October 21 class notes.docx

October 21, 2009 Theories of Global Inequality Market-oriented theories: unrestricted capitalism; minimum government intervention Best possible economic consequences will result if individuals are free to make their own economic decisions Modernization theory: poverty of low-income societies explained by cultural and institutional barriers to development To eradicate poverty, changes in values and attitudes are necessary; no government intervention in economic affairs; high rates of savings and investment should be encouraged Dependency theories: global poverty is the result of the exploitation of poor countries by wealthy ones Exploitation and poverty of certain regions intrinsically tied to global capitalism all the way back to colonialism World-systems theory: the capitalist world system as a whole-not just individual countries must be understood to make sense of global inequality Focus on the relationships of core, peripheral, and semiperipheral countries in the global economy; long-term trends in the global economy State-centered theories: role of government in fostering economic development The experience of the rapidly growing East Asian newly industrialized economies as an example Structural Adjustment Programs and Global Inequality SAP: Policies purporting to improve the economic performance of poor countries Poor countries qualify for new loans from the World Bank/International Monetary Fund (IMF) if and when they commit to follow very specific economic policies Loans from World Bank/IMF require strict adherence to certain economic policies from the loan-receiving poor countries These include: Devaluation of their currencies against the dollar Lifting of export and import restrictions Removal of price controls and state subsidies RESULT: This often leads to cuts in basic social programs like education, health and social services Production of one or two primary commodities destined for export, resulting in dependency on volatile global prices This also reduces food production for local consumption Prices of available goods and services are often too expensive for the majority of the population Very strong criticism (by some policy makers, governments, academics, human rights activists etc) against the detrimental consequences of SAP programs in the poorest regions of the world IMF and World Bank now use new terms to designate somewhat similar policies as SAP (The Poverty Reduction Strategy Initiative, for example)