Forum 6

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LESSON 6: NEW FORCES

Introduction

In this lesson we will look at opportunities and challenges to development. We will gain a different understanding and perspective of this topic based on experts’ views. The assigned readings will provide further explanation and you will come to understand how different their views on development are.

New Forces in Development

How do bad leaders, corruption, bad institutions and policies, and even rich nations exacerbate problems through high barriers to trade? What are possible solutions? Some solutions might include forgiving debt (but we should recognize that this is not the complete solution), as well as removing barriers to global integration, encouraging local regional trade, eliminating tariffs and quotas for highly indebted nations, and fostering economic freedom /reforms. The Global Policy Forum website summarizes many of these factors, and posts articles that focus on many important issues in development, as summarized in the image below. Please click on the link in the Reading and Resources folder to access the Global Policy Forum website section on Poverty and Development in Africa in preparation for our discussion this week.

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In making our assessment of economics and the international system, we must also recognize the impact of culture on economic performance. Culture includes the peculiarities of local history, social structure, psychology, religion, norms, and politics. While the apostles of globalization contend that market forces overwhelm everything else, others such as Paul Krugman and Jeffrey Sachs powerfully counter-argue that geography is itself a limit to globalization. Just think of what it means to be a landlocked country, and how much extra it costs to bring goods to ports for trade in an open, competitive system. Add to these complications of physical geography other factors such as climate, tropical location, local traditions, and the picture becomes complicated quickly. If we include the dynamics of culture and geography, we begin to understand why traditional macro-economic measures may have less of an impact than many previously assumed they would in the international system.

What are the effects of economic globalization on poor countries? Since the backlash demonstrations against globalization at the ministerial meetings in Seattle and Genoa in the late 1990s, this question has entered public debate. Neither globalization nor protests, however, are new. Indeed, throughout the history of development economics, attention to the implications of international integration has been of prime interest, especially regarding whether foreign trade and investment reduce or increase inequality. Now international financial “crises” and issues of global economic governance also pervade the debate.

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Culture, Globalization, and Development

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The Role of Foreign Aid 

Dr. Moyo, in her own words, has called aid to Africa a "disaster" (Moyo, n.d.). In an interview with Forbes magazine, Dr. Moyo discussed how she envisions the aid industry changing in the years ahead. She states, "Fundamentally, an aid model hurts incentives and discourages people from doing the right thing.  And that is clearly what has happened across Africa. Am I sanguine that the model is somehow going to change? No, because there are so many vested interests in keeping things as they are today" (Pereira 2011).

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The advanced industrial states, including Europe and the United States, are facing difficult choices about how much aid to allocate in light of increasingly pressing domestic issues. Dr. Moyo believes that as governments prioritize domestic issues, such as education, pension reform, infrastructure, etc., that few resources will be left to allocate to development. As a result, African governments will have to look for other means of development assistance beyond aid.

At the same time, however, Dr. Moyo has publicly stated that she remains optimistic that change will eventually take hold. Her reasons for optimism center on two primary factors:

These arguments can be put into greater perspective by examining where most foreign aid is currently allocated. When we look at data from the Organization for Economic Cooperation and Development (OECD), we see that only one-quarter of all official development assistance goes to the world's poorest countries (see charts below). The biggest share goes to low-middle income countries, not the world's poorest states, as one might assume.

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Knowledge Check

Question 1 

When we look at data from the Organization for Economic Cooperation and Development (OECD), how much of all official development assistance goes to the world's poorest countries?

1

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I don't know One attempt

You answered 0 out of 0 correctly. Asking up to 2.

One-quarter

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Half

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Conclusion

In conclusion, we begin this section with less theory and more conjecture than we have used in previous weeks. We will discuss Dr. Moyo's position, along with the positions of Dr. Jeffrey Sachs and Dr. William Easterly, in the forum this week. The reading will shed light on how divergent their views on development are. Whose argument do you find the most persuasive and why? Does each economist adequately account for the complexities in the process of development? Do they adequately account for country-specific factors that might vary across Africa? These are some questions to ask yourselves as you complete the reading this week on the development debate.

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References

Moyo, Dambisa. N.D. “Aid Ironies: A Response to Jeffrey Sachs.” The World Post.

Pereira, Eva. 2011. “Dambisa Moyo: An Economist with a Vision.” Forbes, April 19.

Image Citations

"Chart that shows Average Portion of ODA Received between 1970-2012" by Globalissues.org.

"Chart that shows Share of ODA Aid Over Time" by Globalissues.org.

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