Pearson - Always learning

All your resources for Economics

RSS icon Subscribe | Text size

Posts Tagged ‘developing countries’

Looking for solutions to the growth in inequality

Each January, world political and business leaders gather at the ski resort of Davos in Switzerland for the World Economic Forum. They discuss a range of economic and political issues with the hope of guiding policy.

This year, leaders meet at a time when the global political context has and is changing rapidly. This year the focus is on ‘Creating a Shared Future in a Fractured World’. As the Forum’s website states:

The global context has changed dramatically: geostrategic fissures have re-emerged on multiple fronts with wide-ranging political, economic and social consequences. Realpolitik is no longer just a relic of the Cold War. Economic prosperity and social cohesion are not one and the same. The global commons cannot protect or heal itself.

One of the main ‘fissures’ which threatens social cohesion is the widening gap between the very rich and the rest of the world. Indeed, inequality and poverty is one of the main agenda items at the Davos meeting and the Forum website includes an article titled, ‘We have built an unequal world. Here’s how we can change it’ (see second link in the Articles below). The article shows how the top 1% captured 27% of GDP growth between 1980 and 2016.

The first Guardian article below identifies seven different policy options to tackle the problem of inequality of income and wealth and asks you to say, using a drop-down menu, which one you think is most important. Perhaps it’s something you would like to do.

Articles
Project Davos: what’s the single best way to close the world’s wealth gap? The Guardian, Aidan Mac Guill (19/1/18)
We have built an unequal world. Here’s how we can change it World Economic Forum, Winnie Byanyima (22/1/18)
Oxfam highlights sharp inequality as Davos elite gathers ABC news, Pan Pylas (21/1/18)
Inequality gap widens as 42 people hold same wealth as 3.7bn poorest The Guardian, Larry Elliott (22/1/18)
There’s a huge gender component to income inequality that we’re ignoring Business Insider, Pedro Nicolaci da Costa (22/1/18)
Ahead of Davos, even the 1 percent worry about inequality Washington Post, Heather Long (22/1/18)
“Fractures, Fears and Failures:” World’s Ruling Elites Stare into the Abyss GlobalResearch, Bill Van Auken (18/1/18)
Why the world isn’t getting a pay raise CNN Money, Patrick Gillespie and Ivana Kottasová (1/11/17)

WEF archive
Articles on Inequality World Economic Forum

Questions

  1. Distinguish between income and wealth. In global terms, which is distributed more unequally?
  2. Why has global inequality of both income and wealth grown?
  3. Explain which of the seven policy options identified by the Guardian you would choose/did choose?
  4. Go through each one of the seven policy options and identify what costs would be associated with pursuing it.
  5. Identify any other policy options for tackling the problem.
Share in top social networks!

Global vision

World leaders are meeting at the World Economic Forum in Davos, in the Swiss Alps. This annual conference is an opportunity for politicans, economists and businesspeople from around the world to discuss the state of the world economy and to consider policy options.

To coincide with the conference, the BBC’s Newsnight has produced the following slide show, which presents some economic facts about the world economy. The slide show provides no commentary and there is no commentary either in this blog – just some questions for you to ponder.

Using the economics you’ve learned so far, try answering these questions, which focus on the reasons for the patterns in the figures, the likely future patterns and the policy implications.

Slide show
Davos: 22 facts people should know BBC Newsnight (23/1/14)

Data
For additional international data to help you answer the questions, see:
Economic Data freely available online Economics Network

Questions

  1. Go through each of the slides in the Newsnight presentation and select the ones of most interest to you. Then, as an economist, provide an explanation for them.
  2. Identify some patterns over time in the statistics. Then project forward 20 years and discuss whether the patterns are likely to have changed and, if so, why.
  3. What policies could governments adopt to reverse any undesirable trends you have identified? How likely are these policies to be implemented and how successful are they likely to be?
Share in top social networks!

Wrong climate at talks

A two-week international climate change summit opened in Cancún, Mexico, on 29 November. But will the talks make any progress in tackling global warming? Will mechanisms be put in place to ensure that the previously agreed ceiling of 2°C warming is met?

After the largely unsuccessfuly talks in Copenhagen a year ago, hopes are not high. But a likely rise in global temperatures of considerably more than 2°C could have disasterous global consequences. Indeed, new evidence suggests that even a ceiling of 2°C may be too high and that, as temperatures rise towards that level, domino effects will start that may become virtually unstoppable. As Andrew Sims in the Guardian article notes:

This is the problem. Once the planet warms to the point where environmental changes that further add to warming feed off each other, it becomes almost meaningless to specify just how much warmer the planet may get. You’ve toppled the first domino and it becomes virtually impossible to stop the following chain of events. Honestly, nobody really knows exactly where that will end, but they do know it will end very, very badly.

The following podcasts and articles look at the importance of reaching international agreement but the difficulties of doing so.

