Unit 4D- Global Poverty and Development

Introduction Development and poverty have risen sharply up the global issues agenda since the 1960s. There are two proximate causes for this – (1) the failure of decolonization to trigger economic and social development in the former colonies (and exploration of the different and competing reasons for this) and (2) The contradictory rise of poverty with dramatic increases global economic activity & volumes of world trade.

Development – a controversial term referring to the process by which societies change over time. It is a highly contested term that often excludes the effects of slavery and colonialism on both the ‘developed’ world and the ‘developing’ world. Development is sometimes taken to mean that the developing world must model the developed world in order to develop. Finally some measures of development are purely economic whilst other measures focus on the quality of human life.

Nature of poverty  – absolute monetary definition $1.90 a day World bank measure from 2015. World Bank- $1.25 a day at PPP (Set 2004) whilst $2.50 a day puts 49% of population, 3.14 bn in poverty. According to UN MDGs report January 2016 835m now in absolute poverty compared to 1.9bn in 2008. Economic Growth – the growth of national income usually measured by gross national income and other measures such as gross national product. Gross National Income (GNI)  – is the total value of goods and services produced in any particular year.

The Bottom Billion (2009)  – Collier’s term for the world’s poorest billion, sometimes also called Africa +

Versus capacity/opportunity-based definitions human development in the UN Development Reports; MDGs (2000-2015) and SDGs. (2015-2030). Monetary definition of poverty VS capacity/opportunity based i.e. access to clean water, healthcare, education, human rights, sustainable development.

MDGs

 

  • Eradicate extreme poverty and hunger,
  • Achieve universal primary education,
  • Promote gender equality and empower women,
  • Reduce child mortality,
  • Improve maternal health,
  • Combat HIV, AIDS, malaria and other diseases.
  • Theories of development  

 

      • ‘Orthodox’ theory of development as modernization economic liberalism
      • virtues of free market and free trade;
      • linear process of development from ‘traditional’ to ‘advanced’ societies Rostow 1960 Modernisation: A Non Communist Manifesto
      • Modernization theory- states modernize from traditional, pre industrial, agrarian societies to modern, industrial, mass consumption ones. (Rostow, 1960)
      • Internal obstacles to growth. Primarily the developing world should follow the developed world’s path towards modernity. The barriers to 3rd World development were internal.
      • backward culture that discourages enterprise; autocratic rule etc
      • ‘alternative’ theories of development ‘human’ development model;
      • development as freedom; ‘bottom-up’ development; views from global South.

 

  • Neo-Marxist theories  – World Systems Theory Immanuel Wallerstein 1974 – ‘core’ states of global capitalism systematically exploit and oppressed ‘peripheral’ ones world systems theory; external obstacles to development neo-colonialism – Core, Peripheral and Semiperipheral
  • Dependency Theory – a Marxist influenced alternative theory of development. This focuses on the external barriers to development such as colonialism and expropriation of resources. Underdevelopment – a term used by dependency theorists to describe the process of exploitation practiced by the North against the South. (Andre Gunder Frank) Colonialism – a system of direct political control of  another country with colonial administrators and governors ruling the country in question.
  • Neo-colonialism –  an indirect form of exploitation of former colonies by their colonial masters through aid, trade and diplomacy. Largely economic exploitation rather than political but Marxists would argue that political forms of oppression arise from the particulars of the economic base. Cultural and economic, coca-colonisation Wagleitner (2007); Glencore (Zambia) Copper. G8 New Alliance on Food Security and Nutrition
  • Neo-liberal economic theory – promoted by Milton Friedman of the Chicago school from the 1960s onwards. Became the dominant mode of economic policy making from the 1970s onwards. Favours deregulation, privatization and liberalization, low taxes and attacks on welfare.
  • These policies have been heavily promoted in the development  by IGOs such as the IMF, The World Bank in the form of SAPs. SAPs – structural adjustment programmes these are neo liberal economic policies that are attached to any facilities for aid, loans and debt relief made to developing countries or CITs (Countries in Transition)
  • Tanzania and the water industry, Haiti and Telecoms privatisation
  • Joseph Stiglitz pointed out that SAPs often lead to greater poverty – the pressure to reduce gov. spending led to cuts in welfare, education, healthcare (privatisation of water supply in Tanzania) Ha Joon Chang – kicking the ladder away Bad Samaritans one size fits all, too much micro management.
  • SAPs are based on a flawed model of development, very low empirical evidence on whether they actually work  – Based on the myth of free market development
  • Even the IMF and the World Bank admit that SAPs cause short term economic and social disruption
  • International Monetary Fund – Key IGO established at Bretton Woods in 1944 the ensure global financial stability. It takes contributions from member states which it can then loan out if a country’s economy suffers shock or instability.
  • The World Bank – Full name the International Bank for Reconstruction and Development. Often accused of acting in the interests of the west, for example by granting loans at unaffordable interest rates and requiring policies that damage development.
  • The Washington Consensus – formed in 1989 to coordinate global development around the priorities of the three main institutions of Global Economic Governance, the IMF, The WTO and the World Bank.
  • Transnational Corporations (TNCs) – large corporations which source, manufacture, employ and distribute goods and services on a global scale. There has been a staggering rise in the number of TNCs since the 1960s. 1960 -7000, 2007 – 38,000. 2013 – 63,000
  • Trends in global poverty and inequality
  • North-South divide – from Three-Worlds model to North-South divide; Brandt reports North South A Programme for Survival (1980) Common Crisis: North South Cooperation for World Recovery (1983)
  • fragmentation of the global South; emerging economies;
  • sub-Saharan Africa as the 4th World
  • decline in between-country inequality and increase in within-country inequality;
  • impact of global economic crisis on the global South.
  • Implications of globalization for poverty and equality
    • arguments that globalization reduces poverty and narrows inequality (provides inwards investment; TNC bring benefits (jobs, higher wages, new technology, training and skills development; career opportunities
    • economic restructuring and prospect of export-led growth
    • arguments against globalization (TNCs interested in cheap labour and have no long-term commitments; domestic demand ignored in chase for cash crops and export markets. Cash Crops – developing world agriculture for the benefit of consumption in the West and North. Tea, coffee, sugar and even narcotics.

