The North And South Gap In Economic Development

“According to dependency perspective has globalization increase or reduce the North and South gap in economic development?”

The international political economy is determined by two significant income gaps. The first is the significant gap between the rich and poor nations, and the second is the growing differences between groups of LDCs. When we analyze North-South differences, we observe the North and South’s problems -Western system-.

North-South debate had became great significant at the end of the 20th century. The return from an investment on a sustainable basis gap between North and South is growing. Also, the objects produced by the states of the South become lesser costly for developed countries. Such situation enables the less developed nations to create more in order to buy even lesser goods from the wealth countries. It decreases the skills of the less developed countries to direct the global economy because their goods are not needed and their view is not taken into account by the rich countries. Therefore less developed countries are usually discomfort with the direction of the global economy because of the little role that they play in its organization.

The North-South issue was studied by the three different philosophical approaches, which argued whether this gap could be decreased in the global economic system. Liberal theory of economic improvement is the theories in the International economy. Globalist or Marxist approaches look the problem in the free-trade system. Structuralists are between liberals and globalists because they claim that the system is not optimal however can be in peaceful manner reformed and organized again. All theories can be made judgments at many point, but all of them contain significant information for the complex view of the issue.

Marxists keen on the economics of South by North, which is an initial pattern of the capitalist system. They claim that free-trade represents a non equal exchange between the North and the South in the economy dominated the North. That’s why because of its direction ability, a requirement for the raw materials and markets abroad, the North decreases prices on the materials exported from the North. The problem with this approach is that the Third World is not any longer very important to the wealth nations. Its exports goods don’t have affect on the North because “each consumptions of raw materials reduces because of changing growth patterns, conservation, substitution and technological developments”.

Structuralists has same view with Marxists that free trade is not equal exchange with most of its benefits belonging to the rich countries. But, they argue that it is not a required view of the system. They say the two structure of society when some people has primal conditions and some has the global economy due to their job in export industry. By regional integration structuralists say creating of trade associations among many developing nations to require attractive and reliable to the foreign investors. This theory problem is the question of its practical act of implying. There is a political trouble connected to the economic realm: how can the weakest state change their situation against the will of the strongest state? Another question is whether regulation can be do and what is needed to do for its strengthened.

Since the end of World War ll, developing countries have searched several different ways in an effort to change their dependence.

In the Bretton Woods era, developing countries were dependent on the developed North and pursued national strategies designed to isolate or protect themselves from the international economic system.

The major aims of the developing countries are to handle poverty and inequality, growing and to has an important role in the global economy decision process. Developing nations demand to change the system or to adapt to it with the lowest cost to their economy. There are many general Southern strategies to achieve these aims, which were acquired many years later of samples and mistakes, such as the attempt to delink themselves from some aspects of the International economic system, “the try to change the economic rule itself, and the try to increase the greatest level the gains from integration into the common system”.

After the decolonization period, the non wealth countries made political independence however did not provide economic level. In many situations developing countries experienced suffering in having some countries but their main state as their financial suppliers. The Developing states’ economies were limited of capital and technical skills. Both factors comprised the dependence of the Southern states on the technology realm and economic resources of the more developed countries. The other wave of dependence was that developing countries depend their economies on one exporting material and so soon became dependent on their main countries. Bad result of the dependence situation of the developing countries on a only one commodity was that the price decreased this very commodity effected the all economy and destabilized it. Free-trade system looked like to advantages all however the developing countries; therefore they were distrustful of its effectiveness. To restrain their dependence, developing states began two new strategies;

the import substitution strategy (IS)

the export substitution strategy (ES).

The other strategy to achieve economic improvement for developing nations was to want the United Nations assisting in the sense of aid from foreign and special trade choices for example lower tariffs. As a result of this together cry for changes G-77 was made “to behave as last indefinitely political parts representing the interests of the developing nations in the UN”. The structure of the (UNCTAD) -United Nations Conference on Trade and Development- which deliver the opinion of structuralists about the greater aid flows, limiting of free trade and control of MNCs, showed the confrontations between LDCs and wealth countries in UN.

The tries of the LDC to establish their assembly to affect the wealth countries went beyond. In 1974 developing nations called for a New International Economic Order, which promises to solve the economic crises. Its achievement depended on the integrity of the Southern nations, credibility of their export goods and meaning their vulnerability by North. The New International Economic Order failed because of these three steps was not completed. Firstly, there was a high gap between the Newly Independent Nations and the less developed countries. In addition, the commodity became less costly for North, whose want raw materials were reducing. The other factor was that the North did not demand to make any changes besides what they were eager to do. The North suggest its help by agreeing to send the funds, to offer advise to learn about export strategies, to avoid degradation of the global circumstances and to decrease the flow of the South’s people to the North.

    The shortcoming of the New International Economic Order did not solve the North-South issue. After 2. shock it became clear that oil suppliers and developing nations succeeding the export substitution strategy very well.

Criticisms of Washington Consensus

The term Washington Consensus was firstly coined in 1989 to describe a set of ten important economic policy offers that he considered should constitute the reform package provide for crisis-wracked developing countries based institutions such as the International Monetary Fund (IMF), World Bank, and the US Treasury Department. It has been criticized by people such as Joseph E. Stiglitz.

This is the most important point of Stiglitz’s criticisms of the IMF neo-classical approach in the South. They simply do not have the institutions or information transparency for the neo-classical model to work. Stiglitz’s criticisms are about the disadvantages of globalization. He stated some problems about this consensus.

The South is getting screwed by asymmetrical trade opening.

The South is getting a raw deal on the opening up of services and intellectual property rights.

The South would gain more from trade than aid.

The IMF is too doctrinaire and ideological in applying its one size fits all to countries around the world.

The IMF screwed up in East Asia, by mis-diagnosing the basic causes of the problem.

The result of capital account crises combined with the IMF’s classic medicine has been disaster.

There is a huge market failure in world capital markets. All of the risk is being carried by the South because they cannot borrow long-term in their own currencies. Hence, the borrowers, not the rich lenders take the risk.

CONCLUSION

While both Liberals and Marxist advocate growth ideology, especially economic growth, these approaches do not give importance to power structures and relations. The main aim of these approaches that how can developing countries reach the standart of developing economy in the North. Whereas, social transformation is of highly importance for this transformation.

After examining many different views to deal with the North-South issue, It can be said that solution of this problem is not simple. Gap between North and South can be decreased by some reforms. In light of these reforms, economy of developing countries must be developed. On the other hand, social development is of highly importance in terms of reducing of North-South gap. Equality of member in society must be provided.