Poverty and Development

Question 1

Define ABSOLUTE POVERTY

Answer 1

Absolute poverty is a standard of living that is based on an income level or access to resources, especially food, clothing and shelter, which are insufficient to ‘keep body and soul together’. The World Bank uses the monetary measure of $1.90 a day.

Question 2

Define RELATIVE POVERTY

Answer 2

Relative poverty is a standard of living in which people are deprived of the living conditions and amenities which are customary in the society to which they belong. For example, the UK government measures 60% of median income as the poverty line.

Question 3

What is the liberal (orthodox) view of poverty?

Answer 3

They see ‘development as growth’, with the best way to generate wealth being through market capitalism. They believe that poverty is caused by factors internal to countries (e.g. cultural/religious norms, chronic corruption). The solution is market reform and the integration of the national economy into the global capitalist economy.

Question 4

What is the alternative view of poverty?

Answer 4

They put poverty down to external factors to poor countries, e.g. traditional imperialism and neo-colonialism. They look at culture, education, money combined to look at overall quality of life.
Development should come from the bottom up and should be invested in ways that will preserve ways of life.

Question 5

Define DEVELOPMENT

Answer 5

Development is a deeply contested term that essentially means growth - the act of improving, enlarging or refining. It is commonly linked to economic growth by orthodox theorists.

Question 6

What is the liberal (orthodox) view of development?

Answer 6

Understands poverty squarely in economic terms and implies that development can be equated with economic growth.

Question 7

Define HUMAN DEVELOPMENT

Answer 7

Human development is a standard of human well being that takes account of people’s ability to develop their full potential and lead fulfilled and creative lives in accordance with their needs and interests.

Question 8

Define the NORTH/SOUTH DIVIDE

Answer 8

The North/South divide is a socioeconomic and political division that exists between the wealthy developed nations, (the North), and the poorer developing nations (the South).
The divide is not wholly defined by geography.

Question 9

In what ways is the North/South divide still a useful concept?

Answer 9

• The majority of developed nations exist in the global North, while the majority of developing nations exist in the global South
• Arguably the divide between the North and South is growing - richest 20% of population has 74 times greater income than the bottom 20%.
• Wealth has been concentrated in the global North, those who benefitted in the global South were already rich
  EXAMPLE: in 2001, 900 million who lived in the worlds most affluent nations accounted for 85% of consumption, whereas the poorest 1.2 billion for just 1.3%
• The North can still control the South through neo-colonialism.

Question 10

In what ways is the North/South divide now an outdated concept?

Answer 10

• Rapid growth of the BRICS and MINT economies
• In September 2009 the G7 expanded to become the G20, including developing nations
• Much of inequality is within nations rather than between them
• The South is no longer seen as a single entity
  EXAMPLE: CAR has a GDP per capita of around $630, whereas Qatar’s is $132,000 per capita. Both countries exist in the global south.
• Poverty and disadvantage are now more narrowly concentrated in sub-Saharan Africa and South Asia in particular

Question 11

Define COMPARATIVE ADVANTAGE

Answer 11

Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries.

Question 12

What are the arguments for free trade?

Answer 12

• The theory of comparative advantage. Nations can make the best use of resources through specialisation.
• Allows poor countries to modernise through surplus income which can then be invested in development
• Results in cheaper prices for consumers due to costs saved through economies of scale (purchasing or technical).

Question 13

What are the arguments against free trade?

Answer 13

• Does not protect infant industries and instead exposes them to the global economy
• Tariff revenue is often seen as the most importance source of government revenue e.g. in 2005 it accounted for 54.7% of government revenue for Swaziland
• Not all free trade is desirable and can fuel crime and corruption in some countries.

Question 14

What is the ‘alternative’ approach to development?

Answer 14

• It is a wider measure of poverty than purely economic explanations
• They reject free trade and industrial projects in favour of the environment and self reliance. Should be done through democratic inclusion and giving marginalised groups such as women and indigenous people a voice.
• Recommend that development should come from the bottom up . They like small projects that help keep communities sustainable and protect the global commons (water, land, air forest).
• Believe in fair trade over free trade.

Question 15

Define IMPERIALISM

Answer 15

Imperialism is the policy of extending the power of the state beyond its boundaries, typically through the establishment of an empire.

Question 16

Why are African countries poor?

Answer 16

• Civil wars often result in development going backwards
• The North has superior bargaining power of the South
• Training and experience needed to run an economy was limited to white Europeans, and when they left there was a huge knowledge gap
• Many countries rest on the export of one or two commodity products
• Internal rivalries made it difficult to implement coherent economic plans
• Following independence, their main trading partners were often their former colonial masters

Question 17

Define AID

Answer 17

Aid is the transfer of goods, services or money to support poverty reduction and development in other countries.

Question 18

Who are the key liberal theorists in the aid debate?

Answer 18

Jeffrey Sachs, Dambisa Moyo (neoliberal) Jonathan Glennie

Question 19

What are the main criticisms of international aid?

Answer 19

• Aid leads to dependency
• Aid fuels corruption in developing states
• Foreign aid is often structured to meet Western donor ideals rather than address the needs of the recipients.

Question 20

What is Dambisa Moyo’s view on aid?

Answer 20

She believes that Africa and other aid receiving countries need less aid in order to decrease their dependency on it.
Governments need to become more accountable and less lazy.
Aid fuels corruption - it ‘makes good leaders bad and bad leaders worse’.
Aid is a Western backed industry - leaders want to fill their pockets and western populations want to feel like they are helping. (e.g. Live Aid).
Aid provides a band aid solution and does not tackle the key causes of the issues.

