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The balance of trade
There is a balance of trade between the countries of the developed North and the developing South. However not everyone agrees that it is particularly fair.
The developing countries of the world tend to have most of the raw materials that the developed countries need. However the developing countries do not have the technology or finances to process these raw materials and so sell them to the developed countries who can process them.
Often the products produced are then sold back to the developing countries for a far higher price than the original raw materials were sold for.
Every country imports and exports. This is their own trade balance. Developed countries tend to earn more money from their exports than they spend on imports, meaning they have a trade surplus and will become richer. Many developing countries import more than they export, meaning they have a trade deficit and so become poorer, and fall greater into debt.
The biggest single problem for developing countries is the debts that they have, especially as there are interest payments on them. That is why many people have been calling for the debts to be written off to allow these countries a real chance to spend their money on becoming more developed. The chances of it occurring appear minimal though because that would mean the developed countries losing their economic control over the developed countries.
Aid
Aid is given by donor countries to recipient countries to help their development, or help them recover from a natural disaster.
The aid takes many forms and can be given on a large scale or small scale. Large scale aid is called top-down aid as it is usually given to the government of the developing country so that they can spend it on the projects that they need.
Unfortunately this can lead to the mis-use of aid money by unscrupulous governments. Aid from developing country governments tends to be given as top-down aid.
Small scale aid projects are called bottom-up aid. These target the people most in need of the aid and help them directly, without any government interference. Aid from charities tends to be bottom-up aid.
There are five main types of aid that can be given to developing countries, and these are outlined below:
The different types of aid
Bilateral Aid: See conditional aid.
Charities (Non-Governmental Organisations): Charities such as Oxfam, Comic Relief and Save the Children raise huge amounts of money for projects in developing countries. They mainly get their money from the general publics generosity, however they also receive government grants.
The charities tend to target small scale community-based projects to fund. They realise that in this way their money is going directly to the people who most need it.
The charities are also the ones who often are quickest on the scene with short term aid after a natural disaster such as a famine or flood.
Conditional Aid: Conditional aid is given by a donor country (MEDC) to a receptor country (LEDC) to finance projects in that country. In return the receptor country usually has to agree to buy other products from the from the donor country.
- A good example was the building of the Aswan dam in Egypt. The Russians gave the Egyptians money to help build the dam, in return for Egypt allowing them unlimited access to its airfields.
The project began in the 1950’s and General Nassua eventually told the Russians to leave after the six day war in 1967.
- In 1994 the British Government came under fire as details of a supposed conditional aid package reached the public. The scheme involved Britain giving £234 million worth of aid to help the Malaysian Government build their Pergau hydro-electric dam scheme.
However it then emerged that this aid was linked to £1.3 billion of British defence contracts with Malaysia. Similar claims were made about defence contracts and aid money given to Indonesia.
Long-term Aid: Long term aid aims to help the country develop in the future, by introducing schemes to help things like health care, education and food production. Many of the NGO’s are involved in these long term schemes, which can be large scale or small scale projects.
The main aim of the schemes is to introduce ideas and thinking that can be easily sustained by the local community, with only the help of the NGO to set them up in the first place.
Many of the schemes introduced by Comic Relief into countries like Burkina Faso and Ethiopia are examples of long term sustainable aid.
Multilateral Aid: This form of aid involves the developed countries giving money to central international organisations such as the World Bank and the World Health Organisation. These then decide where and when the money is going to be spent. In the case of the World Bank this money is still a loan, that will need to be paid back, whilst other organisations act more like charities.
It is this form of aid that the Brandt Report suggested each country should give 0.7% of its GNP towards. However most countries do not get close to reaching that target.
Short-term Aid: Also known as emergency aid, this is the aid that you will have seen on the news. Charities and governments send short term aid after a natural disaster to help the country recover.
Two recent examples include the famines in Africa for which food, medicine and shelters were quickly sent over to countries such as Ethiopia and Sudan. Then there were the terrible floods in Mozambique in early 2000, which led to food, medicine, clothes and shelters being sent over, as well as South African helicopters being used to pluck people from the flood waters.
Tied Aid: See conditional aid.
The main disadvantage of all forms of aid is that many developing countries have become dependent upon it for their survival.
This has led to some developing countries calling aid an “economic colonialism” where the developed countries have a tight hold over the development of the developing countries. The massive debts that many of them have only increase this dependency on aid form the developed countries.
Case study Ethiopia:
Last year Ethiopia could feed itself was 1982.
Famine at greatest in 1984. Natural cause was drought – years of lower than average rain, rains failed in 83/84. Civil war worsened proble.
500, 000 died in 1984
nearly £15million was rasied in 1984 in Britain alone by the UK Disasters Emergency Committee. Nearky wall was food aid.
From 1984-1992 the Ethiopian Famine Relief Fund, consisting of Band Aid and Live Aid, raised £110 million.
1990s – continued need for relief. Drought not gone away and high birth rate! Half population still live in poverty and malnutrition major problem.
Some NGOS (non-governmental organisations) are setting long-term targets to help areas like Ethiopia. Cafod provides practical help:
- Finding high quality seeds which mature even if rains are poor
- Planting drought-resistant trees
- Digging ponds and wells • Marketing surplus produce
- Providing loans