Podcasts and webcasts
Post-Copenhagen, a Cancun compromise? Reuters (30/11/10)
Climate change ‘Dragons’ Den’: What are the options? BBC News, Roger Harrabin (29/11/10)
Cancun climate change summit seeks new emissions deal BBC News, David Shukman (3/12/10)
Can nudge theory change our habits? BBC News, Claudia Hammond (29/11/10)

Articles
Cancún climate change conference 2010 Guardian, (portal)
Q&A: Cancún COP16 climate talks Guardian, Shiona Tregaskis (8/10/10)
72 months and counting … Guardian, Andrew Simms (1/12/10)
Cancún climate talks: In search of the holy grail of climate change policy Guardian, Michael Jacobs (29/11/10)
Cancún and the new economics of climate change Guardian, Kevin Gallagher and Frank Ackerman (30/11/10)
Facing the consequences The Economist (25/11/10)
UN climate talks low on expectation BBC News, Richard Black (29/11/10)
Expect little from Cancun talks The Star (Malaysia), Martin Khor (29/11/10)
Don’t let us down: UN climate change talks in Cancun Independent, Jonathan Owen and Matt Chorley (28/11/10)
Cancun and Climate: Government Won’t Act, But Business Will Time Magazine: The Curious Capitalist, Zachary Karabell (28/11/10)
At Global Climate Change Talks, an Answer Grows Right Outside Huffington Post, Luis Ubiñas (29/11/10)
Cancun climate change talks: ‘last chance’ in the snakepit The Telegraph, Geoffrey Lean (29/11/10)
Climate Change Talks Must Deliver After Record Weather Year Scoop (New Zealand), Oxfam (29/11/10)
World climate talks kick off in Cancun DW-World, Amanda Price and Axel Rowohlt (29/11/10)
On international equity weights and national decision making on climate change Vox, David Anthoff and Richard S J Tol (29/11/10)
Climate treaties all bluster, no bite The Age, Dan Cass (10/12/10)

Conference website
UNFCCC COP16/CMP6: Mexico 2010 Official site

Questions

  1. What would count as a ‘successful’ outcome of the climate change talks? Why might politicians interpret this differently from economists?
  2. What can governments do to internalise the externalities of greenhouse gas emissions?
  3. What insights can game theory provide into the difficulties of reaching binding climate change agreements?
  4. What are likely to be the most effective mechanisms for getting people to adapt their behaviour?
  5. Can nudge theory be used to change our habits towards the environment?
  6. Explain the use of equity weights in judging the effects of climate change. Are they a practical way forward in devising environmental policy?
Share in top social networks!

Paris Club relief

The Paris Club is the name given to the grouping of 19 rich countries which meets in Paris monthly to consider the cancellation or rescheduling of official loans to poor countries (see Sloman Economics 7th edition, pages 784–5). For many of the 40 heavily indebted poor countries (HIPCs), this debt relief has been substantial, with 36 of the HIPCs receiving full or partial cancellation of their debts (see Sloman Economics7th edition, pages 788–90).

On 17 November it was the turn of the Democratic Republic of the Congo. The Paris Club cancelled 97.6% of the debt owed to its members by the DRC – $7.35 billion. As the Paris Club press statement says:

The representatives of the Paris Club creditor countries and Brazil met with the representatives of the Government of the Democratic Republic of the Congo (DRC) on 17 November 2010 and agreed on a reduction of the debt following the DRC having reached its Completion Point under the enhanced initiative for the Heavily Indebted Poor Countries (enhanced HIPC Initiative) on 1 July 2010.

As a contribution to restoring the DRC’s debt sustainability, the Paris Club creditors will provide a cancellation of USD 7350 million, fulfilling all their commitments under the enhanced HIPC initiative.

However, the Paris Club did have some reservations. These are explored in the articles below.

Articles
Paris Club cancels more than half of DR Congo’s debt International Business Times, Palash R. Ghosh (19/11/10)
Creditors agree Congo debt write-off, flag worries Reuters, Brian Love and Katrina Manson (18/11/10)
Paris Club and Brazil Cancel $7.35 Billion of Congo’s Debt Bloomberg Businessweek, Michael J. Kavanagh (18/11/10)
DR Congo gets US$ 7bn debt cancellation afrol News (18/11/10)

Paris Club Press Release
DRC Paris Club (17/11/10)

Questions

  1. Explain the process whereby HIPCs receive debt relief.
  2. What were the reservations expressed by the Paris Club in granting debt relief to the DRC?
  3. To what extent is there a moral hazard in granting debt relief? Explain.
  4. What can Paris Club members do to reduce the moral hazard?
  5. Find out what other debt relief has been given by the Paris Club to HIPCs over the past few months and whether concerns were expressed in those cases.
Share in top social networks!

