- Created by: tsmithbecerra
- Created on: 28-10-18 00:59
Strengths and Weaknesses of Debt Reduction schemes
- Allow a country’s loans to be rescheduled to make them more manageable
- Make a country’s economy more competitive
- Improve foreign investment potential by removing trade and/or investment restrictions
- Boost foreign exchange by promoting exports
- Reduce government deficits through cuts in spending
- Often accompanied by a shift from domestic food cultivation to production of cash crops or commodities for export.
- Reduce government expenditure by cutting social programmes, e.g health and education, and abolishing food and agricultural subsidies
- Privatisation of state enterprises to cut government expenditure results in assets being sold to TNCs
- Increase pressure on countries to generate exports to pay off debt. This likely to increase deforestation, land degradation and other environmental damage.
- Some HICs accused of protecting their own interests.
Strengths and Weaknesses to identify how successfu
Reducing poverty: Unsustainable debt can be a considerable burden for a country, and can lock it into poverty, and prevent it from progressing towards greater development. Servicing debt creates a considerable opportunity cost for countries – the more that debt is repaid the less funds are available for reducing poverty and increasing development. Reducing or totally forgiving debt could therefore help reduce poverty and free-up resources for other uses, such as education and infrastructure.
Improving growth and jobs: Improvements in efficiency and productivity will, in turn, stimulate growth and development, and enable governments to implement more progressive tax policies which can both stabilise the macro-economy as well as provide a flow of funds into its central bank. Infrastructure is especially significant for land-locked countries. By reducing debt repayments, more national income is available for generating growth, and this will generate jobs.
Benefits to the global trading system: Of course, creditor countries do not necessarily lose in the long run by forgiving debt – they can gain in both a multi-lateral way - through the development of the global trading system which enables them to gain from general increases in export earnings – and in a bi-lateral way as the relief of debt may mean gains for specific exporting firms and those who may win contracts to improve infrastructure.
Moral hazard: Critics of debt relief – usually the creditor countries - argue that it may send out the wrong signals to potential and existing borrowers. For example, by providing an insurance policy against poor financial management by national governments, debt relief creates the problem of moral hazard, so debtors do not take proper steps to prevent debt problems arising in the future. Furthermore, it may be argued that borrowers do not have a chance to learn from their mistakes, and continue to make the same mistakes that led to debt problems in the first place. This is certainly the view of Greek creditors, including Germany, who may take the view that debt relief will simply encourage debt defaulting in the future.
Higher interest rates: Cancelling debt, or the possibility of debt default, means that creditors will look to increase their expected return on new lending, meaning that interest rates on new loans are likely to increase - this in turn will have a negative effect on other borrowers. Furthermore, lenders in developed economies may be less likely to lend in the future.
Resources are diverted: Lost revenues from debt relief could have been used to help other developing economies who are also in debt, but have not reached unsustainable levels. To this extent, every unpaid dollar is one dollar less for, perhaps, more worthy lending.
Aid vs Trade
Aid is bad
- Afghanistan Case Study/Top down aid: For every $1 of Aid from rich to poor countries, between $7-10 dollars returns to the rich countries. (Debt repayments, interest, tarde, private sector transfers, capital flight). UN reveals the net transfer of wealth is $200 billion per year from poor countries to rich countries.
- Purgal Dam in Malaysia - done without consulting people and may be tied in arms deal
Aid is good
- Aid had a positive effect on democracy in Africa after the cold war. After 1992, foreign aid increased the likelihood of a democratic transition.
- E.G Senegal 2010 donor pressure led to the former president changing the constitution, so that citizens could fairly elect a new president.
- Mali WaterAid
- Aid has helped accelerate GDP growth over the last 30 years by 1% -> the poorest billion don’t see a decline in their income
Trade is Good
- Trade is good because it brings economic growth.
- Fair Trade
- Kuapa Kokoo
Trade is Bad
- Indonesia ‘cashew nut farmers not being paid” - world vision add notes
- Trade Dependency theory, causes of debt (Arab-Israeli conflict), Tariffs and MNCs.
