Aid, Trade and Development Flashcards
1
Q
Aid
A
- Refers to any flow of resources from developed countries to the developing world
- Aid can come in the form of money, technology, gifts or training
- Can be provided by a grant which does not have to be paid back or a loan with interest which does need to be paid back
Types of Aid
-
Official Development Aid: aid from public or official sources such as national governments or international agencies of development
↳ Accounts for 80% of aid
↳ Bilateral Aid: countries in the developed world giving money directly to governments, local communities or businesses in the developing world
↳ 70% of ODA is bilateral
↳ Multilateral Aid: involves the UK (and other countries) donating money to international agencies such as the World Bank and the European Commission and there are over 200 international agencies which provide aid to developing countries
↳ 30% of ODA flows through such international agencies -
Non-Governmental Organisation (NGO) Aid: independent charities such as OXFAM which raise donations from the general public
↳ thousands of NGOs ranging from the very large and well-known eg Oxfam which focus on a range of development projects, to the very localised and specific, which may consist of just a few individuals focusing on one development issue in one area or the country
↳ NGO aid makes up 20% of aid -
Private Aid: international foundations which are set up by wealthy individuals or corporations such as the Bill and Melinda Gates Foundation
↳ accounts for a relatively small proportion of aid flows
2
Q
Argument’s for Official Development Aid
A
-
Early Modernisation Theorists: essential to inject aid into countries to establish infrastructure and change attitudes
↳ From the 1950s to 70s aid programmes seemed to have a positive effect on many developing countries as both economic and social development increased, however this progress seemed to stall from the late 1970s - Rostow: aid is a good thing because if developing countries were injected with money and western expertise it would help erode ‘backward’ cultural barriers and kickstart their economies
-
Neo-Modernisation - Sachs: large scale aid can work when it is practical, targeted, science based and measurable
↳ aid money has led to mass immunisation of children against diseases such as smallpox and measles, polio, diphtheria
↳ smallpox was practically wiped out with $100 million of very targeted aid aimed at vaccinating those most at risk -
Barder: every year foreign aid pays for 80% of immunisations and saves 3 million lives a year
↳ in the 1960s, Western Aid assisted in the green revolution in China, India, and South East Asia which saw rice yields increase by 2-3x
↳ Some counties were then able to use the income generate by these cash crops to diversify and grow their economies, transforming into NICs (Asian Tiger Economies) -
Riddel: substantial body of evidence that South Korea, Botswana and Indonesia have all benefitted economically from ODA
↳ rich countries need to shoulder the blame for the failure of aid because they often fail to distribute it to the countries that need it
↳ eg less then half of all aid is channelled to the poorest countries and there are too many donors and projects which fail to cooperate with each other and undermines the effectiveness of aid
↳ aid agencies fail to promote a sense of ownership of development projects among local people and so the projects fail because the locals don’t support them -
Hans Rosling: extreme poverty breeds problems such as war and conflict so if we lift people out of extreme poverty, they will become the customers of tommorow
↳ a lot of middle income countries have benefitted from aid -
Paul Collier: aid is merely a holding operation preventing things from falling apart but without aid, the countries of the bottom billion would have become even poorer than they are today
↳ the more aid is increased, the less is the return on economic growth
↳ aid is often rendered ineffective but two traps - conflict and bad governance trap - which traps prevent aid from being spent effectively and because a significant proportion of aid money gets siphoned off into funding the military or simple into the pockets of rich elites
3
Q
Arguments against ODA
A
- Dependency Theorists: concerned about the way in which aid is distributed and for what purpose
- Neoliberals: trade is a more effective mode of development and highlight the problems with ODA
-
Marren: aid is shaped by the self-interest of donor countries and may be used as a ‘sweetener’ to gain access to resources and markets and foster better trade links
↳ donor countries stand to gain more from from giving aid to the slightly better off rather than the very poorest - Aid may be a way stimulating the donor economy: some counties attach conditions to aid stipulating that a proportion of the funds must be spent on goods manufactured in the donor country (‘tied aid’)
- Aid may be a way of strengthening political links and securing strategic interests ↳ eg countries which are viewed by the Americans as allies in the ‘War against Terror’ are generously rewarded with aid
