Understanding the ‘North-South’ Divide

1. Understanding the ‘North-South’ Divide Economic Disparity in the World

2. Economic Disparity is… • …the growing economic gap between the world’s rich and poor. • For example, at the end of the 1990s the 13 richest countries had per capita GDPs of more than US$20,000 per year, while the 26 poorest countries had per capita GDPs of less than US$350 per year.

3. The Nature of the Problem of Disparity • Less than 20% of the world’s GDP is produced in the developing world, and yet this is where 80% of its people live. • In addition to global disparity, there are significant economic gaps within each nation, which are worse in developing countries. • For example, in India 47% of the population lives in “dire poverty” (a GDP of less than US$1 a day), while another 40% lives on between US$1 and US$2 a day. In India alone there are 700 million people living on less than US$2 a day.

4. Causes of Disparity • Impact of colonialism – colonization of developing countries produced distortions on their economies that still have huge effects. • Population growth – as the population growth in developing countries is much higher than that of developed countries, any economic growth is simply providing the same level of existence for more people, instead of increasing the level for a more stable population. • Foreign debt – in 2000 developing nations owed US$2.5 trillion in loans from developed countries. After paying the interest on those loans many countries couldn’t afford to invest in their own economic development, education, and health care.

5. Causes of Disparity, cont. • War – in many developing countries wars and civil unrest has been going on for decades, which stifles any economic progress. As the governments of those nations are constantly changing hands, the new people in power only work to stay in power, not to improve the state of their countries’ economies. • Leadership issues – the leaders who come into power in developing nations have far too often been corrupt, and have used their position to steal the countries money and resources for their own personal use. • Trade inequities – the G8 nations (except Russia) have traditionally restricted imports from developing countries, such as the tariffs placed on cloth and clothing produced in Africa and the Middle East, which are four times as high as the tariffs on similar products from other G8 countries. • Local control – developing countries have a lack of local control over their own affairs. Too many critical decisions are made outside their country by the United Nations, the World Bank, First World governments and transnational corporations.

6. Addressing the Problem • Political colonization by imperial powers was replaced with economic colonization by huge corporations. A way must be found for developing nations to run their own economies, without being dependent on the companies that take advantage of them. • Population growth is declining in the majority of developing nations to a more manageable level, allowing those countries to use more of their resources to improve the quality of life for their people. • More assistance and more effective forms of aid are needed from developed countries.

7. Addressing the Problem, cont. • The levels of debt owed by developing nations are unsustainable and must be dealt with. • Developing nations need a stronger voice in the vital decisions that affect them, such as the creation of an African Union, modeled after the European Union, that was agreed to be developed by the governments of Africa in 2001. This will make it easier for those countries to stand up to foreign interests in economic negotiations. • Developing nations need leaders who will work for the national good rather than for their own interests.

8. Development Assistance(Foreign Aid) • Began after World War II by General George C. Marshall (known as the “Marshall Plan”). He proposed the United States give money to aid the non-communist European countries to rebuild. • This benefited the United States as well, as it provided a smooth economic transition from wartime to peacetime, and Europe became a long-term customer for U.S. products.

9. Reasons for Providing Development Assistance • Humanitarian Motives • A belief that the rich countries have a responsibility to help the poor countries. • Economic Motives • Can benefit the donor country’s economy. For example, the government of Canada could purchase a surplus of wheat from farmers in Saskatchewan to give as aid. • Political Motives • Can create a relationship between the donor and recipient countries, or be taken away from a country as punishment. Can also be influenced by former colonial relationships, as Canada has a stronger record of giving aid to former British and French colonies.

10. After the “Marshall Plan” • Foreign Aid was relatively successful between the 1950s and 1980s, but public support for these programs started to decline in the 80s. • Because of the decreased public support the government gave less and less assistance to developing countries.

11. Promoting Development • When the United States started giving development assistance to Europe the problems they needed to fix where clear. The war had destroyed much of the physical infrastructure of those countries, such as roads, homes, railways, etc. but they still had the necessities of a structured economy, government and human resources. • That is not the case in the developing world. Those basics must be built from scratch, not just rebuilt.

12. A Flawed Model • The model of foreign aid we use is a top-down, centralized approach. The donor country often decides what they want to donate based on what would benefit their own country, and doesn’t take into account what the recipient country needs. • For example, with food aid: • It may not make it out to those who need it the most, the rural poor, but instead stays in urban areas where those people may not need it to survive. • It may distort local prices of foodstuffs, hurting their economy and the local farmers • It may be unfamiliar food that the people aren’t sure how to prepare, such as one case where children became ill from eating powered milk as their mothers didn’t know they had to mix it with water.

13. Canada’s Uneven History of Development Assistance • Although Canada has been one of the more generous nations, we have never reached the 0.7 percent goal set out by our own Prime Minister Lester Pearson. • Support for our foreign aid budget has fallen dramatically since the 1980s, as public opinion has shifted. Our efforts have lost focus. • For example: in one case we were playing both sides in Guyana. We were funding a Canadian mining company operating in the region, while funding the indigenous population who protested that operation. Both funds came from the same department, the Department of Foreign Affairs and International Trade (which is responsible for CIDA).

14. NGOs (Non-Governmental Organizations) • There are hundreds of non-governmental organizations giving many forms of aid to developing countries. • The Red Cross, UNICEF, World Vision, etc. • CIDA (The Canadian International Development Agency) works with many of these.

15. What Will Happen Next? • Aid Fatigue • The people in donor countries believe that their money is being wasted by corrupt governments and vast bureaucracies; basically the money is not going to those it was meant to help. • Business vs. Civil Society • The development of free trade and economy vs. the donation of aid. • Elimination of Development Assistance • Activists in recipient countries are calling for a reduction or elimination of aid to their country. They argue that aid often has too many political strings attached, that it often doesn’t address their actual needs, and that it leads to a sense of dependency on the donor country.