SAPs, Debt crisis and Resource curse in Africa Flashcards
Resource curse
inequality, can’t utilise resources
trend in underdevelopment
Political policies can…
have a major effect in effectiveness
over-reliance and vulnerability to market means…
Hard to plan economic policies
Hit by slumps in global market
Long term commodity prices (natural resources) decreasing in global South
Ricardo - comparative advantage
increased production
expansion of capitalism to new geographical locations
liberal economic globalisation
removes barriers and protectionism
free flow benefits comparative advantage
4 basic components of SAPs
- currency devaluation
- removal/reduction of state
- elimination of subsidies in an attempt to reduce expenditure
- trade liberalisation
Scale of debt - pre 1970
$18 bil
Scale of debt - today
$2.7 trillion
Other side
Dependency on oil and gas
power of finance and capital
rise of new poles of capital accumulation
What did the OPEC do to cause the financial crisis of 1982?
fixed the price of oil
Gas crisis increased by…
280%
Dramatic increases in the years
1973-74 and 1979-80
Recyling petrodollars is..
OPEC = increased income
recycled capital in US banks to lend to developing countries for modernisation and basic needs
1981-82
Decrease in export prices associated with global recession
High interests
1982
Debt crisis
Mexico = bankrupt
IMF steps in
Reasons for SAPs
modernisation = failure
state role = inefficient
comparative advantage needed
neoliberal model = solution
Impact of debt crisis
GDP fell to 1.7% (1980-90)
1988 - 1 billion chronically underfed
violence
Manufacturing declined: modernisation reversed
e.g. Zambia
1980s: 25000 employees
2002: below 10,000
Increased developing countries debt because…
Loans = hard currency
Value of exports decreased
re-financing of loans
To reduce debt…
Reform
Relief
Growth
1996
debt cancellation of $97 billion
Not all benefitted: vulture funds, re-accumulation of debts
Economic cycle =
periods of boom and bust
Who did well during this period?
China
Did debt cause poverty?
No, but worsened it.
Trade = growth, but doesn’t escape relative poverty
