1 A look at various organizationsWorld Development A look at various organizations

2 Poverty Brandt Line The map above shows the inequality between more ecnomically developed countries and less economically developed countries. Most of the MEDCs are found in the northen hemisphere, with the exception of Australia, New Zealand and some of the recently developed asian tiger countries.

3 Inequality The top 1% of U.S. households earn as much annual income as the lowest-earning 40%.

4 Inequality But is income really the best way of measuring economic inequality? Income represents something very specific, the amount of money a household earned in a given year. It does not account for the variability of a household's income over time. Would seem more useful to look at the amount of money that household actually has, household wealth.

5 Wealth Disparity

6 According to a 2014 report by the National Bureau of Economic Research, the wealthiest 1% of U.S. households own about 42% of the country's wealth. On the other side, the share of wealth owned by the bottom 40% of U.S. households amounts to just 0.3%. Measured in these terms (bottom 40% vs top 1%), the U.S. wealth disparity is over100 times bigger than the income disparity.

7 Income vs Wealth DisparityThe problem is not with billionaires, but with a system that has been skewed to favor the wealthy at the expense of everyone else.

8 Oxfam: 85 richest people as wealthy as poorest half of the worldThe wealth of the 1% richest people in the world amounts to $110tn or 65 times as much as the poorest half of the world. Source: The Guardian Jan 2014

9 How do we measure development?

10 What does it measure? Main development points:Employment Poverty Health Education Social Cohesion Safety and Security Good Governance Aspects of Development that cannot be measured: Freedom Security Sustainability Conservation

11 Measuring DevelopmentOne common view of development is that it can  be measured economically: that increasing wealth or decreasing levels of poverty are indicators of development. However, development may also be measured in terms of social improvements to health, education or equality. The wealth of a country is usually measured by its Gross National Product (GNP) per person. The GNP per person of a country is calculated by: STEP 1: add up the total value of goods and services produced by people living in that country and by people abroad who are still citizens of that country.  STEP 2: Divide this figure by the total number of citizens of that country This gives a figure which can be thought of as the average annual income of the country. The United Nations (UN) now refer to GNP as Gross National Income (GNI) per person. So for example, the average annual income (GNI or GNP) in Mali, Africa is US$350 (or about US$1 a day). Remember, this is an average, so some people earn more than this and others earn less. In fact, 73% of Mali's population earns less than US$1 a day.

12 Criticisms Criticisms of using GNI or GNP per person to measure development: Does no take into account the variations of wealth in one country Does not take into account the % of people living in urban and rural areas

13 How else can we measure development?Economic indicators Gross Domestic Product (GDP) is the total value of goods and services produced by a country in a year. Gross National Product (GNP) measures the total economic output of a country, including earnings from foreign investments. GNP per capita is a country's GNP divided by its population. (Per capita meansper person.) Economic growth measures the annual increase in GDP, GNP, GDP per capita, or GNP per capita. Inequality of wealth is the gap in income between a country's richest and poorest people. (the proportion of a country's wealth owned by the richest 10 per cent of the population, compared with the proportion owned by the remaining 90 per cent). Inflation measures how much the prices of goods, services and wages increase each year. High inflation can be a bad thing, and suggests a government lacks control over the economy. Unemployment is the number of people who cannot find work. Economic structure shows the division of a country's economy between primary, secondary and tertiary industries. Demographics study population growth and structure. It compares birth rates to death rates, life expectancy and urban and rural ratios. Many LEDCs have a younger, faster-growing population than MEDCs, with more people living in the countryside than in towns. The birth rate in the UK is 11 per 1,000, whereas in Kenya it is 40. Human indicators Life expectancy - the average age to which a person lives, eg this is 79 in the UK and 48 in Kenya. Infant mortality rate - counts the number of babies, per 1000 live births, who die under the age of one. This is 5 in the UK and 61 in Kenya. Poverty - indices count the percentage of people living below the poverty level, or on very small incomes (eg under £1 per day). Access to basic services - the availability of services necessary for a healthy life, such as clean water and sanitation. Access to healthcare - takes into account statistics such as how many doctors there are for every patient .Risk of disease - calculates the percentage of people with diseases such as AIDS, malaria and tuberculosis. Access to education - measures how many people attend primary school, secondary school and higher education. Literacy rate - is the percentage of adults who can read and write. This is 99 per cent in the UK, 85 per cent in Kenya and 60 per cent in India. Access to technology - includes statistics such as the percentage of people with access to phones, mobile phones, television and the internet. Male/female equality - compares statistics such as the literacy rates and employment between the sexes. Government spending priorities - compares health and education expenditure with military expenditure and paying off debts.

