Why is there a wealth gap between the northern countries and the southern countries? Theories such as economic liberalism, world system theory, and dependency theory, have emerged to explain the North-South Gap. A clear understanding of these distinct theories is essential to drawing the similarities and differences between how Northern and Southern countries earn their wealth.
Reiterating the previous sentence, a comprehensive understanding of economic liberalism theory is crucial. Coming from the latin root, liber, meaning free, the notion of economic liberalism was developed by Adam Smith who contended that the power of free markets was unprecedented and would be the most ideal system. He advocated for the idea of free trade in conjunction with the reduction of government controls and regulations, as this efficiency of trade, coming from greater lending and investments, would stimulate the economy, thus growing it. This concept was laissez-faire (let it be), the precursor to economic liberalism theory. Now, economic liberalism holds that free trade makes everyone richer through positive sum gains. The most common example used is a pie. From a mercantilist perspective, states would merely compete amongst one another to gain a larger slice of the pie; in contrast, liberalists argue that free trade would allow the pie to enlarge, increasing everyone’ share. How exactly does this play in reality? Essentially, liberalized economies empower investors and corporations to make enormous sums of money, including countries in the “North”, as those states would gain revenue through taxation. Likewise, while this also reduces power of governments in the “South” to shape economic policies domestically and to respond to problems when they occur, neoliberalist policies, theoretically, also empower LDCs, as salaries can be taxed on by the government for those working in corporations, providing the government with another financial stream.
The global system of regional class divisions has been seen by some IR scholars as a world-system or a capital world economy. This view is Marxist in orientation ( focusing on economic classes) and relies on a global level of analysis. In the world system, class division are regionalized. Region in the global South mostly extract raw materials.- work that use much labor and little capital and pays low wages. Industrialized regions mostly manufacture goods- work that uses more capital, requires more skilled labor and pays worker higher wages. The manufacturing regions are called the core of the world system. This constantly reinforces the dominance of the core countries. This had resulted in the North-South gap in the world.
Marxist IR scholars have developed this theory to explain the lack of accumulation in the third world. It is define as a situation in which accumulation of capital cannot sustain itself internally. A dependent country must borrow capital goods; its debt payments then reduce the accumulation of surplus. Dependency is a form of international interdependence- rich regions need to loan out their money just as poor ones need to borrow it. Foreign capital invested in a third world country to extract a particular raw material in a particular place, it only leaves the the country with some jobs for few local workers. Over time, the resource depleted. Another pattern is that national controlled production, a local capitalist control the cycle of accumulation based on production. The profit goes to the local capitalist mostly and that builds up a powerful class of rich owners within the countries.
The wealthiest country in the world (according to Michael and Samuel)
https://magic.piktochart.com/output/3863251-the-wealthiest-country
The Rapa Nui, once a large and thriving society, had led to their own doom by degrading the environment and over-extracting resources. As the population of these statue building people increased, pressure on the environment also soared and soon, they deforested the island.
The situation the Rapa Nui people faced against deforestation and the situation between the people on earth and the environment may be symbolic in meaning, but the problems happening to the environment are much harder to solve nowadays. The Rapa Nui people, in order to solve the problem with deforestation, could simply stop carving moais, the large stone heads. However, the international environment is interdependent, thus, creating a difficult collective goods problem.
Even though 70% of Earth is water, overfishing is becoming a serious problem since 1.2 billion people are dependent on fish as their main source of protein. Even though actions such as fishing farms may seem like an alternative, it is not. Most farm fishes are carnivorous, thus, around 5 kilograms of wild fish is needed to produce 1 kilogram of farm salmon. Fishing farms do not create more fish; it simply converts low value small fish to higher value big fish. Overfishing is not only caused by the increase in population size. It is also due to greater access to global markets and seafood dependency. If this continues, Earth will run out of fish by the near future. Fortunately, throughout history, efforts had been made to solve this problem, though how successful they are can be debatable. The United Nations Convention on the Law of the Sea treaty deals with overfishing, where states need to make sure their resources in their exclusive economic zone are not endangered by over-exploitation. Also, Individual Transferable Quotas (ITQs), a method enacted by the government to regulate fishing by having regulators set a species-specific total allowable catch, are adopted by countries such as Netherlands, Iceland, and Canada. All these attempts to stop overfishing, such as the ITQs, removal of subsidies, and artificial stocking, however successful they are, makes us different from the Rapa Nui people since we are trying to change while they watched their resources drain away.
Climate change, on the other hand, is a much more difficult problem to solve. Climate change has been very difficult for sates to tackle and take collective action on because like fish, they are not marked by boundaries. The air is free moving, thus, however much carbon dioxide is emitted into the air by a certain nation, it will affect Earth as a whole. Nevertheless, when it is necessary, countries were able to agree on environmental issues. For example, when there was a problem with the ozone layer, caused by ozone depletion, the Montreal Protocol on Substances that Deplete the Ozone Layer was designed to protect the ozone layer. Another example can be referred to the time when multilateral and bilateral approaches are used to solve the problem of acid rain. In November of 2013, the United Nations Climate Change Conference was held in Warsaw, Poland. United States and China reached an agreement to cut carbon emissions, where United States aims for reduction of a quarter by 2025 and China set goals for emissions to fall after 2030.
