Geo File - Trade vs Aid

Geo File - Trade vs Aid

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Geo file
January 2009
Online 587
Callum Rae
Trade Versus Aid
Geofile will look at both approaches, countries were being encouraged
Introduction how they have been applied and what to use the same kind of model that
Since the 1950s we have been familiar effect they have had upon the third Western countries had adopted in the
with the concept of the `third world' world. past, a capitalist system of trading
or `developing world', a recognition coupled with a powerful industrial
of the gross inequalities that exist sector. The theory was that since it
between the world's nations. This Trade and economic growth had worked for the West, it should
difference between countries When the concept of the developing work for the rest of the world too.
is sometimes referred to as the world gained recognition in the 1950s
`Development Gap'. Today's LEDCs and 1960s, the principal approach Even though it was clear by the end
actually make up over two-thirds of to improving conditions was to find of the 1960s that this model was
the world, in terms of both area and ways for those countries to generate not having the desired impact upon
population, consisting of the majority high levels of economic growth. economic growth, the basic concept
of Africa, Latin America and much Economic growth can be defined as of using trade to promote economic
of Asia. These countries are almost the increase in output of goods and growth to improve a country's
all former colonies of the European services that a country produces over conditions has remained at the core
powers, and are characteristically a period of time, which can be seen of much of development thinking
very poor in economic terms when by an increase in GDP . Economic to this day. This is partly because
compared to the West. A typical growth is considered essential to the the attitude that `the West did it, so
LEDC has little in the way of development of a country, increasing can they' has remained strong with
industry or technological advances, the amount of wealth being generated certain international groups, but
with the majority of production being in the country, and in theory that also because economic growth is
low-level agriculture. Many of these extra wealth allows for the living still seen as highly desirable. This is
countries also suffer from chronic conditions of the country's population true even for development thinkers
poverty and related issues of famine, to improve. who are less concerned with simply
disease and violence. economic results. As the majority of
In the 1950s and 1960s the approach any population is seen to be involved
For the last 60 years efforts towards taken was that developing countries with the local market in one way or
the development of the impoverished needed to increase economic growth another, the generation of economic
world have been characterised by via a process of modernisation. growth is seen to have a `trickle-
two key approaches, with highly Essentially this consisted of two key down' effect, providing extra money
debateable results in each case. The elements, the first being an increase and resources. This extra wealth
first is the concept of using trade in international trade and the should ideally allow for new industry
to promote economic growth. The second being a process of intensive to begin and for more goods to be
second is the provision of aid by the industrialisation to help provide produced, allowing for more trade
wealthy West to the poor South. This goods for export. In effect, developing and further economic growth. The
Figure 1: World map showing percentage of population living below poverty line
No data
Source: CIA World Factbook, 2008
Geofile Online © Nelson Thornes 2009
GeoFile Series 27 Issue 2

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January 2009 no.587 Trade Versus Aid
adoption of Western-style capitalism Figure 2: The World Trade Centre in is further exacerbated by Western
is also seen to be beneficial politically, Seoul, South Korea. countries seeking to protect the
as capitalism tends to foster interests of their own farmers. A good
democratic institutions, allowing example of this is the EU Common
for the population to be better Agricultural Policy. Countries also
represented and for fairer conditions leave themselves open to exploitation
to be established.…read more

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January 2009 no.587 Trade Versus Aid
They question whether trade and Figure 3: ActionAid project: women top'. These are typically capital-
wealth alone are enough to deal with in this Indian village now market their intensive schemes aimed at
problems like famine, war, corruption own produce. improving the country as a whole.…read more

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January 2009 no.587 Trade Versus Aid
financial aid has been cut too. Many adjustment if they are to receive trade by themselves are enough to
donor countries lost the political will much-needed financial aid from these make a significant difference to the
to maintain aid programmes. The institutions. developing world, but must be used as
current figures on aid expenditure for part of a much greater framework of
members of the OECD (a group of the Despite these problems and international development.…read more


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