- Factors affecting trade - global inequalities
Trade Wars: Steel
Trade Wars: Steel - Successful
More than 20 US steel producers went bankrupt between 1997 and 2002, and those that remained were considered to be inefficient and costly compared with foreign counterparts. So, four months after the Doha talks, the USA imposed tariffs of up to 30% on steel imports to protect its own fragile steel industry.
The crux of the problem is that world steelmaking capacity is 20% higher than current demand. Although restructuring has already occurred, more is bound to happen both in the USA and in other parts of the world.
The reaction of America´s trading partners was predictable. Trade unionists warned that the new trade barriers could result in 5,000 job losses in the UK and a total of 18,000 in the EU.
The countries affected by the new tarrif argued that the USA was breaching the terms of WTO. They announced a demand for compensation, but as it takes two yeaars for the WTO to reach a judgement, significant damage might be done in the intervening period to the steel industries of those nations affected.
To its credit the EU stated that any retaliatory action would be within WTO rules. Overall this dispute was the last thing that global steel industry, worth an estimated $500 billion, wanted.
Trade Wars: Tea
Trade in tea: Unsuccessful?
Tea, like coffee, bananas and other raw materials, exemplifies the relatively small proportion of the final price of the product that goes to producers. The great majority of the money generated by the tea industry goes to the post-raw material stages of processes, distributing and retailing), usually benefitics companies in HICs rather than the LIC producers.
In 2006, a report by the Dutch Tea Institute drew particular attention to the probelm of falling prices, the pressure to limit labour costs of tea production workers, and the urgent need for improvement of labour, social, ecological, and economic conditions throughout the tea sector in LICs.
The global tea market is dominated by a small nomber of companies including Unilever and Sara Lee. About half of all the tea is produced internationally. Annual export sales of tea in it's raw state are worth almost $3billion, the retail value of the global tea business is of course much higher. The large tea companies have immense power over the industy, and global supply is rising at a faster rate than consumption, keeping prices low.
Tea producers complain that the global trading sytem prevents them from moving up the value chain by processing and packing the tea they grow. This is mainly because they would find it very difficult to achieve the economis of scale of the global tea companies.
The state of Ghana retains full control on the cocoa marketing system and sets a minimum price based on its projected sales income less expected costs. This makes the cost of state support to the sector of critical importance – the more spent on government workers, the less there is available for farmers. At times, farmers have received less than 30 per cent of the export price, with the rest going to government. Farmers were largely powerless.
Kuapa Kokoo is a democratically run organization, formed by a group of farmers in 1993,to sell their own ghana. It was supported by the UK Department for International Development, and ensures farmers are paid for what they produce and are not cheated by middlemen. It has flourished, growing from 2,000 to more than 60,000 farmers in 1,350 villages with in 38% of members being women. Kuapa Kokoo’s members produce almost 6% of Ghana’s annual crop and have earned a good reputation for repayment of loans, cocoa quality and timely delivery within the industry.
As a successful cocoa trading company, Kuapa has joined other traders to form a representative body to lobby the government, and its voice is particularly powerful because it is the only farmer-owned trading company in Ghana. Currently, farmers expect to receive around 70% of the export price. Because it is well organized at the village level, Kuapa Kokoo has been able to leverage many other supports from government, development agencies and sponsorships from local service providers (e.g. mobile phone companies) for its members, including scholarships, credit, farm inputs and development project resources.
DFID in action: Bangladesh, Cyclone Sidr, 15th Nov
6 million people affected and the death toll could reach 10000. 300000 houses have also been destroyed. Crops and agricultural land has also been destroyed.
2.5 million pounds contributed by the DFID, channelled through the UN for immediate relief efforts.
A further 4.5 million pounds added to help the survivors rebuild their homes and livelihoods. 12 lightweight boats provided and 100000 blankets for homeless people.
DFID money being used to rebuild more than 16000 homes and provide food to 70000 families and clean water to 260000 families.
UK’s disaster relief aid in Bangladesh now totals almost 12 million pounds.
WaterAid in Mali
WaterAid was established in 1981 in Mali, in West Africa. It one of the world’s poorest nations, with a harsh, deteriorating environment.
