The Global South

The Global South Who is the GS? Development Hurdles IMS, II & IF, ITS, GN reliance GS Economic Development Tactics

Who is the Global South? 5 categories Of GS countries

IPE Categories of GS Countries Emerging Markets Greater % of people =middle class (>$10/day) Frontier Markets Investment category- just below EEs Countries in Transition (CITs) Former USSR, Eastern Bloc Growth rates differ ¤

IPE Categories of GS Countries Least Developed Countries (LDCs) GDP p/c ave.=$750; most in Africa Highly Indebted Poor Countries (HIPCs) Debt relief 36 get assistance; 3 applied (2016) Only 5 non-African (4- LA; 1 Asia) ¤

Development Hurdles

Poverty Why did Morales back a law in Bolivia to lower the minimum age for child labor? Reality of local situation Need kids’ earnings Kids working anyway- law mandates work permits, humane conditions, fair wages Stay in school Kids pushed for law Keeps kids off streets ¤

Poverty What are the criticisms of this policy? Lack of enforcement Kids in adult-only hazardous industries Lack awareness of law Need sex ed. and birth control Rural family sizes But, under-population issue ¤

Gender Inequality UN Gender-related Development Index (GDI) Country GDP p/c Women GDP p/c Men Dev. Level Saudi Arabia $16,197 $78,689 Very High Norway $56,994 $70,807 U.S. $41,792 $63,163 China $9,288 $13,512 High Botswana $11,491 $18,054 Medium Pakistan $1,707 $7,439 Low

Gender Inequality Gender inequality hinders development Less literacy higher population Less education more child labor Lower GDP p/c for women v. men in every country ¤ http://www.glpinc.org/Web_pages/Illiteracy_Globally.html

Income Inequality http://www.theatlantic.com/international/archive/2011/09/map-us-ranks-near-bottom-on-income-inequality/245315/, 2011

Income Inequality Gini index- measures inequality Gap bt. rich/poor Development income equality More developed greater equality Less developed lesser equality Stark exception is US Brazil: 10% control 51% of wealth Mexico & Argentina: 10% control 42% of wealth http://en.mercopress.com/2010/03/27/gap-between-rich-and-poor-in-latinamerica-is-largest-in-the-world-says-un ¤

Income Inequality More income equality = higher growth rates (IMF report) Consequences of income inequality Fewer people w/ resource access Banking, formal sector credit Social services Income tied to political stability Corruption Limited tax base ¤

Why China is GS http://www.china-briefing.com/news/2015/10/26/chinas-gdp-growth-more-shocks-ahead.html

Sustainable Development (SD) SD expectations GS- AND- GN Environmental issues Human security issues Need to diversify Cash crops tax farmland; deforestation Non-renewable resources Nigeria- 75% of GDP  petroleum ¤

Sustainable Development Why is poaching such a huge problem in the GS? Lack of local investment Wildlife damage crops, livestock Poverty Lack of job opportunities Corruption Arable land as national parks Need to address demand ¤

Corruption Not limited to GS, but worse there Corruption discourages FDI Correlation bt. corruption and parking tickets Transparency Int’l TI Index Mo Ibrahim Foundation Est. 2007- but only 4 winners ¤

What similarities do the highlighted countries have that are tied to corruption? Authoritarian rule Surrounded by cronies Regulate media Fire challengers Bribes ‘Merit-based’ reward Everyone does it ¤

What similarities do the highlighted countries have that are tied to corruption? Claim to serve ‘their people’ Try to conceal corruption Point fingers =image of addressing issue Apathy, tacit consent of public Especially during economic growth Distractions Economic growth, nationalism, public shows of humility ¤

What factors contribute to the DRC’s corruption? Corruption is endemic History of not paying gov’t employees New gov’t still corrupt Wages skimmed or never received Lack of banks Accountants delivered cash Ghost employees Lack of infrastructure Money transfer robbery ¤

How has the DRC tried to eradicate corruption? Encourage people to use banks Got employees to open accts. Direct payment to banks deliver to employees ↑ flow of cash Want more dollar deposits, more borrowing, sales Shifted payment responsibility to banks Bank staff now deliver cash ↑ transparency Why would banks open/take responsibility? ¤

Political Stability Political stability Infrastructure & institutions

What are the benefits of remittances? 2x foreign aid Bigger impact than aid Bypass corrupt officials Spur recipient economy More kids go to school Even better- improved system to remit ¤ http://www.economist.com/news/economic-and-financial-indicators/21708663-remittances?frsc=dg%7Ca

Filipino migrant workers in Hong Kong

What are the barriers to remitting money? Expensive transfer services Huge fees for transferring $ G7 wanted cuts; still not close to target % Peer-to-peer transfers Mobile money= no fee Use other channels Local networks ¤

What are the barriers to remitting money? (cont.) Regulations Fear of money laundering, financing terrorism Harsh penalties on MNCs MNCs bound by procedures Background checks, software, checking wire-transfer info, etc. Define ‘risky’ transaction Protect MNCs that follow procedures ¤

What are the barriers to remitting money? (cont.) Role of GS GS need national ID systems India’s new system easily tracks money GS needs regulations on mobile money MNCs Need competition ↑ costs in working country= ↓ remittances Fewer jobs in working country Tighter immigration laws ¤

How does an economy suffer when remittances diminish? Less regional growth Less $ goes into recipient economy Directly affects former recipients Work longer hours Tap into savings ↑ poverty ↑ gov’t debt ¤

IMS Hurdles Currency instability Import dependence = hard cash going out Strains on public spending Inadequate tax base Corruption, poverty, infrastructure ¤

ITS Hurdles Lack of market diversity Dependence on primary goods Market isolation; lack of market integration Need more trade liberalization Strains on public spending Political instability Discourages FDI Lack infrastructure ¤

II & IF Hurdles Jobs for remittances GN reliance Conflicting interests with GN Self-interested actors Reliance on GN Foreign Aid Technology FDI Employment Primary goods reliance Jobs for remittances ¤

GS Development Tactics Internal & External Policy Strategies

GS Development Tactics Internal Policy Strategies Import substitution Nationalization of industries Establishing cartels Protectionism ¤

GS Development Tactics External Policy Strategies Use regional IGOs (ASEAN, Mercosur, SADC, etc.) Form global IGOs (Group of 77 NAM, UNCTAD) Collective int’l pressure ¤

Good News? Fewer people in extreme poverty Healthier people Year ¤ Year Billion People % Living on <$1.25/ day 1981 1.94 BP 52% 2011 1.1 BP 15% 2012 896 MP 12.7% on <$1.90/day 2015 (est.) 702 MP 9.6% on <$1.90/day Year Billion People % Living on <$3.10/ day 1990 2.9 BP 66% 2012 3.1 BP 35%

Recap

Development Factors IPE Status Infrastructure Reliance on external assistance Physical Civil institutions IGO, NGO aid Corruption FDI Need for sustainable dev. Remittances Production Tactics to overcome issues ¤