-
Moyo: the long term effect of the ‘aid injection’ has been to decimate the local economy and make the local population dependent on foreign aid from abroad
↳ in 1970, 10% of Africans lived in poverty - now it’s as high as 80/85% living in poverty -
Misuse of aid: too much aid money is spent on salaries, admin fees and conference so reduced money is spent on actual development
↳ aid agencies as the ’lords of poverty’ -
Dependency Theorists: political agenda to aid as the allocation of US and UK aid is often depended on whether the political ideology of the developing country is met with Western approval
↳ main point of aid is to make recipients dependent on the donors
↳ during the cold war developing countries were rewarded with aid if they aligned themselves with the capitalist west and against the socialist regimes of Eastern Europe and China
↳ Tied aid is now illegal in the UK
↳ The damaging strings that the World Bank and the IMF attach to aid, loans and debt relief often make it more difficult for poor countries to effectively tackle poverty which often force poor countries to undertake SAPs (cut vital spending on health and education or to privatise their public services) which provide opportunity for international companies to take these services over - Post-Development Perspective: ODA has focused on monstrous projects such as the building of dams and roads which have sapped local initiative, harmed the environment and lead to social injustices
-
People-centred approach: focusing on aid for developing countries suggest that Africans are helpless
↳ concerts such as Live Aid perpetuate the idea of Africa as a helpless continent incapable of helping itself -
David Lamy: ‘white saviour’ approach is problematic and argues comic relief reinforces stereotypes about people in Africa being helpless
↳ Local people should tell their own stories - it’s doing very little to educate the public and does nothing to show the emerging middle class etc
Moyo - Aid encourages corruption
- Growth cannot occur in an environment where corruption is rife
- Corruption leads to worse development projects: corrupt government officials award contracts to those who collide in corruption rather than the best people for the job
↳ results in lower-quality infrastructure projects - Aid is corrosive in that it encourages exceptionally talented people to become unprincipled: putting their efforts into attracting and siphoning off aid rather focusing on being good politicians or entrepreneurs
4
Q
NGOs
A
- NGOs are groups of concerned citizens who are independent of the government and business, and are normally non-political and non-profit organisations
- Typically have charity status and raise funds through a combination of voluntary donations from the public, but also grants from governments and other international development institutions
- Focusing on development in one region and specialising in one area however there are global institutions have budgets and work in several countries such as Oxfam and Action Aid
Key Functions of NGOs
- Development Function: focusing on small scale aid projects such as local irrigation schemes or developing rural health and education schemes in conjunction with local communities
- Empowerment Function: NGOs aim to empower local communities and this involves striving to give local communities a role in how aid projects are developed but also lobbying international institutions like the European Union to establish trade rules which do not unfairly advantage Western companies and farmers
- Education Function: developing education for schools and advertising to keep developing world issues in the public consciousness eg Oxfam
- ’Emergency Aid Function’: when natural or social disasters occurs, NGOs are often the front line in the delivery of emergency humanitarian aid
5
Q
Strengths of NGO’s
A
- Campaigning for sustainable development: NGOs have played a major role in pushing for sustainable development by campaigning for governments and corporations to take actions on a range of social and environmental issues, such as the regulation of hazardous waste, the destruction of rainforests, land mines, child labour and slavery
- Education and consciousness raising: NGOs can be bottom up catalysts of social change
↳ Desai: NGOs are particularly good for women in terms of challenging customs, ideas and beliefs that perpetuate unequal gender relations
↳ Kilbey: how NGOs have set up self-help groups for poor women in India, which have made a massive contribution to women’s empowerment, which in turn has led to the alleviation of poverty, a reduction in both material and infant mortality rates, an increase in the number of girls in schools and an improvement of women’s rights in rural areas
6
Q
Criticisms of NGOs
A
- Dependent on the support of Western populations often mean ‘populist’ aid agendas
- Hulme and Edwards: many NGOs are actually financed by Western governments and international agencies (making them less unbiased and free as we would think)
