services and
more of a better physical environment, more leisure, improved healthcare services, and quality
life for all society members. Many countries view the slowdown of economic growth and
development as a periodic and recurring phenomenon; therefore, they can control it using various
traditional policies such as monetary value. Other countries view it as a form of manifesting
stagnant economic growth due to aging populations that promote reluctance in the investment
culture. Using an example of Canada, most of the years starting from 1981 up to the present, her
economic growth and development have been averaging to more than two percent each year.
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 5
This persistence in Canada's economic growth over the decades best suggests that the rate of
economic growth is a standard measure rather than a deviation from the secular status. The paper
provides a broad and vast overview and explanation of economic growth and development over a
wide range of time within various developing countries around the world. It is always a benefit
to the public policy examining the causes and effects of the slow economic growth and
development.
Economic Growth Limiting Factors
These are factors which promote to the reduction in the overall growth and development
of the economy in urban areas and communities. They include the poor healthcare facilities, low
levels of education, the flight of capital within an economy, political instability which includes
government's tendency to collapse due to various reasons such as rising conflicts, differences,
and high competition among various political parties within a country and the lack of proper
infrastructure which act as channels for the transportation of goods and services.
Poor Health Care Facilities
At large, poor healthcare facilities promote to an increased poor health population within
an economy at a society and country level. A poor health population is usually associated with
reduced saving levels as well as rates. A poor health population can also contribute to low capital
returns rates within a country's economy, leading to additional poor levels of both foreign and
domestic investment. Poor health and diseases act as a burden to the affected people. These
people affected by illness are usually weak and therefore find it hard to work to provide for their
children and families.
Considering an aggregated level, the high burden on diseases can have great negative
effects on general productivity. These negative effects can generally drive a country into low
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 6
economic growth and development. For instance, many United States individuals have been
experiencing high payments for healthcare services and facilities, which have not been reliable to
cure and manage many complicated chronic diseases and illnesses. (Nurmagambetov et al.,
2018). Many people who live in the United States find themselves spending large amounts of
money on poor healthcare services, including Canada, compared to other countries.
The Canadian healthcare system has been failing when it comes to providing a better
medicine as well as drug plan for its individuals, and this has been a major which has been
affecting the health statuses of the individual, thus affecting their contribution towards her
economic growth and development (Morgan et al., 2017). In general, these poor healthcare
facilities lead to poor health conditions of the individuals, thus reducing their production output,
which in turn reduces economic growth and development.
Low Education Levels
Low levels of education result in poorly qualified workers within an economy. This acts
as a competitive disadvantage as compared to the other economies in other areas. Town centers
that lack the facilities to train their workers really suffer when it comes to qualified personnel
since their workers won't perform the various duties perfectly. Since they have no skills, they are
supposed to carry out professional work. Therefore, this makes the country's economy
disadvantaged in competition with other towns whose workers are more skilled, thus leading to
low economic growth and development. According to many types of research which have been
done on the development of many urban areas in African countries, it is clear that many of them
have been heavily affected by low levels of education (Eggoh et al., 2015). The graph below
shows the GDP growth rate for most of the African urban centers (Coleman , 2020). The graph
shows the growth rate as from 2016 to 2020.
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 7
20162017201820192020
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Africa's GDP growth rate (%)
Fig 1. Africa’s GDP Growth Rate
For the United States, every $1 that is spent on educating students concerning economic
development skills, an average of $10 to $15 is generated as a contribution to the economic
growth and development of the states' urban areas (Grant, 2017). Education can be termed as the
leading factor determining the economic growth, earnings, employment, and development of
most urban areas in many countries. Therefore, without considering a proper educational skill, it
would in one way or the other endanger the general prosperity and development of many urban
areas and major towns for future generations.
Capital Flight
Capital flight is the situation of large-scale outflows of financial assets as well as capital
from a country. This may be caused by various events, including economic and political
instability, devaluation of the currency, and capital control imposition. Capital flight causes a
burden to many countries' economies, affecting the economic development and growth of urban
areas. This is due to the lack of capital required in carrying out development projects within
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 8
these urban areas, thus leading standards of individuals. Capital flight is mostly contributed by a
poor investment culture that is mostly associated with high levels of poverty, low investment,
saving rates, poor technological growth, and poor economic performance.
Capital flight is usually associated with negative effects on the economic growth and
development of urban areas in many countries. It reduces the domestic investments of
individuals, which is a major factor promoting economic development. It poses a strain on
economic growth and development, leading to poor and slow economic growth. In another case,
capital flight reduces the base of domestic tax. This makes the government distort taxes which in
turn introduces market inefficiencies. These market inefficiencies promote reduced economic
growth in urban areas of many countries. Capital flight leads to high government borrowing
rates, which causes a strain on the economy as it tries to pay the debt. This can include an
increase in taxes to accommodate the payment of the debt. Due to this issue, the government
won't concentrate on developing the urban areas but instead will put more weight on paying for
the debts.
Political Instability
Political instability is defined as a government's tendency to collapse due to various
reasons such as rising conflicts, differences, and high competition among various political parties
within a country. Political stability usually goes in hand with the economic growth and
development of most of the urban areas within any economy. Therefore, political instability is
usually associated with an unstable political environment, which reduces the investment rates,
thus reducing the rate of economic growth of most urban areas.
In recent research on the effects of political instability on economic development and
urbanization in the United States, the former president, Donald Trump, decided to get itself away
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 9
from the Trans-Pacific Partnership agreement (TPP). This issue raised a great concern since it
affected America's political stability, which affected many of the development plans and strategies for
the government (Narine, 2018). Political instability, on the other hand, promotes poor government
economic performance. Poor government economic performance affects how the government
operates its tasks in controlling and managing economic performance, reducing or rather slowing
the rate of economic development.