Currently 65% of the country is desert or semi-desert, as the already low rainfall levels are falling further, and desertification is spreading.
WaterAid has been active in the country since 2001. Eleven million people lack access to safe water, so WaterAid is running a pilot scheme in the slums surrounding Mali’s capital, Bamako, providing clean water and sanitation services to the poorest people.
Its main objective is demonstrate to both government and other donors that projects in slums can be successful, both socially and economically, however theres a concern that the fully privatised water industry frequently fails to provide services to the poorest urban and rural areas.
WaterAid in Mali
WaterAid has financed the construction of the area’s water network; It is training local people to manage and maintain the system, teaching them how to raise money to keep it operational; It encourags the community to invest in its own infrastructure is an important part of the philosophy of the project; It empowers the community to continue their own development into the future, so that WaterAid can move on and help others will little effect on Mali; There has already been significant improvements in the general health of the community. The general view is that it takes a generation for health and sanitation to be properly embedded into people’s daily life.
In the longer term, communities are able to plan and build infrastructure that enables them to cope better in times of hardship. In areas with WaterAid projects, life in times of drought is eased because:
Previously in times of drought women in particular would spend hours in search of water, leaving little time to find food; Children would also miss out on education in the search of water; Cattle can also be watered, rather than sold or left to die because of water shortage; During famines, with sanitation, water and hygiene, people are less sick and so are better to fend off diseases.
Aid - Top-Down and Bottom-Up
The Hunger Project is one of a number of organisations that have adopted a radically different approach. The Hunger Project has worked in partnership with grassroots organisations in Africa, Asia and Latin America to develop effective bottom-up strategies.
The key strands in this approach have been mobilising local people for self-reliant action, intervening for gender equality and strengthening local democracy.
The financing of the Pergau Dam in Malaysia with UK government aid is an example of a capital-intensive government-led aid programme, set up without consulting the local people.
Work began in 1991 and around the same Malaysia bought ₤1 billion worth of arms from the UK, leading many people to believe the 234 million in aid was tied to the arms deal.
Afghanistan - Case Study
Human Rights Training programmes were implemented by many agencies. These training courses were determined by aid establishments as a priority, not by Afghans themselves, who lacked basic health care. Authority and decision-making power was given to people who often lacked the fundamental knowledge of Afghan customs, traditions and overall culture let alone the complexity of the war nor the role of religion.
“When the international community entered Afghanistan, Afghanistan was rendered empty. A blank slate. And we poured into this empty land our goals, our visions and our approaches for the country. In effect, we became the architects of their future, with no domestic consent.”
They wrote policies, restructured government, wrote national laws, imposed elections and planned the economy for the next 12 years. All, without any consent from the people that it will affect.
“The reason why we cannot help because our interventions are more about us. When the west engages with other societies, especially non western ones, it’s trying to find a glimpse of itself in them. Its trying to find western values, ideals and principles, and when they can’t find any, it selts up an aid relationship… to reform them in becoming more like us.”
“It took western Europe over 200 years of struggle and violence to achieve state maturity. But Afghanistan? Afghanistan has like a minute, or a decade, to accomplish the same task"
Tourism - Socio-Cultural Impacts
Negative Social and Cultural Impacts Examples
The abandonment of the traditional values and practices - e.g South Spain - Benidorm, Mombasa Kenya
Displacement of people to make way for tourist developments - eg FIFA 2014 Brazil
Abuse of human rights by governments and companies in the quest to maximise profits - eg the actions of the military in Burma, forcing people from their homes to make way for tourism development, and using forced labour to construct tourist facilities.
Positive Social and Cultural Impacts
Learning about and embracing new cultures - Rotorua New Zealand
A multitude of cultures congregating together for major international events such as the Olympic Games can have a very positive global impact
Tourism - Economic Impacts
Negative Economic Impacts
- Economic leakages: When a tour operator from the UK will build a hotel in the south of Spain, all inclusive so people don’t need to leave the hotel, and all the money will go to the UK rather than be re-filtered into the Spanish community
- Tourism is labour inensive, providing a range of jobs for woomen and young people. However, most local jobs created are menial, low paid and seasonal.