The human race will not end up like the Rapa Nui people! Even though resources are slowly being drained by over usage and exploitation, unlike the Rapa Nui people, efforts had been made toward fixing such problems. One may argue that these efforts made toward solving these problems are mostly ineffective, at least efforts had been made, thus, we are not at all like the Rapa Nui people. If the human race does end up facing extinction, it will not be because we used up all our resources.
The three documentaries, Inside Job, Why We Fight, and Life and Debt, all described the inequality within the international economic system and the dominant role of United States and Western countries.
In the first video, Inside Job, talks about the economic crisis in the year of 2000. It's mainly caused by the excessive and reckless
risk-taking, resulting in deregulation. The frauds that the investors created in the market soon collapsed, and now the banks have hundreds of billions dollars of loans. The global economic crisis costed tens of millions of people their savings, their jobs, and their homes. There are massive decline in financial stability for global masses and massive incline in financial gain for minority of people. This trend still continues today.
Why we fight, the documentary tells us the real motives of America for going to war with so many countries. On September 11, 2001, planes were hijacked by terrorists who directed the plane into the World Trade Center. From that day on, US started a campaign to eradicate all terrorism. Maybe you can say that their purpose to fight for freedom, their army forged with peace, and their cause just. However, can they be aiming for power and control? Can the invasion of Iraq be a message to the world that everyone must obey the US? People have no idea about the reasons behind the various terrorist attacks. They don't know that America's secret operations had caused many retaliations, and they think that the terrorists are simply evil or hateful. America fight for their interests, not for a just cause.
Lastly, the documentary, Life and Debt, the video focused on the economic hardship that Jamaica faces. As a former British colony, this country has not yet been well developed. It's poor and is forced to seek loans from the International Monetary Fund, but it did not work out and resulted in more debts. Jamaica couldn't flip their situation because the Western countries have imposed neoliberalism as the condition for loans. The privatized industries now can go into the country because of the liberalized markets. Now the market is open to foreign competitions, which, Jamaica's local industries could never compete due to the immense subsidies Western countries give to their industries, especially farms. Next, they set up free zones for really cheap labors. If any of the workers were to complain about their extremely low wage and horrible working condition, they were fired immediately and included in the blacklist. Sometimes, the investors actually leave, because they found places where the labor is even cheaper. Their departure left to countless of people unemployed. Now, the only thing that sustained Jamaica's economy is the tourism. However, a few families control everything. They are the ones who gets all the money. While they live on mansions on mountains, the rest of the nation were living in slums with income that could barely support their basic needs.
The three videos all show how the US and many western countries dominate the global economic system. If no actions are put stop this from worsening, our world will only become a place where most of the money are possessed by the 1% few, and the vast majority are left starving, poor, and hopeless.
Since the massive economic growth in the 20th century, caused by population boom, Industrial Revolution, and economic liberalism, trade network continues to grow and gross domestic product (GDP) is rising. However, the greatest increase in world trade happened in the last 50 years. What caused this sudden surge of international trade? This essay is going to discuss about whether the world trade regime is based more on reciprocity, where several countries work together to provide benefits for each other, or dominance, where the hegemonic, or simply powerful states, take advantage of the inferior and less developed countries.
Some organizations help regulate the reciprocity in world trading network which includes the World Bank and GATT (later became WTO). The World Bank was originally intended for Reconstruction and Development of Europe but later it extended its purpose to help advancing global economic development and ending poverty. It provides financing to states to fund projects that seek to improve transportation, infrastructure, education, sanitation, energy, etc. Also, the International Development Association (IDA) gives low or interest-free loans to the poorest countries but does so with conditions that require policy changes. GATT, or the General Agreement on Tariffs and Trade sought to eliminate tariffs (tax on foreign goods) and help states negotiate reduction of trade barriers. In 1995, GATT became the World Trade Organization (WTO). This organization uses methods to discourage tariffs such as, if a country places tariffs on a specific product from one country, it must do so on all countries.
At the same time, large parts of the world were decolonizing. One could say that it's the end of mercantilism, where powerful states uses the favorable balance of trade (export > import) to gain immense wealth, but the newly independent states are already economically dominated by the US. The great subsidies that the US, Canadian, and European give to their own farmers makes the crops in Africa non-competitive price wise. In the documentary, Black Gold, it mentions that Ethiopia, Africa's largest coffee producer with more than 15 million people depending on coffee for their survival, gets ripped off by the rich businessmen who pays 23 cents at most for a kilogram of fine coffee for $230 worth of coffee. This example is excellent in explaining the dominant element in the world trade regime.
I think that among the states with similar development and power, reciprocity is the greatest factor that influence the trades between them. On the other hand, when it comes to states with unequal economic condition, the more powerful states tend to take advantage and become dominant to ensure the maximum profit.
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