IPE OF DEVELOPING COUNTRIES
I. Defining the Third World
A. Divide according to GNP/capita: Spectrum of DCs
High-income: oil exporters & NICs
Middle-income: Egypt, Nicaragua
Poorest: Haiti, Bangledesh, Ethiopia
** GNP says nothing abt. quality of life & dist. of benefits
B. Defining devt.
1. Modernization theory:
Progress = Industrializatn, consumption, inc. GNP
2. Mixed blessing: pop. growth, urbanizatn, envtl. degradation
"Poverty" = modern notion; subsistence was premodern norm
3. Human Development Index (UN): 4 axes, not just GNP
C. Realism: DCs defined as either threats or opportunities to ICs
Threats: source of immigrants, control "vital" resources
Opportunities:
* Quote from Business Week: "Multinational executives consider
Latin America to be one of the world's major investment opportunities. It's all there -- protein, minerals, forests, water, cheap labor."
D. Dependency: victims of ICs; colonial legacy
**Show debt transparency
Kennedy article: More $ flows from DCs to ICs than vice versa
EX: Mexico's peso crisis caused by too much foreign portfolio
investment instead of direct investmt. in factories &
office bldgs. (because of low int. rates in U.S.)
-- Bail-out protects U.S. investors.
Q: How are these loans guaranteed?
A: Mexico's oil revenues.
** Classic ex. of dependency
II. Traits of most DCs
A. Clear class structure
EX: Brazil -- 2/3 pop. malnourished, while Brazil exports coffee
& meat. (Chile article in Global Issues)
Globally, rich getting & richer & poor poorer.
B. High unemploymt., rural & urban
C. Basic human needs unmet: food, water
Health: Canada 1 doctor/500 ppl; Indonesia: 1/12,00;
Ethiopia: 1/60,000 (>> groups like Doctors w/o Borders)
D. High population growth rate
3% in much of Africa; less than 1% in most ICs.
E. Goal of export-led growth
But whether it achieves its goal or remains an exporter of raw
materials, DC remains dependent;
EX: Following OPEC's ex., DCs tried to form cartels for primary raw
materials like copper & tin in 70s & 80s; failed because ICs
control downstream mkts & prices.
F. Profound environmental degradation
Export of primary commodities: cash crops, minerals; timber.
Desertification, deforestation.
G. Instability >> mil. repression
Military consumes avg. of 5% GNP in 3rd world.
H. Refugees (civil wars)
30 million; most are from Afghanistan, Cambodia, Rwanda
J. Low status of women
Ironic: men gone, so women lead community groups
** Show Oxfam video clip, "Community" (4:20-13:00)
Q: Which paradigms do the best job of explaining this?
III. Sources of hard currency:
A. Loans: private (most), indiv. govts, multilateral (WB, IMF).
Q: Why World Bank is so powerful (only 10% funding)?
Even World Bank is moving toward micro-loans we saw in video.
B. Private investment
MNC = corp that owns or controls facilities outside country in
wh. it is based.
Revenues of MNCs dwarf GNPs of most dev'ing countries.
** Q: Are MNCs good or bad for DCs?
Good:
MNCs further econ devt: bring tech'l innovatns, mgerial skills
creates jobs, creates new mkts (win-win situatn)
MNCs are a force for peace: create liberal econ & pol order;
democracy comes w/ modernizatn.
Bad:
Undermines local industries & trad. societies; adds to existing
probs. by creating new needs & diverting effort fr real sols.
Ex: Nestles infant formula as "modern"
Promote conflict by maintaining econ. disparities bet & w/i ntns;
expansion since WW2 not accompanied by reductn in war.
Q'able practices of MNCs: EX: bribery of local officials,
interventn in internal pol. affairs
Environmentally destructive
-- mining in Latin America & Africa; tropical deforestatn in
Southeast Asia (Japan); "biopiracy"
C. Exports
1. LDC exports are usually low-priced, noncompetitive products
2. Countries can't feed their own people, yet export food
3. Debt crisis >> hard currency goes to creditors rather than
dev't needs.
D. Foreign Aid
Until recently, most aid came from US & SU and was highly politicized;
most of it was military aid.
Corruption rampant (Phillipines, S. Korea)
1. *Q: What is effect of end of Cold War on aid to DCs?
a) Former Eastern bloc countries compete for same pot
b) No superpower competition >> less aid
2. U.S. debate (** If time, have in class.)
Jesse Helms: "Foreign aid is equivalent to pouring money down a
rat hole."
a. Voter perception: it consumes a large portion of budget.
1/4 think it's the single largest item in US budget!
Reality: 0.5% ($13.5 B. in 1994)
In terms of percentage of GNP, US lags far behind other ICs
** Show transparency
b. Over half is military aid
c. Half of nonmilitary aid goes to Israel, Egypt & former
SU & is considered untouchable