14 Development 101 Why are some countries more developed than others?Historical events that led to economic order Two theories that try to explain why we are where we are. Dependency Theory Modernization Theory

15 Dependency Theory Frank (Marxist led)Resources flow from a poor “periphery” of countries to a rich “core” of wealthy states or countries. Advantage the rich. Stage 1: Mercantile Capitalism 15th -16th centuries, European merchants sailed the globe….high price in Europe for the goods Stage 2: Colonialism Between 16th-20th centuries – European countries took direct political control of land around the world

16 Dependency Theory Cont’The land was exploited for cheap food, resources and labour. In Africa in the 19th century, borders were drawn for the convenience of the colonial power. Local food production was replaced on the best land by cash crops for export and huge plantations were owned by companies and individuals in the colonizing countries. 1. In some cases, such as Indian cotton cloth production, industries were closed down to prevent competition with European manufacturers. 2. Little attention paid to social groupings or previous history.

17 Dependency Theory Cont’Stage 3 Neo-colonialism Mostly after mid-20th century The most powerful influence on current global development Colonial powers gave up direct political rule but continue to exert enormous influence through economic power. Former colonies were left with economies that had benefited their foreign rulers

18 Dependency Theory Cont’Continued influence occurred because: Colonial powers’ ability to influence government decisions High dependence on resources developed in the colonial period. Ex-colonies were then economically vulnerable No democratic models could develop. Low skill base in management by the locals because they were never hired by colonial power.

19 Modernization theory: Rostow (anti-communist)

20 Modernization Theory Stage 1: Traditional SocietySubsistence agriculture economy Social structure based on birth rather than ability

21 Modernization Theory Stage 2: Pre-conditions to take-offAgricultural output increase because of improved technology Some industries start to develop, particularly extractive industries. Entrepreneurs emerge

22 Modernization Theory Stage 3: Take-Off A rise in investmentManufacturing industries emerge Rapid rise in infrastructure

23 Modernization Theory Stage 4: The Drive to MaturityMechanization develops Investments increase Political reforms allow for voting rights International trade becomes more significant

24 Modernization Theory Stage 5:High Mass ConsumptionGrowth of consumer industries Rapid increase of personal wealth and ownership of property Stable political and social system High levels of education

25 History of Aid ColonialismBritain and other imperial powers exported capital and manufactured goods to colonised countries in return for substantial imports of raw materials. This set up trading relationships that persist through to this day. Aid money from the colonisers to their colonial governments, usually in the form of loans, was never enough for genuine economic development, instead it usually benefitted urban elites and colonial business interests

26 International Level- Aid

27 History of Aid 1944-46 Post-war developmentThe United Nations was established along with international financial institutions (IFIs): International Bank for Reconstruction and Development (IBRD or World Bank) & the International Monetary Fund (IMF). World Bank founded to raise capital for the reconstruction of Europe and Japan; original aim of the IMF was to promote international monetary stability. Aid was viewed as a way of supporting ‘developing’ country economies to industrialise, attracting large scale investments of capital and technical expertise that would lead to western style industrial development. While this process was successful for many European countries, the power imbalance between the (primarily Western controlled) International Financial Institutions and the recipient countries in Africa, Asia and the Pacific meant that industrialisation attempts largely proved disastrous for communities and environments in countries mandated for ‘development’.

28 History of Aid 1949 Modernisation and industrialisationDevelopment aid focused on the dominant economic and political theories of the time.[i] US President Harry Truman stated that ‘underdeveloped’ countries had to modernise and industrialise if they wanted to tackle poverty and economic problems. Industrialisation proved largely disastrous for communities and environments mandated for development largely due to the power imbalance between the IFI’s and recipient countries in Africa, Asia and the Pacific.

29 History of Aid 1950s-1960s DecolonisationNotions of the ‘developed’ and ‘developing world’ emerge out of decolonisation and the lack of industrialisation in many newly formed independent states. The idea of tackling poverty took hold and the UN and Bretton Woods Institutions (originally formed for post-war reconstruction) became mechanisms for action on development, although many would argue that the institutionisation of aid programs amounted to neo-colonialism. 1970s A more human approach Development focused more on social considerations such as health (life expectancy, infant mortality rates and disease), education, income distribution, and gender equality, rather than simply macroeconomic growth. The UN family of organisations and the World Bank conceded that, whilst the old model of development aid led to some significant economic growth, it had made little impact on social indicators of poverty such as life expectancy, infant mortality rates, income distribution and education levels.

