World Sociology: Aid and Trade

Evaluation, Discussion and Description of Aid and Trade.

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  • Created by: Issy H
  • Created on: 18-06-12 15:24

Introduction to Aid

  • Forms: gift, laons, money, equipment, resources. 
  • Via government: bilateral aid, multi lateral aid
  • Via NGO's. 
  • Purposes of Aid: Development Aid (long term), emergency aid (short term), relief aid (short term). 
  • Conditions may be attached: Tied Aid (e.g. SAP's)
  • UN recommends 0.7% of every countries GDP should go to aid. 
  • Africa gets 1/3 of aid given. WB argues aid is less open to corruption if a condition is attached, when paired with imporved governance. 
  • 2005- make poverty history= G8's aim to improve aid by $50billion a year. 
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Arguments for Aid

  • Modernisation Theory: Aid comes with catalysts which help developments. Aid provides the injection of capital needed to begin industrialisation and establish new education systems, which transmit meriocratic values. It occurs on a large scale, marco-sociology, which breaks the cycle of poverty. Investment will stimulate the economy. 
  • Post World War 2 it was the main model of development. World Bank heped Chile and Mexico 'take off'. Indicators of development increased.However, it has caused the gap between the richt and the poor to increase. 
  • People Centred Approaches: Positive, assuming adis is done on a small scale, by imporiving existing ways. Not to replace with western technologies. Intermediate technologies should be bought with aid to improve lifestyles. Microcredit (small loans)  should be given to help assist buisness development. 
  • The approach has increasing global influence. A proportion of bilateral aid is ring fenced to go to a local level. Many argue it is too small scale, not equitable. Ignores the good impact of industrialisation. If microcredit is not government funded interst rates are high. 
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Arguments against Aid

  • Neoliberalism: Aid hinders development. It keeps things the same, prevents changes which need to occur. Creates a hand out culture. It povides subsidies for corrupt politicians. Bauer: Aid: props up corrupt regimes, undermines entreprenerialism and distorts markets by keeping them falsly bouyant. Aid had increased and development indicators have decreased. 
  • Dependancy Theory: Payments are used to beinifit the rich world. It is used a political tool to keep allies on your side, or bring neutral countries in ther favour. When aid it tied, if often forces  purchase of goods from colonial powers which seriously stunts local industries. Aid legitamines dominance interms of metropolis and satellites. Aid is often given in return for other things (miltary base). Hayter: Aid benifits rich: gives them an underhand in subsidies, long terms dependnacy and undermines indigenous industry. 
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Loans and Debt

  • Loans count for the majoirty of world debt. World Bank is the biggest giver. 
  • Countries are only managing to pay off the interest- not the loan. 
  • Induviduals are taking out loans to deal with the loans which already exist. This ends up becoming a vicious cycle. 
  • Dependancy: Loans exploit the poor as the west have control over capital. 
  • Neoliberal: Loans prevent hand out culture: has to repay. 
  • People centred: loans in the form of microcredit. 

THE DEBT BOOMERANG: Susan George- Debt has an effect on western nations:

  • Exploits our natural resources
  • Can't clamp down on drugs as it is the only way to make money. 
  • Taxation increases. 
  • Can't afford to import: uneployement (USA)
  • Immigration becomes worse. 
  • Causes Social Unrest. 
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Sociologists to Include

  • Aronosn: 1978 50% profit made by banks was by loans. 1986: $600, 1998: $2.2billion. 
  • George:Debt Boomerang
  • Wilkinson and Pickett: The more equal the country, the more they give in aid.
  • Sachs: Big push needed for development to occur (break cycle of poverty)
  • Schumacher: Use of Micro credit and Intermediate Technology. Improve not Replace.
  • Chang: Fallacy of Composition and Consumption (micro credit) 
  • Erixon: As aid rises, indicators fall. 
  • Bauer: AID: undermines entrepreneurship, props up corrupt regimes, distorts markets
  • Vidal:£1 is given by UK, revies £1.50
  • Hayter: Aid benefits us all. Underhand in subsidies, long term dependency on us, undermines indigenous industry (lack of competition). 
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Introduction to Trade

  • Now accepted as a more important process than aid. 
  • Cecil Nartey: If the majority world increased their trade by 5% they would gain $300 billion, 5 times the amount given in aid. 
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Trade Patterns

  • 80% of the world only own 30% of trade profits/revenue. 
  • Asian Tigers, have doubled their economic growth in terms of trade. However that is at the expense of Africa and Latin America. 
  • China has increased its trade, therefore raw materials are needed- improves global market. 
  • Many only rely on one crop. Zambia- 70% on Copper. Congo- mostly on Coltan. 
  • Prices fluctutate according to supply and demand- causes huge vulnerability.
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Perspectives

  • Modernisation: Trade benefits industrialisation, trade must occur to increase capital (Asian Tigers). 
  • Neoliberalist: Free Trade, lack of red tape. Comparative advantage. 
  • Dependency Theory: Trade occurs on unfair Terms: cash crops, hypocritical. 
  • People Centred Approaches: Fair Trade, address inequalities: Social Premium- contribute to development. 
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Free Trade

THE STATE WHO DOES LEAST IS BEST

  • Neoliberalism
  • Development occurs when businesses and entrepreneurs are left to invest their money, and engage in the global market. 
  • The exchange of goods should be unimpeded, and this will allow the majority world to improve profits, by joining the global economy. 
  • Countries should remove trade barriers. 
  • Countries should specialise in what is best. 
  • There should be a reduction in tax. Cut down in public services. 
  • Encourage privatisation of services to remove tax burden on entrepreneurs. 
  • Bretton Woods Institutions driven by neoliberalist theory. 
  • SAP's ensure that economy is reorganised to remove trade barriers.
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Trade Distortions

UNFAIR TERMS OF TRADE

  • Dependency Theory
  • Historical Processes...
  • Hard to break free from colonial models
  • Economy is more likely to fluctuate. 
  • The global market pressures nations with no back up. 
  • There is over competition within primary produce.
  • Moving away from protectionism harms nations. 
  • Contemporary Processes...
  • There are no restrictions on rich nations. 
  • Majority world cannot compete with low prices from mass production. 
  • Cant sell their own goods, as they are undercut in their own countries. 
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Fair Trade

Focus of Fair Trade:

  • Minimum agreed price
  • Social premium
  • Sustainable development
  • Lack of child labour

Strengths:

  • Strengths in numbers, no competition (different product). 
  • Economies of scale, deal in bulk due to the new technology used. 

Weaknesses:

  • Increases protectionism (Neoliberalism)
  • Small scale and too selective
  • Transparency, there is misspending of the social premium. 
  • Elitist- the rich still benefit.
  • Tokenistic (social washing) Costa Coffee- 1% fair trade products.
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Sociologists to Include

  • Nartey: If majority world were to increase trade revenue by 5%- gain $300billion- 5x what is given in aid. 
  • Ricardo: Comparative advantage: no winners or losers, specialise in what they do best. Swap this with other countries.
  • Hayter: Due to decrease in protectionism a glut of food is produced. Due to competition it never gets sold. There is are false riches.
  • Black Gold: Coffe unfairly priced. Social Premium.
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