7
Q
Trade and its role in International Development
A
- Free Trade: a policy formed between two or more nations that permits the unlimited import or export of goods or services between larger nations
- When nations don’t have free trade agreements which are treaties that outline the parameters of trade between trade partners, tariffs are imposed on goods and services
↳ Tariffs = taxes that nations impose of imports and increase the costs of goods which is passed onto consumers - Free trade eliminates tariffs and makes corporations more competitive in foreign markets and many critics of free trade question whether it is beneficial for countries
- Smith: when the countries in a free trade agreement made products and provided that product for the other country at a cheaper rate than the receiving country could produce it, both countries benefitted
- Ricardo: expanded on Smith’s ideas arguing that countries should do they do better and cheaper than other countries - called comparative advantage
- Free Trade also helps countries generate foreign currency they can use to purchase the things they need
↳ Free Trade opens foreign markets and lowers barriers for corporations that otherwise might not be able to compete against local competitors
↳ without free trade agreements foreign corporations must pay tariffs that increase their cost and decrease competitiveness -
Obvious relationship between trade and economic growth: the worlds top 5 countries, ranked by GDP, export (and profit from) 40% of the world goods
↳ The bottom 50 GDP countries export less than 1% of the worlds goods
8
Q
Arguments for Trade as a strategy for development: Modernisation Theory and Neoliberalism
A
-
Modernisation Theory and Neo-Liberalism: developing countries need to increase their share of world trade (export and import more) in order to develop, and both recognise that most developing countries have enormous potential to increase exports, given that they have competitive advantages over the west
↳ an abundance of natural resources (which the west no longer has) and abundance of cheap labour - Modernisation theory: prefers aid to encourage trade and increasing trade with other countries is a crucial part of ‘climbing the ladder of development’ (Rostow’s 5 stages)
-
Neoliberalism: developing countries need to create a ‘business-friendly’ environment in order to encourage inward investment from wealthy individuals and TNCs
↳ Neo-Liberal free market economic policies - Friedman’s ‘Golden Straightjacket’
↳ Many developing countries have set up huge Export Processing Zone or Free Trade Zones in order to attract TNCs
↳ they offer incentives for TNCs to invest, including tax breaks, low wages and lax health and safety legislation
9
Q
Arguments against ‘Free’ Trade as a tool for development
A
-
Dependency Theory: the last 70 years of free trade have benefitted the ex-colonial powers more than the poor countries of the south
↳ Some countries have managed to ‘climb the ladder of development’ but many countries have been left lagging behind - Poorer countries tend to export low-value primary products such as agricultural goods, while richer countries export higher value, branded goods, advanced technologies and services
↳ poor countries can’t keep up - Global capitalist system depends on an International Division of Labour: it is essential to pay as little as possible for the raw materials and the manufacturing in order to keep up demand and keep the system going
- Lack of regulation: workers have few protections in developing countries - without health and safety and minimum wages in place, working in factory which produces goods for export doesn’t necessarily pay someone a living wage
- Poor trade deals often only benefit a few wealthy individuals
-
Unfair trade rules keep poor countries poor
↳ the WTO which is supposed to encourage free trade on equal terms allows rich countries to impose tariffs on the exports of developing countries, while forcing developing countries to open up their markets to Western exports making it impossible for poor countries to compete - Even if a country can generate an income, much of the money goes abroad - either into the offshore accounts of TNCs or it gets used to service debt-repayments
- Marxism: suggest that the employment opportunities opened up by trade and TNCs are a form of neo-colonialism and that TNCs are exploiting workers in the developing world as they are paid a fraction of their western counterparts and have less employment legislation to protect them
- Marxists: trade deals that the developing world can negotiate with the West are uneven and often prices are set by Western commodity speculators rather than by the seller
10
Q
Agencies of Development
A
- Agencies of development are those organisations and institutions that play a part in development
- TNCs: companies such as Shell, Nike or Apple which in more than one country. The annual revenue of the largest TNCs are largest than the GDPs of some of the smaller countries such as Portugal, and several times greater than the largest African nations