 

 

 

 

  • Promoting development Aid and development – campaigns to increase international aid (work of NGOs and anti-poverty movement; Millennium Development Goals; G8 Gleneagles agreement; Aid – refers to economic, military, technical and financial assistance given (or loaned) to developing countries. Bilateral Aid – aid between two parties – the donor and the recipient. Multilateral Aid – pooled or shared funds acting as aid banks ( World Bank, IMF etc)
  • arguments in favour of international aid
  • humanitarian relief;
  • infrastructural project build economic capacity;
  • counters dependency

 

        • More level playing field (developed countries commit to 0.7% of their GDP for IAD)
        • Some further argue that there is a moral duty to provide international aid to heavily deprived countries.
        • The prosperity of the North has been built in substantial part on mistreatment of the South, Slavery, Colonialism, Neo Colonialism, Debt
        • Builds domestic capacity  –  increasingly targeted in long-term projects and it is orientated around capacity building for the future MDGs
        • The effectiveness of aid is evident in the fact that countries such as China, India, Brazil and Thailand – major recipients of aid in the past are now developing strategic aid programs themselves. Rise of the BRICS.
        • Emergency relief from aid – the idea that a growing proportion of aid is now so-called humanitarian aid provided for purposes of emergency relief.
        • The need for emergency relief has grown as humanitarian crisis have become more common (because of movement towards asymmetrical Wars, (Syria) Natural Disasters (Pakistan Floods, July 2010, Haiti Hurricane Mitch 1998)  Famine (Ethiopia and Eritrea 1984/85)
        • International community broadly agrees that it has a moral obligation to act in circumstances such as these.

 

  • arguments against international aid
  • creates dependency;

 

        • Avoids tackling root causes
        • Perpetuates poverty
        • Aid does not work

 

  • corruption and oppressive government prevents aid getting to the poor;
  • donor self-interest
  • Debt crisis and debt relief – nature of debt crisis of 1980s

 

      • The Debt Crisis – refers to the specific debt crisis of the 1980s and now any situation in which punitive interest forces a country to default on its loan repayments. Debt repayments are a form of bondage which allows Western banks and countries and agencies such as the IMF to implement structural adjustment policies which many argue impede (and in fact reverse) development.
      • Debt boomerang – George argues that the many negative effects of debt are such that it would be in the long term interests of those banks and countries to whom money is owed to write off that debt.
      • HIPC (Heavily Indebted Poor Countries) Initiative –  refers to a system whereby heavily indebted poor countries can write off debt if they conform to certain conditions.
      • Conditionality – the setting out of certain conditions on which aid or assistance is granted. These ‘conditions’ usually reflect the priorities of the neo-liberal Washington Consensus of the IMF, the World Bank and the WTO and involve privatisation and deregulation, access to markets by foreign corporations and cuts in government spending and subsidies.

 

  • significance of debt relief  – progress made in cancelling debt; arguments for and against debt relief

 

      • The debt crisis developed in the 1970s and 1980s, as poorer countries (starting with Mexico in 1982) announced that they could no longer service their debts, meaning that many Northern Banks were faced with the possibility of collapse.
      • More seriously, Southern countries due to the size of their debts and their poor economic performance, channelled more and more money into their escalating debt repayments at the expense of building schools and hospitals, investing in the economic infrastructure and helping to alleviate poverty.

