Ways of Promoting Growth and Development

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Fair Ways of promoting growth and development

1. Aid

Aid is the transfer of resources from a developed country to a lower economically developed country.

There are two forms:

Humanitarian - Generally given in times of crisis i.e earthquake, flood.

Developmental - Given with the purpose of building a sustainable economic growth

Arguments for aid

Eradication of absolute poverty - statistics such as a child dying every 3 minutes from poverty , it is only human to want to eradicate this. Giving/ donating is a means of building infrastructure e..g healthcare, education.

For the UK 0.7% of GDP is given in aid - this is a tiny amount and still leaves countries with 99.3& of their GDP to spend on their own economy.

Can stabilize post conflict regions - can help rebuild their society e.g, to protect governments from overthrow.

Investment in education/infrastructure can help to create a self-sustainable economy -> putting money into infrastructure can improve skills of a person i.e education can help gain a better job and improve standard of living.

Arguments against aid

Absolute poverty is not our problem -> it is the responsibility of the government of that country to sort their own problems out.

Corruption / incompetence -> The money given may go to a corrupt or incompetent government which may not lead to an improvement in the economy -> therefore waste of money/opportunity cost.

Created an "aid dependency" culture -> countries who receive aid may not try to develop on their own and may rely on other counties too much - as no incentive to develop

Misdirected aid (e.g India) -> aid being sent that is not needed for example India has a space program yet we sent them aid, however poverty still exists so should they be developing a space program?

2. Fair trade Schemes

They aim to work with businesses, communities, groups and individuals to improve the trading positions of producer organizations in the south and to deliver sustainable livelihoods for farmers, workers and their communities.

Any product that have been evaluated against a strict set of rules can carry the mark of fair trade, the rules are:

Pay a price that covers cost of living

Pay a premium that the producers can use to invest in development

Make partial advance payments when requested by producer

Sign a contract that allows for long term planning and sustainable production practices

Examples, Coffee, sugar, bananas, tea.

Arguments for fair trade

Guaranteed price above the current market price

Producer has higher income levels

More certainty over income

Aims to help communities to develop i.e provide employment -> better living standards

Don't support actions such as child labour

Arguments against fair trade

Price floor encourage excess supply

Fair trade activity less than 5% sales

Benefits to large retailers ( makes them look good )

Increasing demand for fair trade products leaves producers off other goods worse off

Consumers may be discouraged from pursuing other ways of buying ethical products that may be more effective

Local Vs Fair trade -> hurts local British produce

The Nestle Argument -> ethical company selling ethical products doing an unethical things

3. Free market / government intervention approaches

Includes->

Import substitution policies

nationalisation

farmers forced to sell their produce to state controlled boards at low prices

price subsidies on many goods regardless of necessities

Over valued exchange rates ( aim to reduce cost of imports)