Question 21

What is Jeffrey Sachs’ view on aid?

Answer 21

He argues that aid has not been effective because not enough has been given e.g. the US defence budget per year is $600bn whereas the worldwide budget for aid is just $150bn.
Aid works when it is directed, and other countries should give aid because it is both morally right and in their self interest to do so.

Question 22

What are some examples of organisations giving aid?

Answer 22

• Save the Children

- Water Aid

Question 23

What are the arguments for international aid?

Answer 23

• Aid helps poor countries overcome structural biases that threaten to lead to perpetual under-development.
• Helps to fill the ‘skills gap’ by providing technicians, economists, civil servants and engineers to help a nation build up its own capacity.
• It is a moral requirement of rich countries, and they do not give enough in aid - only 5 OECD states achieved the UN target of 0.7% in aid in 2015.
• Aid can also be given in the form of humanitarian relief, e.g. after natural disasters, like the 2010 Haiti earthquake.

Question 24

Define FAIR TRADE

Answer 24

Fair trade is trade that satisfies moral criteria related to alleviating poverty and respecting the interests of producers in poorer areas.

Question 25

Define FREE TRADE

Answer 25

Free trade is a system of trade between states not restricted by tariffs or other forms of protectionism.

Question 26

What are the benefits of fair trade?

Answer 26

• Means fair pay and working conditions for farmers and producers
• It is better for the environment because it supports sustainable practices that minimise the environmental footprint.
• Supports communities and aids local development - farmers can invest their fair trade earnings in local infrastructure, housing, healthcare, schools etc.
• Gives producers control of their own future - allows producers to build and control their own businesses.

Question 27

What are the criticisms of fair trade?

Answer 27

• It distorts market forces, making some better off and some worse off. The majority of farmers are not fair trade and there will be a fall in demand for their products. Also, the higher prices paid for fair trade goods encourages overproduction, leading to excess supply and lower prices.
• Distracts from the key issue of why farmers are poor - not enough free trade in primary production (e.g. huge agricultural subsidies in USA, EU and Japan).
• Inefficient way to get money to poor countries, in comparison to aid or debt relief, as consumers pay higher prices but a lot goes to the supermarkets in the middle as profits.
• Fair trade products do not make up a lot of the market, so does not make much difference - the vast majority of produce is not fair trade.

Question 28

What was the UN recommended amount that should be given in aid?

Answer 28

In 1970 the UN recommended that rich countries should give 0.7% of total GDP to international aid, which only 6 countries met in 2017.

Question 29

Define DEBT RELIEF

Answer 29

Debt relief is agreements to write off foreign debt or reduce it to ‘sustainable levels’, often linked to conditions of good governance.

Question 30

What are the advantages and disadvantages of cancelling debt in the developing world?

Answer 30

Advantage: The money saved can be invested in infrastructure, schools, education, healthcare (i.e. alleviating poverty). Before, this money was concentrated on repayment of debts.
EXAMPLE: The HIPC initiative has cancelled the debt of 36 countries (33 of which were in sub-Saharan Africa) since it began in 1996. This accounts for $118 billion.

Disadvantages:
1. Lack of conditionality - there is no guarantee that the money saved from debt relief will be invested into economically and socially worthwhile projects.
As Dambia Moyo said, aid makes ‘good leaders bad and bad leaders worse’.
EXAMPLE: the countries with the highest levels of corruption appear lowest on the HDI
2. Sends a dangerous message to other developing countries about their debts and may encourage them to run up more debts in the future as they know they could potentially get away with them.

Question 31

Define the DEBT CRISIS

Answer 31

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 because economic surpluses were insufficient to meet interest repayments.

Question 32

What was the ‘Year of Africa’?

Answer 32

During 2005, the international community devoted unprecedented attention to the plight of Africa, as poverty increased. This prompted the Gleneagles G8 meeting which committed developed states to:

• increasing world aid by $50 billion a year
• cancelling 100% of debt owed to the financial institutions
• delivering conclusions to the Doha round of trade talks that started in 2001.

Question 33

Define CORRUPTION

Answer 33

Corruption is a failure to carry out public responsibilities because of the pursuit of private gain, usually involving bribery or misappropriation of economic aid.

Question 34

What is the relationship between poverty and corruption?

Answer 34

1. Aid money becomes ineffective - corrupt leaders use aid for their own gains
   EXAMPLE: 11% of all aid to Africa ends up in military budgets
2. Poor governance causes corruption - poverty in a society means public officials are underpaid, leading to corruption such as bribes . Liberalisation brings more opportunity for corruption.
   EXAMPLE: the corrupt gain of oligarchs from Soviet State privatisations
3. Corruption is an natural part of early of early development - was common in Britain and France and USA
   EXAMPLE: New York state representatives sold their voters for upwards of $1000
   ‘Corruption oils the wheels of development’

Question 35

What are the differences between fair trade and free trade?

Answer 35

1. Defined differently - fair trade is done in the interests of the producer whereas free trade is done in the interests of the consumer
2. Supporters (and why) - neoliberals support free trade because it allows counties to modernise and specialisation brings cheaper products for consumers. Alter globalists support fair trade because it benefits the producers, helps the environment and supports local development
3. Criticisms
   Free trade - exposes weak infant industries, damages the environment, encourages the exploitation of labour, reduces tax revenue for governments
   Fair trade - distorts market forces, distracts from key issues of why countries are poor and is an inefficient way of getting aid to poor countries

Question 36

Define the WASHINGTON CONSENSUS

Answer 36

The Washington Consensus is a term used to describe the policies of the IMF and World Bank which set out a view as to how reconstruction of the developing world economies should take place.