 

  • Advantages
  • A lot of the debt is not voluntary, rather they are forced to take the debt –
  • global or regional economic volatility, the collapse in the global price of an export commodity
  • interest on the debt it in fact has been paid back multiple times.
  • Money on debt can be better spent on infrastructure, education, health.
  • Northern hemisphere banks have made enormous profit on this.
  • The debt that the developing world has gives the IMF and the World Bank influence over developing countries that are in debt to them
  • The boost given to African countries to cancel the debt (Gleneagles 2005),
  • World systems theory  – Wallerstein
  • SAPs
  • Canceling debt would help countries reach the MDGs
  • Disadvantages
  • it sends a bad message – you can borrow without paying back.
  • The loans have to be funded
  • A cycle of debt is created by cancelling the debt (more demand would be created)
  • Cancelling the debt – allows corrupt governments to misuse the loan. Marcos in the Philippines.

 

      • The debt crisis has not only been explained in terms of economic backwardness, but also of changed borrowing strategies amongst western banks.
      • Attempts to resolve the debt crisis include the provision of loans by the IMF and the World Bank, often linked to the implementation of structural adjustment programmes, designed to promote growth and enable debtor countries to pay off their debts, and the writing off of debt through so-called ‘debt relief’.
      • For example, in 1989 the USA launched the ‘Brady Bonds’, which underwrote a proportion of Latin America’s debt overhang from the 1970s and 1980s.
      • Under the HIPC (Heavily Indebted Poor Countries) initiative, negotiated in 1996, the World Bank and the IMF agreed to extend the opportunity for debt relief to 40 of the world’s poorest countries; by 2006, 29 countries were enjoying debt relief.
      • G8 2005 Gleneagles; The Year of Africa: Make poverty history – debt cancellation significantly accelerated the pace of debt relief, through the agreement to provide 100 % cancellation of debt owed to the IMF and the World Bank; by 2006, this covered 21 countries, with plans to include up to 43 countries

 

  • Environmental Implications of Development
  • Sustainability – maintaining a constant balanced ratio between resource depletion and resource renewal so that the resource can be utilized in perpetuity.
  • Sustainable Development – development that sustains resources to allow for sustainable use by future generations. Brundtland Report (1987) Our Common Future – highlighted the importance of sustainable development in the developing world.
  • Global Warming – refers to the rise in global temperatures now acknowledged to be caused by human activity. This is likely to lead to rising sea levels and increased desertification.
  • Deforestation –  refers to the deliberate clearance of forests for development, agriculture or industry (logging). Has a unique and catastrophic effect on biodiversity.
  • Desertification – the spread of the deserts to erode vegetation and topsoil.
  • Biodiversity – refers to the number and variety of species on the planet and the human contribution to loss of biodiversity
  • Non renewables – natural resources which are finite and cannot be replaced such as coal and oil.
  • Renewable resources – hydro-electric, wind and solar power
  • Exhaustible Resources –resources that are renewable but also capable of being exhausted. Fish stocks and forests are good examples of these.
  • Shared resources – resources that are not privately owned and sometimes referred to as public goods.
  • Realism, Liberal and Critical Perspectives on Development
  • Realist Theory largely draws on Mercantilism, the idea that economics requires a degree of political management to maximise opportunities for the state.
  • This is bound to lead to protectionism which serves as both advantage and disadvantage to developing countries.
  • Neo realists however would stress the tendency towards the domination of the economically weak by the economically powerful.
  • Economic Liberalism. Human beings are primarily motivated by the desire for material consumption.
  • Liberals provide the basis of ‘orthodox’ development. The market is therefore, a self-regulating mechanism (to promote economic prosperity).
  • ‘Development failures’ (e.g. corruption, culture rivalries, authoritarian institutions)
  • Can be solved through ‘Market Reform’ (e.g. privatization, financial deregulation, tax cuts,..)
  • Critical – Dominated by neo-Marxist.
  • Post-1945 period, imperialism gave way to economic/ ‘dollar’ imperialism.
  • States developed through economic dependency (Rise of TNCs, IMF and World Bank), leading to exploitation of ‘core’ to ‘peripheral’ areas. (e.g. low wages).
  • Green politics challenge the idea of ‘development as sustainability’. They believe it takes a healthy environment for meaningful development.
  • For feminists, development through changes of social structures, institutions and cultural practices in developing world . (‘development as growth’)

 

Past Exam Questions (15 marks)

Explain the orthodox (economic liberal) approach to development

What is the North-South divide, and why is it sometimes said to be an outdated idea?

What was the debt crisis of the 1980s, and how much progress has been made in resolving it?