30 History of Aid 1980s The Lost Decade of DevelopmentRecession in the industrialised world and debt crisis in developing countries ensues. The structural adjustment policies of the World Bank and regional development banks force major economic reforms through privatisation and deregulation in the developing world. 2000 Millennium Development Goals Partly as a response to the failure of explicitly growth-focused aid in alleviating poverty, governments come together to form an international action plan to increase the amount of aid by 2015 to 0.7% of GNI and to target poverty reduction in eight areas. 2005 The Paris Declaration 91 countries make a joint agreement on aid effectiveness. The Declaration sidelines growth as the foundation of aid effectiveness, instead focussing the principles of recipient ownership, alignment, harmonisation, managing for results, and mutual accountability.[iii]

31 World Progress

32 National Level Groups Canada – Canadian International Development Agency (CIDA) CIDA.nsf/eng/NIC HZK (Mission and Mandate)

33 National Level Groups United States Agency for International Development (USAID). Spending less than one-half of 1 percent of the federal budget, USAID works in over 100 countries to: promote broadly shared economic prosperity; strengthen democracy and good governance; improve global health, food security, environmental sustainability and education; help societies prevent and recover from conflicts; and provide humanitarian assistance in the wake of natural and man-made disasters.

34

35 Reasons why countries Provide AidEconomic Development: Aid to help a recipient country develop an aspect of its economy. Recipient country is obliged to import parts or technical assistance from he contributing country.

36 Reasons Continued Political InfluenceAid can be provided to create political obligations. Ex. Food = support foreign policy.

37 Reasons Continued Historic ObligationSome wealthy develop countries keep personal ties with countries that were former colonies or former allies.

38 Reasons Continued Humanitarian obligationsAid is based on feelings of moral responsibility. Ex. Kosovar refugees in 1999.

39 Colonialism “God forbid that India should ever take to industrialization after the manner of the West. The economic imperialism of a single tiny island kingdom, Britain is today keeping the world in chains. If an entire nation of 300 million took to similar economic exploitation, it would strip the world bare like locusts.’ Mohandas Ghandi

40 Colonialism and ImperialismColonialism: Acquisition and settlement of a territory or country by another nation. Imperialism: the control, political and/or economic of one or more countries by a different nation This dominated the world’s economic system for four centuries Impact so profound that still affects the economic, social and political systems of much of the world.

41 Colonialism con’t In early colonial times, colonies were sources of useful products (Canada: lumber, furs) Mercantile system: colonies only existed for the benefit of the mother country. Colony was not allowed to operate in its own best interests. Colonialism is the root of much of the disparity that exists in the world today.

42 How was colonialism used to make Europe rich?Seized territories Resources and enslaved population Wealth from colonies from cheap land and labour War and treaties Political subjection, maximum exploitation

43 How did this affect the colony?Inherited economies Rely on one or two commodities Delayed local manufacturing Foreign political systems Established local elites Land divisions, culture and language Infrastructure built for colonial power

44 Types of Aid Tied Aid: Bilateral Aid: Multilateral Aidare conditional and will only be given if the recipient country abides by certain conditions – such as purchasing goods from the donor country or building a road or dam with the aid money. The most common form of aid. Bilateral Aid: Aid given from one country to another. Example: Canada sending experts and money to build dam Multilateral Aid means "many sides“,organisations that involve many countries, give help. This aid is run by groups such as the World Health Organisation (WHO) and United Nations Educational, Scientific and Cultural Organisation (UNESCO) or World Food Programme - all of which are part of the United Nations (UN).

45 Concerns About Foreign Aid1 – Foreign aid does not reach the poorest people. Channeled through bureaucracies to urban centers, where well-off people live. Israel, Egypt and Turkey receive far more U.S. Aid than poor countries such as India, or those in Africa. Richest 40% receive U.S. $2 for every $1 of aid given to the poorest 2%. Only about ¼ of the AID from OECD donor countries goes to the least developed countries.

46 Concerns Continued... 2 – Foreign aid is limited in its usefulness because there is no infrastructure (schools, roads, rail, hospitals, and common service) in place to support improvements in he long term.

47 Concerns Continued 3 – Foreign aid can inhibit local entrepreneurs, who find it difficult to compete with low cost items. Ex. Food aid vs local farmers.

48 Concerns Continued 4 – Foreign aid may hinder reforms that would have helped poor people in the long term. Ex. Root cause of poverty and chronic hunger in a country may be a lack of access to land for its poor, but land reforms may be delayed or abandoned as long as food is being shipped into the country to feed its poor.

49 The bottom Billion

50 Paul Collier’s Bottom BillionExplores the reason why impoverished countries fail to progress despite international aid and support. In the book, Collier argues that there are many countries whose residents have experienced little, if any, income growth over the 80’s/90’s. He argues there are 60 such economies, home to approximately 1 billion people.

