Capital as a factor that affecting economic growth and economic development

For countries that are developing, a lack of capital is inhibiting development. The low level of capital formation in developing countries is caused by low saving ability. Low saving ability is caused by low income levels. Low levels of income caused by low productivity. The low level of productivity will lead to low incomes and low investment. Low level of investment due to the ability of low capital formation. Interplay between these factors will continue and difficult to disconnected. This is called a vicious cycle of poverty in developing countries, known as a vicious circle.

The world economy experts agreed that in the process of economic development in developing countries should be able to beat large enough to crack the vicious circle of poverty. One way that can be done to achieve that goal is by the formation and development of investment and workforce skills development so as to increase productivity and ultimately their incomes will increase. Without being able to do capital formation and investment, economic growth in developing countries will remain behind.

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