- World Trade Organisation (WTO): exists to promote free trade across national borders & helps settle trade disputes between countries and TNCs
- World Bank: provides aid originally to fund large scale development projects but more recently has started to focus on tackling global problems such as global warming
- International Monetary Fund (IMF): promotes international monetary cooperation and exchange rate stability & bails out bankrupt countries by giving loans
- United Nations, Nation States, Non-Governmental Organisations (Charities)
11
Q
Role of TNCs in Development
A
- Businesses that operate across international borders, though most of them have their headquarters in the USA, Europe and Japan
Key characteristics of TNCs
- Seek competitive advantage and maximisation of profits by constantly searching for the cheapest and most efficient production around the world
- Geographical flexibility: shift resources and operations to any location in the world
- Mainly located in the developing world
- Economically very wealthy: in 2013, 37 of the 100 largest economies in the world were run by TNCs
- Responsible for 3/4 of global trade
- Walmart: the worlds largest cooperation has an annual revenue of over $500 billion compared to Poland’s GDP of $465 billion
12
Q
Arguments that TNCs promote development
A
- Modernisation Theory (Rostow): injection of capital as essential in the pre-conditions for take-off phase of development and TNCs were one of the institutions which could kickstart the process of development by investing money, technology and expertise that the host country did not possess
-
Neoliberals: TNCs need trained workers and this should raise the aspirations of local people and encourage improvements in education
↳ encourage international trade which could increase economic growth and access to overseas markets
↳ all of the above means wealth generated from TNC investment and production should eventually trickle down to the rest of the population
13
Q
Arguments that TNCs do not promote development
A
- Dependency/Post-Development Theorists: TNCs are part of the neo-colonial project and their main focus is to maximise profit by extracting resources from poor countries as cheaply as possible, paying workers as little as possible and externalising as much of the costs of production as possible
Bakan - TNCs exercise power without responsibility
- Ecological Decline and Damage: eg Shell in Nigeria (major oil spills in the Delta in the last 50 years ruined water and land) & Coca cola in India; the area now have inadequate water supplies to keep their crops watered and their appears to be a clear link between the corporation moving into the region and the destruction of livelihood
- Pay workers low wages: eg Nike, Adidas and Primark profit from sweatshop labour (workers manufacture their products working extremely long hours in poor conditions and for extremely low wages)
-
Illness and death in pursuit of profit: Union Carbide in India exploded leading to deadly gas fumes leaking into the surround atmosphere and toxic chemicals
↳ epidemic of cancers, menstrual disorders, ‘monstrous births’, cant muster the strength to move - TNCs profit from human rights abuses and government corruption
14
Q
Role of the WTO in Development
A
- Governments and businesses negotiate rules of trade, settle trade disputes once these rules have been established
- Has trade rules in place covering not only goods but also services such as telecommunications, banking and investment, transport, education, health and the environment
- Committed to the concept of free trade, believing that unlimited competition in the free market results in efficient production, innovation, cheap prices and the fastest possible rates of economic growth
↳ see government intervention as stifling businesses and being harmful to economic growth
↳ WTO trade agreements and trade rules have tended to focus on reducing government intervention such a the reduction of tariffs, subsidies and restrictions on imports
15
Q
Criticisms of the WTO
A
- The WTO has hidden goals and it is really interest in helping rich countries and TNCs maintain their economic dominance
-
Chang: WTO trade rules are unfair and biased against developing countries; they pressurise poor countries to open up their economies immediately to western corporations and banks by abandoning tariffs on western imports
↳ developed countries are still allowed to impose quotas on the imports of manufactured goods from poor countries in order to protect their manufacturing industries - Mckay: WTO trade rules have rigged the terms of global trade in favour of the West
-
Notoriously undemocratic: decision making at the WTO is dominated by a small group of Western members, with representatives of developing countries being outnumbered by the representativeness of wealthier countries and TNCs
↳ tends to see free-trade as more important than protecting rights or the environment