51 Bottom Billion _ways_to_help_the_bottom_billion.html Development traps:

52 4 Developmental Traps 1 – The Conflict TrapCivil wars (with an estimated average cost of $64bn each) and coups incur large economic costs to a country. Additionally, in the time period immediately following a major conflict, relapse is highly likely. Collier also argues that the longer a country stays in a state of conflict the situation becomes increasingly intractable.

53 4 Development Traps 2 – Natural Resource TrapCountries that are rich in natural resources are paradoxically usually worse off than countries that are not. Collier attributes this to a variety of causes:[3] -Resources make conflict for the resources more likely. -Natural resources mean that a government does not have to tax its citizens. Consequently, the citizenry are less likely to demand financial accountability from the government. -The exploitation of valuable natural resources can result in Dutch disease, where a country's other industries become less competitive as a result of currency valuation due to the revenue raised from the resource

54 4 Development Traps 3 – Landlocked with Bad NeighboursPoor landlocked countries with poor neighbours find it almost impossible to tap into world economic growth.[5] Collier explains that countries with coastline trade with the world, while landlocked countries only trade with their neighbors. Landlocked countries with poor infrastructure connections to their neighbors therefore necessarily have a limited market for their goods.

55 4 Development Traps 4 – Bad Governance in a Small CountryTerrible governance and policies can destroy an economy with alarming speed. The reason small countries are at a disadvantage is that though they may have a low cost-of-living, and therefore be ideal for labour-intensive work, their smallness discourages potential investors, who are unfamiliar with the local conditions and risks, who instead opt for better known countries like China and India.

56 Solutions: inexpensive but difficultAid agencies should increasingly be concentrated in the most difficult environments, accept more risk Appropriate Military Interventions (such as the British in Sierra Leone) should be encouraged, especially to guarantee democratic governments against coups International Charters are needed to encourage good governance and provide prototypes Trade Policy needs to encourage free trade and give preferential access to Bottom Billion exports

57 collier yxM&feature=related

58 Why Nations Fail Theories that don’t work: 1. The Geography Hypothesis2. The Cultural Hypothesis 3. The Ignorance Hypothesis Poor countries are poor because those who have power make choices that create poverty. They get it wrong not by mistake or ignorance but on purpose. .

59 Geography Hypothesis Great divide between rich and poor countries is created by geographical differences. Poor countries between the tropics. Rich tend to be in temperate latitudes. This gives a superficial appeal to the geography hypothesis. Philosopher argued that in the tropical climates tended to be lazy and lack inquisitiveness. Contradicted by rapid economic advances of Singapore, Malaysia, and Botswana. Also, Nogales New Mexico/Mexico, North and South Korea, East and West Germany before the fall of the wall. Historically, the Incas and Aztecs.

60 The Cultural HypothesisOriginal hypothesis was based on religion and argued that Protestant ethics played a key role in facilitating the rise of modern industrial society in Western Europe. Also stressed, values and ethics as well. Many people still maintain that Africans are poor because they lack a good work ethic, still believe in witchcraft and magic, or resist Western technologies. Original hypothesis was based on religion and argued that Protestant ethics played a key role in facilitating the rise of modern industrial society in Western Europe. Also stressed, values and ethics as well. Many people still maintain that Africans are poor because they lack a good work ethic, still believe in witchcraft and magic, or resist Western technologies. Chinese culture never growing economically? Nogales has same culture. Trust may be a bigger factor. North and South Korea had same culture prior to the war.

61 Ignorance Hypothesis Asserts that world inequality exists because our rulers do not know how to make poor countries rich. Ignorance can explain at best a small part of the world. (ex Ghana). Institutional constraints, insecure property rights, economic institutions

62 Microcredits, Grameen and KIVAMicrocredit programs make loans as little as $20 Grameen bank first introduced micro credits in the 1970’s after an experiment by economics professor in Bangladesh, Mohammad Yunus. Rather than give $ out, Yunus found that by lending out small amounts of 4 people were able to gain self reliance He believed that this would lead to giving a voice and power to the poor people themselves. He dismissed the popular notion at the time that poor people are not credit worthy.

63 Facts 94% of micro lending clients are womenNow exists in 43 countries through 2500 financial institutions As well as reaching economic goals, micro credits are intended to improve the social status and living conditions of women. Seen as one of the most successful self sustaining anti poverty program in the world

64 KIVA Go to kiva.org Choose a borrowerYou can choose by gender, sector, groups or individuals and country Make a case for this person to get my $$. We make a loan. Other similar organizations: theschoolfund.org,

65 Remittances

66 Hans Rosling 4&feature=related