Lack of Proper Infrastructure
Economic growth and development rely on a well-structured and proper infrastructure.
Proper infrastructure is required to connect various supply chains for efficient supplying and
moving goods and services in different metropolitan areas. This provides many forms of quality
employment opportunities to many individuals, healthcare services, and educational institutions.
Therefore, the absence of proper infrastructure in a country leads to a reduced supply of goods
and services to many of the areas, thus reducing employment opportunities to many of the
individuals within an economy. The lack of employment reduces or rather discourages the
culture of saving and investment and this increasing dependency. Dependency reduces the
government's economic performance, thus reducing economic development for many of the
urban areas within the economy.
Both technology, which includes high speed wiring and transportation and hard,
including water systems, sewers, and good roads, determine the development of cities in the
United States and Canada (Mirza & Ali, 2017). In the European and North American cities, the
lack of modern infrastructure has been a major issue affecting the development of the cities.
Many cities in the U.S and Canada are running behind when it comes to economic growth and
development as compared to other cities in Asia and India (Sadiq et al., 2020). Therefore,
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 10
infrastructure has always been a major consideration for economic growth and development and
funding in many urban areas and communities.
Effects of poor Economic Growth and Funding
The lack of economic growth and development has various effects on the economy of a
country. Many of the cities and towns in the western economies during the post-war span
experienced economic growth of about 2.4% to about 4.0% (Prados, 2017). According to several
research types, as from the early 2000s, the rate of economic growth has been reducing since
then (Gordon, 2018). The graph below demonstrates that economic growth slowed down for the
previous years within the western economies (Pettinger, 2019). The graphs demonstrates
reduction in the rate of economic growth rate.
20162017201820192020
0
0.5
1
1.5
2
2.5
3
3.5
4
Economic growth reduction rate(%)
Fig 2: Economic Reduction Rate
Some of the effects associated with slow economic growth and funding in urban areas or
communities include;
Slow Increase in Living Standards
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 11
A low economic growth rate and funding in the urban areas and communities tend to
reduce individuals' monthly incomes and earnings. This happens especially for individuals with
flexible as well as low-skilled jobs. The reduction in the incomes of the individuals in the
economy discourages savings and investments, which are a major promoter of urban areas and
communities' economic development.
Increase in Government Borrowing
When the government sets a budget on tax plans its spending within a specific financial
year, it also budgets for the expected growth rate of about 3%. However, when the economic
growth rate does not happen as planned, tax revenues can disappoint, and therefore this forces
the government to borrow more funds from external sources. An example is the 2017 U.S. tax
cut. The tax cut was intended to increase the rate of economic growth but instead reduced
economic growth, which in contrast to what was planned (Bazel & Mintz, 2017). Therefore, this
forced the government to borrow more funds.
Increase in Unemployment Rates
The slowdown in the rate of economic growth and development of urban areas and
communities is associated with high unemployment rates. Unemployment reduces many
individuals' living standards, increasing the rates of poverty (Hanratty, 2017). This can also be
associated with reduced hours of working instead of working on the normal working hours, also
known as disguised unemployment (Cho, 2020). According to various studies, since 2010, the
U.K. has been experiencing reduced employment (Horemans et al., 2016). This has been thus
promoting reduced economic development of urban areas and communities.
Ways of Improving Economic Growth in Urban Areas
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 12
The rate of economic growth and development can be improved by considering various
factors. They include improving the healthcare facilities and services, increasing the levels of
education, avoiding flight of capital, and maintaining stable political stability. Another way of
improving the economic growth in urban centers is the improvement and modification of the
transport systems to be more sustainable. Sustainable transport systems are a type of transport
system which accommodates all forms of transport. This includes the introduction and
implementation of Bus Rapid Transit (BRT) which have routes that are dedicated to busses in
Johannesburg (Asimeng & Heinrichs, 2021).
The introduction of cable cars as a form of transport that links mostly the hilly parts of a
city with other communities of the city so as to improve the movement of goods and services
thus improving the development of the cities. Increase in nature-based solutions in urban areas
could as well promote to the growth and development of the urban cities. This includes the use of
greened rooftops as well as the streets as in the case in New York (Fruth et al., 2019). This used
in the management of runoff storm water as well as improving the climate of the urban areas and
cities. Improvements on the smart solutions in the urban areas such as digital technologies can
really promote to the development of urban areas. An example is the payment using of goods and
services with the use of mobile money.
All these factors, when put into consideration, can lead an economy into a smooth and
high growth rate of economic development of urban areas and communities.
Conclusion
Since economic growth is referred to as the increase in the gross production within an
economy, the research has majorly focused on Economic growth and development provide a
pathway that many economies require to follow to achieve higher standards of living. This
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 13
includes the utilization of goods and services and more of a better physical environment, more
leisure, improved healthcare services, and quality life for all society members. Various factors
can cause the lack of economic growth and funding in most of the urban centers and
communities. These poor healthcare facilities, poor levels of education, political instability as
well as capital flight. These factors have been well explained and elaborated on how they cause
or lead to slow economic growth, specifically urban centers. The lack of economic growth and
funding in most urban centers and communities is also associated with some effects that affect
the local individuals and the government at large. They include poor living standards,
unemployment, and increased rates of government borrowing. To avoid all these effects of lack
of economic development, the government, together with the individuals, can work together in
ensuring an improvement in the healthcare facilities and services, increasing the levels of
education, avoiding flight of capital as well as maintaining stable political stability to live in a
stable economy which will favor the development of the urban centers and communities of the
country.
LACK OF ECONOMIC GROWTH AND FUNDING IN URBAN AREAS 14
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