THE GLOBAL SOUTH

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

5 CATEGORIES OF GS COUNTRIES Who is the Global South?

IPE Categories of GS Countries 1. Emerging Markets  Greater % of people =middle class (>$10/day) 2. Frontier Markets  Investment category- just below EEs 3. Countries in Transition (CITs)  Former USSR, Eastern Bloc  Growth rates differ ¤

IPE Categories of GS Countries 4. Least Developed Countries (LDCs)LDCs  GDP p/c ave.=$750; most in Africa 5. Highly Indebted Poor Countries (HIPCs)  Debt relief  36 getting assistance; 3 applied (2016)2016  Only 5 not in Africa ( 4- LA; 1 Asia) ¤

Development Hurdles

Development Hurdles: IMS Currency instability Dependence on primary goods Market isolation; lack of market integration  Need more trade liberalization Strains on public spending ¤

Development Hurdles: IMS Taxes in Africa Why has Burundi’s tax take almost doubled since 2101?  Get businesses to pay taxes  Less corruption ended inflated tax bills  Reduce department corruption  Recruited new staff based on entrance exam  Transparency  Autonomous agency ¤

Development Hurdles: IMS Taxes in AfricaTaxes in Africa (cont.)  Gov’t policies  Gov’t lowered taxes  Added VAT to broaden tax base  Tax office focuses audits for highest yield potential  Keeps gov’ts honest  Accountability to citizens ¤

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

Development Hurdles: 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 ¤

Income Inequality

Development Hurdles: 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 ¤

Development Hurdles: Income Inequality More income equality = higher growth rates (IMF report)IMF Consequences of income inequality  Fewer people with resource access  Banking, formal sector credit  Social services  Economic opportunities tied to political stability  More susceptible to corruption  Limited tax base to support government ¤

Development Hurdles: ITS Promoting sustainable development  Sustainable development expectations  Environmental issues  Human security issues  Need to diversify  Cash crops tax farmland; deforestation  Non-renewable resources Nigeria- 75% of GDP  petroleum ¤

Development Hurdles: ITS Resource exploitation- Conservation articleConservation Why is poaching such a huge problem in GS countries?  Lack of investment in local communities  Wildlife damage crops, livestock  Poverty  Lack of job opportunities  Corruption  Arable land designated as national parks  Need to address demand ¤

Development Hurdles: ITS Labor in BoliviaLabor in Bolivia article Why did Morales back a law to lower the minimum age for child labor?  Reflects the reality of the situation in Bolivia  42% families need kids’ earnings  Creates wider safety net for workers  They’re already working anyway- law mandates work permits, humane conditions, fair wages  Stay in school- can legally work  Kids actually pushed for the law  Keeps kids off the streets

Development Hurdles: ITS What are the criticisms of this policy?  Lack of enforcement  Kids working in adult-only more hazardous industries  Many just aren’t aware of the new law  Focus should be on sex education and birth control  Need to limit family sizes in rural areas to curb poverty  At same time, gov’t has under-population issue ¤

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

What similarities do the highlighted countries have that are tied to corruption?highlighted countries  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?highlighted countries  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? ¤

Development Hurdles: II & IF Political stability Infrastructure & institutions

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

What are the benefits of remittances? 2x foreign aid Much bigger impact than aid Bypass corrupt officials Spur recipient economy More kids go to school Improved system to remit even more beneficial ¤

What are the barriers to remitting money? Expensive money transfer services Huge fees for transferring $ G7 committed to 5% cuts over 5 yrs.—still not close at 7.7% Peer-to-peer transfers Mobile money= no domestic transaction fee Use other channels- esp. if legal ones too costly 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 To increase competition to protect recipients from high fees ¤

What are the barriers to remitting money? (cont.) Suffer if economy turns ↑ costs in working country= ↓ remittances Fewer jobs in working country Tighter immigration laws Lower regional growth Less $ goes into recipient economy Work longer hours Tap into savings ↑ poverty ↑ gov’t debt ¤

INTERNAL & EXTERNAL POLICY STRATEGIES GS Development Tactics

Internal Policy Strategies  Import substitution  Nationalization of industries  Establishing cartels  Protectionism ¤

GS Development Tactics External Policy Strategies Regional IGOs (ASEAN, Mercosur, SADC, etc.) International IGOs (Group of 77 NAM, UNCTAD) International pressure  Monetary reforms  Trade reforms  Development  Economic sovereignty  Economic aid ¤

Good News? Fewer people in extreme poverty Healthier people Healthier people ¤ YearBillion People% Living on <$1.25/ day BP52% BP15% MP12.7% on <$1.90/day<$1.90/day 2015 (est.) 702 MP9.6% on <$1.90/day<$1.90/day YearBillion People% Living on <$3.10/ day BP66% BP35%

Recap

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

GS Development Tactics You’re the leader of an average income GS country. What development tactics might you implement to foster development? *Be sure to keep in mind the development hurdles*