- Money borrowed to invest in the necessary infrastructure for tourism increases the national debt
Positive Economic Impacts
- Tourism benefits other sectors of the economy, providing jobs and income through the supply chain. This is called the multiplier effect because jobs and money multiply as a result of tourism development. For example, people who participate in the Walk of St James will most likely stay at many hostels, eat and drink in many towns and villages and spend their money in the more rural parts of Spain instead of the major cities.
- By providing employment in rurual areas, rural-urban immigration can be reduced
Tourism - Negative Environmental Impacts
Negative environmental impacts
In so many LICs, new golf courses have taken land away from local communities while consuming large amounts of scarce freshwater. It has been estimated that the water required by a new golf course can supply a village of 5000 people.
In both Belize and Costa Rica, coral reefs have been blasted to allow for unhindered watersports. Like fishing and grazing rights, access to such common goods as beach fronts and scenically desirable locations does not naturally limit itself. As with overfishing and overgrazing, the solution to ‘over tourism’ will often be to establish ownership and charge for use.
Too many tourists can have a negative impact on the quality of life. Known as overtourism, this phenomenon is creating a burden in such destinations as rural Patagonia, Chile, and urban Barcelona, Spain.
The slopes of Mount Everest are littered and, in Iceland, tourists far outnumber the resident population. In the U.S. where the top 10 parks saw more than 44 million visitors in 2016, the National Park Service is looking for ways to protect natural treasures in light of year-on-year increases in visitor numbers.
Tourism - Positive Environmental Impacts
Positive environmental impacts
The environmental impact of tourism is not always negative. Landscaping nd sensitive improvements to the built environment have significantly improved the overall utility of some res. On a larger scale, tourist revenues cn fund the designations and management of protected areas such as national parks and national forests.
Education is clearly the key to prevent negative impacts. Scuba divers in the Red Sea, who were made to attend lecture on the ecology of the local reefs, were found to be eight times less likely to bump into corl let alone deliberately up pick a piece.
Patagonia, Chile - Minor Case Study:
Whale watching is now a big pull for Patagonia, Chile. There are many issues around whale watching, although Patagonia has a pretty good reputation generally for doing it responsibly. However, there are also good opportunities to do land based whale watching, the Península Valdés being the most popular spot. Here, you can stand on seasickness- and diesel-free dry land and watch southern right whales.
Ecotourism - Galapagos Islands, Ecuador
The Galapagos Islands are a small chain of islands found 1,000km from the West coast of South America. They are Ecuadorian, and are home to an incredible array of animals and plants. Approximately 90% of the Islands are designated as National parks and there are only 20,000 permanent human residents.
The Galapagos Islands represent a place in the world were ecotourism takes place. This is environmentally friendly tourism where the people involved seek to protect the environment as much as possible and to allow for some level of education as well.
It was not always so. In early 2007, the governmet of Ecuador declared the Islands at risk, waring that visitor permits and flights to the island could be suspended. The identified problems include:
A growing local population, where 15000 people are believed to live illegally in the islands. This puts a strain on the limited resources.
Ecotourism - Galapagos Islands, Ecuador
A ‘Special Law for the Galapagos’ has been created to protect the environment. In many cases of ecotourism, some of the profits go back into protecting the environment and the tourism is small scale, with low visitor number densities and environmental approaches to accommodation and food. The Galapagos are run along these lines because tourists visit under these strict rules:
- They can only visit on small ships of 10 to 16 tourists, most of which are owned by local people;
- The tourists can only visit a limited number of places on the Islands, thus protecting the rest of the Islands
- The tourists are only allowed to visit in small numbers.They also have to pay a £25 fee to promote conservation on the Islands
- Visitors also receive information on how to conserve the Islands prior to their departure to the Islands.
However, local people make a valuable living from tourism and there are few other employment opportunities available. Tourists also generate a lot of businesses in the local economy as guides, restraints, hotels, boats owners and cleaners all benefit.