Small is beautiful

“As the global economic crisis forces everyone to downsize, the self-sufficient worker once again has a chance, whether as a farmer growing vegetables for local consumption or as an open-source software developer who makes a living in his basement office.” So argues the first article linked to below. Does this mean that economies of scale are over-exaggerated? Should developing countries provide more support to small-scale production as a growth and development strategy? And does small-scale production provide benefits beyond those of production and profit? Does it meet broader human and social needs? The articles explore the issues: the first two in the context of the developed world and the other four in the context of developing countries.

The Return to Yeomanry New America Foundation (22/6/09)
Entrée: Small-scale farmers on the forefront of a greens revolution The Vancouver Sun (19/6/09)
Extracts – the future of small-scale farming Oxfam International
Malawi’s fertile plan Mail & Guardian Online (25/6/09)
Development: Investment in small farmers crucial in Africa Bizcommunity.com (24/6/09)
Toward Agricultural Sustainability Philippines Business Mirror (24/6/09)

Questions

  1. What are the benefits of ‘a return to yeomanry’ (a) to the individuals themselves; (b) to society and the environment?
  2. Why might it prove a risky strategy for those embarking on small-scale production? How could governments help to reduce the risks for the producers? Should they?
  3. Discuss whether fostering small-scale farming is an appropriate development strategy for developing countries. What specific policy measures should governments adopt?
  4. Is land reform (a) a necessary condition; (b) a sufficient condition if small-scale farming is to flourish in developing countries? What pitfalls are there from a policy of land reform?
Share in top social networks!

Trade and aid – crunch time?

“10 million children die each year from preventable, poverty-related diseases; there are 1.4 billion people in the world surviving on less than $1.25 a day; and more than 70 million primary school-age children are out of school”. The Millennium Development Goals were targets set by the developed world to try to improve this situation by 2015. However, although world leaders met in September 2008 to renew their commitments to meeting these goals, the financial crisis has drawn attention away from these issues and focused most governments on narrower, domestic goals.

Women are key to fighting poverty BBC News Online (23/9/08)
A stagnant promise Guardian (24/9/08)

Questions

  1. Summarise the Millennium Development Goals (MDGs) and the progress that has been achieved towards meeting them.
  2. Assess the policies that have been adopted by developed countries to try to achieve the MDGs. Are they the most appropriate way to achieve these ends?
  3. Discuss whether the financial crisis has made it more difficult to achieve the targets set out by the MDGs.
Share in top social networks!

Growth or poverty – between a rock and a hard place

A recent report from the World Bank has suggested that developing countries need to grow significantly if they are to avoid high levels of poverty. The report suggested that without rapid and sustained growth up to 4 billion people could be living in abject poverty by 2050.

‘Choose growth or accept poverty for billions’ Guardian (22/5/08)
The Doha dilemma The Economist (29/5/08)

Questions
1. Summarise the main findings of the World Bank report.
2. Is rapid economic growth (a) a necessary condition and/or (b) a sufficient condition for alleviating poverty in developing countries.
3. Evaluate two policies that a developing country could adopt to raise levels of economic growth.
Share in top social networks!

The ever rising price of food

Global food prices have been rising significantly in recent months and this has led to food riots in a number of countries, rationing being reintroduced in Pakistan and price controls being introduced in Russia. What has caused these rapidly rising prices and to what extent will they slow the rate of economic development in the Third World?

UK farmers forced to ride income rollercoaster Guardian (26/2/08)
They’re going to need a lot more money to meet the same needs Guardian podcast (26/2/08)
Feed the world? We are fighting a losing battle, UN admits Guardian (26/2/08)
Record rise in fuel prices fuels inflation Guardian (12/2/08)
India’s farmers struggling to keep food on the table Times Online (29/2/08)

Questions
1. Using supply and demand diagrams as appropriate, illustrate the changes taking place recently in world food markets.
2. Assess the main factors affecting the level of farmers’ incomes in the UK .
3. Analyse the likely impact of rising world food prices on the rate of economic development in Third World countries.
Share in top social networks!

Millennium goals – are we on target?

At the turn of the century, the UN Development Programme identified a series of seven Millennium Development Goals (http://www.undp.org/mdg/). The article linked to below from the Guardian, considers the progress that has been made towards these goals. Urgent progress is required if the goals are to be met by the target date of 2015.

Poverty, hunger and disease: so much done yet so much left to do Guardian (10/12/07)

Questions
1. What are the seven Millennium Development Goals.
2. Discuss the action that is required if the goals are to be met by the target date of 2015.
3. Analyse the extent to which an increase in overseas aid will help to achieve the Millennium Development Goals.
Share in top social networks!

A little money goes a long way – microfinance

The article below from the BBC website looks at the issue of microfinance – the provision of very small loans as a form of development assistance to help people in developing countries to support themselves and develop their businesses.

Small loans to women make big changes BBC News Online (21/8/07)

Questions
1. Explain what is meant by microfinancing.
2. Examine the reasons why microfinancing is considered more effective at promoting economic development (as opposed to economic growth).
3. Assess the extent to which microfinancing could help in other developing countries to promote economic development.
Share in top social networks!