Unequal Development: the

Chicken or the Egg

• Why is there uneven development?
Why doesn’t Papua New Guinea
just buy mechanized farm
equipment? Or build factories? Can
PNG afford to?
• Are LDCs poor because they are
not developed? Or not developed
because they are poor?
Barriers to Economic Development
• Social Conditions
– Demographic factors (CBR, Life
Expectancy, Dependency Ratio, etc)
– Inadequate Nutrition
– Lack of Sanitation (sewage systems,
clean water, health care)
– Lack of access to Education
– Lack of Gender Equality
• Disease
Barriers to Economic Development
• Foreign Debt
– The money one country owes to
another country, as a result of loans
and/or a negative balance of trade. –
a negative balance of trade means
that country buys more than they sell
International Trade
 Trade Barriers
• the EU’s internal market is about
removing barriers to free movement
of goods, services, people and capital
• the flow of goods and services
in the world economy is also important
• organizations have been set up
to encourage the removal of barriers
to free global trade
 Why the stress on free world
trade?
• The world economy went into a deep
depression in the 1930s, as many
countries closed their barriers to
trade with other states. This led to:
– Mass unemployment
– Social upheaval
– Rise of fascism and World War II
How to prevent chaos happening
again?
• Global powers set up bodies
to support international trade
– International Monetary Fund
– World Bank
• All countries encouraged to join
these organizations, or face
exclusion from benefits
of free world trade
 What do the IMF and World
Bank do?
IMF:
• Lends to countries with balance
of payments problems – countries that can’t
make their payments
• Pushes for economic reforms – reforms such
as allowing free trade or reduce wasteful
spending
• Reports on policies in member states
• These are short-term emergency loans when a
country is about to go bankrupt. Usually
associated with LDCs, but recently Greece and
Spain have consulted the IMF due to the Euro
zone crisis.
 What do the IMF and World
Bank do?
World Bank:
• Aims to help development by advising and
lending – with many conditions – such as
reducing wasteful spending or focusing on a
particular area of production
• Countries encouraged to lift import and export
barriers, cut subsidies and remove price
controls – encouraging free trade
• These are longer term loans, used to put in
place infrastructure or other big projects.
 Criticisms of IMF
IMF only lends money if countries agree
to:
• Sell their resources cheaply
• Cut public spending
• Critics say this serves to increase the
problems of poverty in poor member
countries – many times the country
ends up paying more money to pay off
the debt than they invest in education
or health care
 Criticisms of World Bank
Loans depend on countries agreeing
a ‘Structural Adjustment Programme’
• Leads to rapid increase in price
of goods in country
• Increases poverty
• Lower investment and cut social
spending
• Little evidence that these policies work
• These criticisms are similar to the
criticisms of the IMF
 What about the World Trade
Organization (WTO)?
• The WTO deals with the rules of
trade between countries
• It developed from the General
Agreement on Tariffs and Trade
(GATT)
• WTO agreements set the ground
rules for international commerce –
Designed to ensure free trade and
to prevent unfair trade advantages
 Why so much outrage over
globalization?
Other than the criticisms raised
earlier, opponents of globalization
point to:
• Falling share of world trade taken
by developing countries – MDCs
getting richer, LDCs staying poor
• Subsidies and tariffs set by rich
developed economies: USA steel
tariffs, EU agricultural subsidies
are two of the culprits
 10 Benefits to the WTO
1. Keeps the peace no wars over
trade disputes
2. Disputes handled constructively
3. System based on rules rather
than power – designed to give
LDCs a fair chance
4. Freer trade cuts the cost of living
5. Gives consumers more choice
 10 Benefits of the WTO
6. Trade raises incomes
7. Trade stimulates growth, inc.
employment
8. Basic principles makes system
more economically efficient
9. Shields governments from narrow
interests
10.Encourages good government
Ten Arguments against the WTO
1. Only serves interests of multinational
corporations
2. Is a stacked secretive court – favoring
multinational corps
3. Tramples over labor and human rights
– b/c favors multinational corps
4. Is destroying the environment - ditto
5. Is killing people
Ten Arguments against the WTO
6. US adoption of WTO was undemocratic –
WTO can enact rules which conflict with
existing US laws and the WTO law stands the
US law must be removed
7. Undermines local development and penalizes
poor countries
8. Is increasing inequality – Favors MDCs who
mostly own the multinational corps
9. Undermines national sovereignty
10. The tide is turning against free trade and the
WTO