Disparities in wealth and development (Reducing disparities)

Reducing disparities

  • Created by: LOLO L
  • Created on: 15-05-13 09:51

Reducing disparities (1)

Reducing disparities with free trade: 

Free trade: The exchange of good and/or services among countries that occurs without barriers such as tariffs or quotas

Gives local companies a chance to become global companies (TNC) i.e. Pollo Campero

Countries who participate in free trade grow faster (Mexico has increased its exports since joining NAFTA)

It makes products less expensive and can encourage citizens to buy them

Improvement to local infrastructure

Attracts foreign direct investment (jobs are created for local workers_

TNC's may take over local producers (i.e. Walmart moving into El Salvador and taking over local supermarkets)

Workers are often exploited by TNC's and paid low wages for long hours

Increases transport costs and contributes to global warming (to ship the products abroad)

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Reducing disparities (1 bis)

Fair trade:

Trade that attempts to be economically, socially and environmentally responsible.

For example, People Tree is a company that follows the principles of fair trade as set out by the WTFO. Working closely with 50 fair trade groups in 15 countries, People Tree is a textiles company aiming to bgring benefits to people at every step of the production process, therefore helping to allievate poverty in some of the world's most marginalized communities.

It reduces disparities by providing a better standard of living, and money to reinvest in farms. 

There are conflicts of interest: consumers want to pay the lowest price, but goods have to be expensive in order for the product to be fair (farmers have to send their kids to school, etc.)

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Reducing disparities (2)

Reducing disparities with market access:

Many MEDC's protect their economies with import tariffs, subsidies and export quotas. Trade isn't free because of existing trade block. The WTO wants to eliminate these measures.

If countries can trade freely, MEDC's will probably specialize in what they are good at: knowledge-intensive products, and LEDC's will probably increase their share of trade.

Expanding trade:

It links the labour markets of MEDC's to the labour markets of LEDC's. This integration had many benefits:

-raised average living standards in MEDC's and accelerating development in LEDC's.

However, it has hit unskilled workers in MEDC's, reducing their wages and pushing them out of jobs. Governments must take action, or MEDC's will continue to suffer from rising inequality and mass unemployment.

Over the past few decades, LEDC's have ceased to be merely export primary products, and their exports of manufactured goods increased massively. They are now a substantial exporter of services such as shipping or tourism.

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Reducing disparities (3)

Reducing disparities with debt relief and SAP's

It is a program for Heavily Indebted Poor Countries (created by the IMD and the World Bank) which relieved 36 countries of part of their debt

It is the poorest countries who have to spend a greater percentage of their GDP on debt repayment.

After decolonisation, the countries received loans. The borrowing of money didn't lead to the expected growth and soon many countries had mountains of debt. As interest payments rise, many countries are unable to pay back their debt. 

SAP's (structural adjustment programs) were designed to cut government expednditure, reduce the amount of state intervention in the economy, and promote liberization and international trade

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Reducing disparities (types of aid)

Reducing disparities with aid: Emergency, short-term aid: aid that is needed immediatly after a disaster such as an earthquake or hurricane. Could be in the form of emergency accomodation, food or clothing (i.e. somalia famine 2010, haiti eartquake 2010)

Bilateral aid: When one country donates money or resources to another (may be in the form of tied aid, where conditions are attached) It is very political and often doesn't reach people that need it most

Charitable aid: funded by donations from the public through charitable organisations

Long-term aid: aims to help the country develop sustainably in the future, through introducing schemes to improve education and health care systems in developing countries

Multilateral aid; Involved government giving money to a central inter.organization such as the World Bank, sho then decide how the money will be spent.

Bottom-up aid: small-scale, targeting specific groups of people - tries to mobilize and empower people - involved direct assistance without government assistance - people are seen as actors in development, local people in charge - women are key producers & make decision

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Reducing disparities (top-down aid)

Top-down aid: 

 They are large-scale development projects that tend to be imposed from above.

 It focuses on providing services through government or charities.

The donors are in charge.

Women are seen as a vulnerable group, passive receivers of aid.

 They may be large infrastructure projects or national health/education programs (i.e. Free education program in Kenya)

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Reducing disparities (pros & cons of aid)

Aid in general:

 -After a natural disaster, aid can be vital in saving lives (it can’t always be provided by the government)

-It can help to build expensive infrastructure that wouldn’t normally be built (new roads, ports or irrigation stations)

-can help build schools and hospitals that improve the health and education of locals.

-local workers are employed. It teaches new skills and builds technical expertise (especially in bottom-up aid)

-many charities provide education about hygiene, diet and health. They improve the well-being of societies

-countries can become dependent on money given by foreign donors, instead of developing their own economy to become independent

-food aid can depress local agricultural prices, which can take local farmers out of business and resulting in greater poverty in rural areas, which increases the risk of famine

-aid may stop because of political changes in donor/receiving country (also, risk of corruption)

-aid might fund innapropriate and/or harmful technologies that can not be sustained after aid has been removed (i.e. nuclear power)

-projects like roads/dam scan cause large-scale environmental problems

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Reducing disparities (remittances)

Remittances: the transfer of money and/or goods by foreign workers to their home countries

The money enters at a local level/community : it provides basic needs

It spurs investment

It can make a significant contribution to many countrie's overall income (i.e. El Salvador received the equivalent of 20% of its GDP from Salvadorians living abroad, mainly in the US)

Reduced unemployment

Reduces pressure on schools, hospitals and infrastructure (house, water, transport, electricity)

Migrants return with new skills (language, ICT)

There is dependency on the sender

It isn't stable, and sensitive for recession (families in Mexico suffered when the crisis hit)

Brain drain -> usually, the youngest, most educated and skilled choose to leave

Creates family division & familiy pressure (the need to provide)

Increased dependency ration in losing country, placing pressure on the government

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Reducing disparities (8)

Modernization theory: 

development takes place via a fixed linear path which exists 

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