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GROUP 3: GEOGRAPHY
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Closing the
development gap
Exam context
Paper 3: economic flows and interactions examine the importance
of loans, debt repayment, development aid, remittances, foreign
direct investment, repatriation of profits in the transfer of capital
between the developed core areas and the peripheries.
Aid
Aid is the voluntary transfer of resources from one party (such as
an individual, organisation or country) to another, with the aim of
improving the human condition in the recipient receiving the aid.
There are three main categories of aid:
Bilateral aid is given directly by the government of a donor
country to a recipient country.
Multilateral aid is given by a donor country to an international
organisation, such as the World Bank or the European Development
IB Review November2015
Benefits of aid
It is widely recognised that aid can be beneficial when it helps
countries respond to emergencies. Some argue that aid also has
a role in improving education, agricultural programmes and the
quality of and access to public health.
For example, with the use of aid, new public health institutions
have been formed such as the Global Fund to Fight AIDS,
Tuberculosis, and Malaria (GFATM). This has enabled the scale-up
of vaccine coverage (largely through Gavi, a global vaccine alliance,
and UNICEF) to increase treatment coverage for HIV/AIDS, and has
expanded tuberculosis control.
According to evidence presented by Paul Collier, professor of
economics and public policy at the University of Oxford, aid has
increased the growth process in Africa. He has calculated that,
by a reasonable estimate, over the last 30 years aid has added
around 1 percentage point to the annual growth rate of the bottom
billion. This seems minimal, yet 1 percentage point has made
the difference between very little economic growth and severe
economic decline. Jeffery Sachs, an American economist, is an
advocate of aid and argues that it is a highly
effective developmental tool, best used in
conjunction with sound economic policies,
transparency, good governance and the
effective development of new technologies.
Failings of aid
Despite political promises from developed
economies to provide aid, it is important
to note that increasing the amount of aid
does not necessarily cause the growth
rate to increase. The Center for Global
Development claims that when aid reaches
about 16% of the recipients gross domestic
product (GDP), it ceases to be effective in
achieving its aim. For example, according
to the World Bank, between 2010 and 2012
Liberia received aid that on average totalled
72.4% of its gross national income (the
equivalent of $681 per person over the 3
years). Despite this aid, 47.9% of Liberian
citizens still live in absolute poverty.
One argument for the failure of aid to
achieve development is that the funds are
not well spent in many of the countries
of the bottom billion. This is largely due
to a culture of corruption. For example,
a 2004 expenditure-tracking survey in
Chad indicated that less than 1% of the
money released for rural health clinics by
the Ministry of Finance actually reached
the clinics. Instead, the aid went into
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the conditions are not met. Aid can also be used to increase the level
of skills among the population. This must be combined with sound
governance and economic policies that attract foreign investment
into the country to create employment opportunities and develop
human capital.
Suppose that a country receives a large donation to assist with
a failed harvest. While this solves the immediate humanitarian
disaster, clear governance by the recipient government regarding
agricultural reform must be put in place if market forces are to
restore the incentive for farmers to plant and harvest crops.
Trade
Can changes to trade policy reverse marginalisation? Given the
shortcomings of aid in effectively addressing the need for growth
Debt cancellation
Theory of knowledge
1 To what extent can mathematical techniques be used to make
accurate predictions about development in the poorest countries?
2 Do emotions or intuition have a larger role in convincing people
to strive to close the development gap?
3 Are reason and emotion equally necessary in justifying solutions
to closing the development gap?
4 If development is about economic issues, debate surrounding
moral obligations should be avoided. Discuss this statement with
reference to philosophical views of emotion, beliefs and reason.
IB Review November2015
Glossary
Absolute poverty First used in 1990, the dollar-a-day poverty line
measured absolute poverty by the standards of the worlds poorest
countries. In 2005, the World Bank defined a new international
poverty line of $1.25 per day, to account for price inflation.
Bottom billion Refers to the poorest 1 billion people on Earth,
whose living standards are falling further and further behind the
majority of the worlds population. The term was coined by Paul
Collier (see References and resources box).
Gross domestic product (GDP) The monetary value of all finished
goods and services produced within a countrys borders in a specific
time period, usually 12 months.
International migration The movement of people across
international boundaries.
Marginalisation The social process of exclusion, e.g. countries
being unable to trade within global markets.
Protectionist policies Economic policies that restrain trade between
countries, e.g. taxes on imported goods and restrictive limits (quotas)
on imports.
Remittance The transfer of money from a foreign worker to an
individual in his or her home country.
Remittances
Does international migration facilitate development?
International migration has enormous implications for growth and
poverty alleviation in both origin and destination countries. By
allowing workers to move to where they are most productive, overall
world income should increase through money that is sent home
in the form of remittance payments. Remittances can reduce the
level and severity of poverty and lead to higher human capital
accumulation, greater health and education expenditures, better
access to information and communication technologies, and
improved access to financial services. These benefits can help low
income countries break the cycle of poverty.
According to the World Bank, remittance payments to developing
countries totalled $404 billion in 2014, an increase of about 3.3%
on the previous year. In Nepal, remittances have been more effective
than aid in reducing poverty. In 2013, every day nearly 1,500
Nepalis migrated abroad to work. These migrants sent back about
$4 billion in total to their families, which accounted for a quarter of
the countrys GDP. The remittances provided additional income to
support households in improving their quality of life.
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Online resources
Guardian articles on global development:
www.theguardian.com/global-development
Jubilee Debt Campaign: www.jubileedebt.org.uk
World Bank summary of development in Nepal:
www.worldbank.org/en/country/nepal
BBC News profile on Nepal: www.tinyurl.com/7duf665
Key points
Aid can be an effective developmental tool, but only with effective
governance, transparency and sound economic policies.
Changes to global trade policies are required to reverse
marginalisation.
Public and private investment is required in the poorest countries.
Migration is changing the development debate.