How Can Rich Countries Best Promote Global Development

Using reading and further knowledge, I have come to the conclusion that, the best ways that, ’rich’ countries can best promote global development, is for the ‘rich’ to focus on building specialised trading relationships between themselves and those that are considered less developed, or ‘poor’. This is because trade enables an injection of demand into a countries circular flow of income and spending, therefore creating positive export multiplier effects, which in turn enable positive development growth; such as gdp growth and improvements in living standards. Adam Smith supported this idea and stated that “free trade allows countries to specialise in their areas of expertise, but also gain from consumption outside of their constrained feasible frontier” (Adam Smith-1776). Though, as I will show, in order for trade to truly promote development for those worse off, ‘rich’ countries will have to ensure that they do not behave in exploitative manner by taking advantage of the weaker, less developed countries. Another way that it is possible for ‘rich’ countries to promote global development is the participation and expansion of aid schemes.

Again as I will show, this is a highly contentious method, as for aid to legitimately encourage development it has to be precisely suited to the receiver, such as project aid or humanitarian aid as this reduces the chances of the aid being exploitative, such as being tied or restrictive; mostly to benefit the donor and also limits a country ability to become indignant. “Satellites will not be able to accomplish development goals by importing sterile stereotypes from the metropolis which do not correspond to satellite eco­nomic reality and their liberating political needs. ” (Andre Gunder Frank-1991)Free trade is where there is an absence of any trade policies such as tariffs and quotas allowing for undiscriminated movement. This allows countries to gain significant funds by concentrating their productive efforts into producing where they have a “Comparative advantage” (David Ricardo-1917) This promotes development as the country is able to at first improve their circular flow of income as it receives expenditure, from other countries which are unable to produce the product at as great economic rent.

Then as firms in that sector gain grater expenditure they are able to employ more human labour, which increases the standards of living as there is more workers earning an income, with which they are able to spend on further goods and services in the economy, creating a multiplier effect, of increasing incomes, employment and total output (gdp). A strong example of trade between the classified ‘rich’ and those not is with the Asian Tigers (Singapore, Hong Kong, South Korea and Taiwan). These countries industrialised and focused on; export-led trade in their areas of comparative advantage such as technology in the 1960’s. This enabled them to have a strong comparative advantage over ‘rich’ countries, which bought a large amount of these goods as they were much cheaper than producing them alone. This caused a large influx of expenditure and investment into these countries which enabled large gdp growth, which approximately doubled every 10 years from 1960 to 2010 (Investopedia), causing the Asian Tigers to be amongst the most developed countries in the world at present. Therefore, if ‘rich’ countries get more involved with the idea of free trade and purchasing goods or services from those less developed economies to create a comparative advantage. This will help promote global development and help those not classified as ‘rich’ to growth their gdp and economy, hopefully leading to higher standards of living, therefore development.

Though as stated in my introduction, the approach to trade between the ‘rich’ and non needs to be strict and advocated. This is because in order for the ‘rich’ to actually promote global development rather than its own further development, the trade has to be beneficial for the ‘poorer’ and not be done in an exploitative matter; “imposing barriers to trade, making inward investment difficult and promoting nationalisation of key industries, stopping the exploitation of ‘poor’ countries by the ‘rich’”(Economics Online). Andre Gunder Frank, presents the idea in his text ‘The development of underdevelopment’. He stated that, “The cause of underdevelopment is that great colonial powers” which we can class as the ‘rich’ for this context, “became wealthy at the expense of the colonies that they exploited and con­tinue to exploit even after the formal colonial period ended. ” (Andre Gunder Frank-1991) This can be directly related to trade using the example of Jamaica. Jamaica had a booming milk industry with high levels of employment being in cow farming, allowing for the reduction of unemployment and for growth within the economy. But, in the 1980s, Jamaica was introduced to the importing of cheap milk powder from the united states; where it was being subsidised, whom previously were buying exported Jamaican milk. Citizens therefore bought the cheap milk powder, as it used less of their very little disposable income, instead of local milk from farmers causing the “destruction of the local dairy industry weakening the long-term food security of Jamaica”(Julia Rendleman-2011).

Furthermore, the statement “The consequent loosening of trade and in­vestment ties during these” world war “periods, the satellites initiated marked autonomous industrialisation and growth” (Andre Gunder Frank-1966) this further proves the contrasting side of the benefit of trade. Therefore, it can be seen that trade must be enforced fairly, disallowing restrictions such a tariffs or subsidies from the ‘rich’ countries so that the weaker are not taken advantage of, and are able to develop from trade. Another way in which the ‘richer’ of the world will be able to promote development is through the technique of Aid. But specifically, project focused local aid, and or multilateral trade, being careful to avoid Bilateral aid, as that is where countries are likely to run into corruption, misuse, or the aid is tied, therefore it benefits the donor rather than the receiver. Aid allows the receiving countries to minimise their government spending or help reduce their debt by allowing less spending in the areas where aid is being received such as in industry or healthcare. It also allows for the country to better target spending in areas of greater need. This helps a country to increase their standards of living and allow them to develop.

Ethiopia has been one of the highest aid receivers in Sub-saharan Africa since 2005. Much of Ethiopias aid has gone into the healthcare sector helping the country to have better medications and vaccinations and better dealing with preventable health conditions such as diarrhoea, helping to improve child mortality rates. Due to much focused investment into the healthcare system, Ethiopia alone has been able to put more resources into its education system. Since 2008, Ethiopia’s gdp per capita has consistently grown since 2005, moving them from 141st in 2008 to 67th in the world at present; based on gdp per capita ratings (World Bank data). Without this aid Ethiopia would have had to aggregate its spending between healthcare and education, limiting the effectiveness, and the potential growth. Therefore, it can be seen that Aid is a good way to promote development by the ‘rich’ as it enables investment and assistance in areas which can push up standards of living, which a country may not be able to do alone. Though, this aid must make sure it is localised to suit the area in need and, that it is channeled in a way avoiding potential corruption and making sure that the aid is truly beneficial for the beneficiary not the donor.

In conclusion, in order for the ‘rich’ more advanced to promote development globally, they should partake in trade with these smaller countries allowing for the growth of industry and network, therefore allowing for expenditure and foreign currency gains, leading to multiplier effects in the economy. Though, trade should specifically be of benefit for the underdeveloped, therefore there should be no trade barriers or exploitation as that only harms the attempted development. Additionally, the ‘rich’ should engage in localised or project specific aid with other countries. This is as it enables the growth of areas that previously would be unable to advance due to the ‘underdeveloped’ not having the funds to invest and administer. Though, aid needs to be strictly managed to avoid corruption, again only being to benefit of the donor and future dependancy such as in Haiti 2010, when the country became over reliant on the humanitarian aid, that the countries own food system collapsed. If these two schemes are done with upmost clarity from the ‘rich’, then it will be seen to promote global development to a high standard.