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The Global North and South  The Cold War created an ideological split between the communist East and the capitalist West.  An economic gulf divides the relatively rich nations of the global North and the relatively poor nations of the global South.  Global North includes the industrial nations of Europe and North America, as well as Japan and Australia.  Most people are literate, earn adequate wages, and have basic health services.  These rich nations have basically capitalist economies.

 Nations in the south include Asia, Africa, and Latin America in the zone between the Tropics of Cancer and Capricorn.  The South has 75% of the worlds population and much of its national resources.  Some nations have enjoyed strong growth, especially the Asian “tigers”, the oil-exporting nations of the Middle East, and several Latin American nations.  About one billion people worldwide live in extreme poverty-many of them children.

Economic Interdependence

Cont.  An example is the oil crisis of the 1970’s.  In 1973, a political crisis in the region led the Organization of Petroleum Exporting Countries (OPEC) to halt its oil exports and raise oil prices.  While efforts were made to find other fuels or to conserve energy use, the energy crisis showed what impact a single vital product could have on the world economy.  Another complex economic problem involved the growing debt owed by poor nations to rich ones.

Cont.  In the 1980s bank interest rates rose, while the world economy slowed down.  Poor nations were unable to repay their debts or even the interest on their loans, their economies stalled as they spent their income from exports on payments to their foreign creditors.  To ease the crisis, the International Monetary Fund, the World Bank, and private banks worked out agreements with debtor nations.  In return, debtor nations had to agree to adopt fee-market policies.  They turned to privatization, selling off state-owned industries to private investors.  The immediate effects of privatization often hurt the poor.

Cont.  A third economic crisis highlighted the inter-dependence of the world’s financial markets.  In the 1990s a recession in Japan caused a domino effect that rippled across all of Asia, businesses closed down, workers lost jobs, and poverty spread.  Financial problems spread beyond Asia, Russia couldn’t repay its debts and Brazil struggled to stabilize the value of its currency.  The century ended with signs of an economic upturn, but the problems created by global financial links remained.

Obstacles to Development  Why do developing counties have problems making progress toward modernization?  Geography, population and poverty, economic dependence, economic policies, and political instability.  In parts of Africa, Asia, and Latin America, geography has posed an obstacle to development.  Difficult climates, uncertain rainfall, lack of good farmland, and disease have added to the problems of some nations.  Each year millions of people are born in countries like Nigeria and India.  All these people need food, housing, education, jobs, and medical care, and meeting these needs puts a staggering burden on developing nations.  Most new nations remained dependent on their former colonial rulers.  They sold agricultural products and raw materials to the industrial world.  Many new nations only had only a single export crop or commodity, such as sugar, cocoa, or copper.  Many new nations ended up using all their income to pay for interest on their products.  ;

Cont.  Many new independent nations saw socialism, rather than capitalism, as a way to modernize quickly.  These nations had little private capital, so only the government could raise the money to finance large-scale development products.  In the long run this blocked economic growth, they then ended up using free- market policies.  Political unrest often hindered economic development.  El Salvador, Lebanon, Cambodia, and Angola are among the many nations devastated by civil wars.  War created millions of refugees, the loss of their labor further hurt war-torn countries.

Development and the Environment  Modern industry and agriculture have gobbled up natural resources and polluted much of the world’s water, air, and soil.  The Industrial Revolution and the population explosion, the potential for widespread environmental damage grew.  By the 1970s environmentalists raised the alarm about the threats to our plants environment.  Chemical pesticides and fertilizers harmed the soil and water.  Gases from plants produced acid rain.  This damages forests, lakes, and farmland.

Cont.  Over the last century, world temperatures have increased.  Scientists blame this global warming on the emission of gases into the upper atmosphere.  In Bhopal, India, a leak from a pesticide plant in 1984 killed 3,600 people.  In 1986, an accident at the Chernobyl nuclear power plant in the Soviet Union exposed people, crops, and animals to deadly radiation over a wide area.  Rich nations consume most of the world’s resources and produce much of its pollution.  At the same time, they have led the campaign to protect the environment.