Unequal Development: the Chicken or the Egg

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

Barriers to Economic Development

• Disease

Barriers to Economic Development

• Foreign Debt

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• Pushes for economic reforms• Reports on policies in member

states

What do the IMF and World Bank do?

World Bank:• Aims to help development by

advising and lending – with many conditions

• Countries encouraged to lift import and export barriers, cut subsidies and remove price controls

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

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

spendingLittle evidence that these policies work

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

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

• 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 peace2. Disputes handled constructively3. System based on rules rather

than power4. Freer trade cuts the cost of living5. Gives consumers more choice

10 Benefits of the WTO

6. Trade raises incomes7. Trade stimulates growth, inc.

employment8. Basic principles makes system

more economically efficient9. Shields governments from narrow

interests10.Encourages good government

Ten Arguments against the WTO

1. Only serves interests of multinational corporations

2. Is a stacked secretive court3. Tramples over labor and human

rights4. Is destroying the environment5. Is killing people

Ten Arguments against the WTO

6. US adoption of WTO was undemocratic

7. Undermines local development and penalizes poor countries

8. Is increasing inequality9. Undermines national sovereignty10.The tide is turning against free

trade and the WTO