What is neocolonialism and how has it been used to explain global inequality?

How and why have strictly economic conceptions of development been criticised?

Explain the advantages and disadvantages of canceling debt for the developed world

What is the ‘Washington Consensus’ and why it has it been controversial

Explain the main justification for international aid

Explain the Key Differences Between Colonialism and Neo-Colonialism.

What is the North South Divide and is it still relevant?

Essay Questions (45 Marks)

To what extent is international aid effective? Examiner’s Comments:  

 

  • Stronger candidates explained that aid can be beneficial in socio-economic development and that the problem is that insufficient aid is given.
  • The international target of 0.7 per cent of GNP aid donation has been met by very few states and that aid may only ‘paper over the cracks’.
  • The counter argument tended to focus on a view that quantity of aid was less significant than quality and directing aid more effectively would help.
  • There is a view that aid is counterproductive as it can discourage initiative and self-reliance and that it can entrench corruption and oppression.

 

‘The IMF and the World Bank have failed the world’s poor.’ Discuss.

  • Strong responses to this question evaluated the impact of the IMF and the World Bank on global poverty in terms of the use of structural adjustment programmes, based on the ideas of the Washington consensus.
  • In the best cases, these accounts were also up-to-date in the sense that they also recognised how SAPs have more recently been modified in the light of criticism.
  • An important discriminator, however, was the extent to which responses evaluated the respective arguments on the basis of empirical evidence.
  • In such a question, candidates certainly do not need comprehensive or detailed knowledge of data, but is helpful for them to be aware of general trends in global poverty and to be able to illustrate these.

 

‘Globalisation has increased, not reduced, global poverty.’ Discuss.

  • Definitions tended to be strong – Globalisation in its economic form refers to the construction of an interlocking global economy and the declining capacity of states to function as independent economic entities.
  • The impact of globalisation on poverty and global inequality has been controversial and many candidates seemed to enjoy making this clear.
  • Sadly, a few students produced very one sided criticisms of globalisation rather than considering ways in which globalisation may have reduced poverty.
  • Ways in which globalisation has been seen to increase poverty included the structural inequalities and injustices, notably ones in which ‘core’ developed states exploit dependent ‘peripheral’ states that are essentially used to produce primary goods.
  • It was argued that globalisation therefore widens the gap between the North and the South, with sub Saharan Africa being particularly disadvantaged.
  • The majority of students suggested that globalisation amounts to a form of neo-colonialism.
  • Candidates also identified the argument that globalisation has promoted widening within-country inequality, both in developed societies and in developing ones.
  • The counter arguments focussed on ways in which poverty has been reduced. These included that globalisation stimulates all economies, including those of developing countries because it brings increased entrepreneurialism, inward investment, improved technology and access to foreign markets.
  • Developments in the global South suggest that many societies have benefited from an engagement with globalisation, notably examples include the Asian ‘tiger’ economies and the dramatic economic emergence of China and India.
  • In such cases, increased growth and prosperity has been closely associated with taking advantage of export opportunities and inward investments that have been provided by globalisation.
  • On the other hand, countries like North Korea, that have remained outside the global economy have suffered from widespread poverty and low growth.

 

‘The poverty of the South is a consequence of the policies and actions of the North.’ Discuss.Examiner’s Comments:

  • Often candidates who began with the Brandt Report and were able to outline the general points arising from this were usually able to launch themselves confidently into a competent essay.
  • The stronger responses demonstrated a better ability to counter the contention in the question; however, there was a strong tendency amongst most to give little weight to such a counter.
  • The best responses tended not just to demonstrate a knowledge of the main institutions (e.g. the WTO, IMF and World Bank) but were also able to discuss the complexities of e.g. structural dominance and neoliberal hegemony.
  • Central argument stressed that there is a view that poverty in the South is based on global North dominance of military, political and structural power.
  • There is plenty of evidence that the major powers have structural dominance in bodies such as the IMF, WTO and W.Bank and that the economic philosophy of the world is based on western free market liberal philosophy which may benefit global North rather than the South.
  • Multinational companies are often seen as a tool of global North dominance along with manipulation of international law and institutions.
  • Candidates’ counterargument focused on the idea that poverty in the South is caused by other factors such as environmental issues, conflict, overpopulation, corruption, debt etc. and that global South should shoulder some, if not all, of the responsibility for its own weakness.
  • A few candidates also made the case that, possibly, far from being hampered by the free market philosophy of the major western powers, global South has suffered from a reluctance to accept the ideas of the Washington Consensus and that growth will take place as this is rectified.
  • Examples of rapidly developing economies were often used here.

 

Participation in an open and globalised economy conquers poverty and brings prosperity to all. Discuss

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