21 Apr 2012
School
Department
Course
Professor
Rise of development
At the end of WWII, Europe suffered in an unprecedented financial way
•
Colonial empire collapsed; handed power over to US
○
Members of British government sent a memo to Secretary of State Marshall saying that Britain couldn't bail out smaller European
nations (especially Greece and Turkey)
○
Shift in power dynamics --> Britain could not provide the aid
•
We're not just trying to build Europe: we want to promote the security of the US and protect Western civilization
○
The real enemies of democracy were hunger, poverty, desperation and chaos
○
Aid was always given but it was not an instrument --> now it has an agenda
Foreign aid becomes an instrument of foreign policy
○
Marshall plan (1948- 1952): 13 billion dollars
•
Southern hemisphere is for the first time is an "underdeveloped" region
○
We're spreading the light of capitalism and freedom to these regions
○
4th point: we must help underdeveloped areas. More than half the people in the world are living in poverty.
Truman's 4 points
○
President Truman gives his inauguration speech: foreign policy and aid was going to spread American interests in the world: capitalism
and freedom
•
US Treasury Secretary (Morgantheau), Chief Economic Advisor (Dexter), British economist (Keynes) lead the move towards a new
economic order
○
It becomes a moral argument
In the old order, there was no macroeconomic faciliation of trade --> result was social ills, chaos, fascism, etc.
○
Bretton Woods conference in 1944 --> new international monetary regime
•
IMF- aid
Bank- lends money to impoverished countries for development projects
IMF and World Bank
○
Western countries advance in economic growth
Poverty in most western countries is crushed
3d world saw some growth but declining terms of trade for raw materials
Results
○
Bretton Woods Era (1944- 1971)
•
Development's beginnings
•
US prints more money
○
OPEC raises oil price
○
OPEC puts money in US private banks
○
Interest rates go plummeting down
○
Private bank lending increases from 2% to 33%
Private banks lend money to 3d world dictators
○
Oil crisis
•
Brazil- 73 billion
Mexico- 36.7 billion
1973 - 1982: Loans skyrocket from 295 billion to 1, 689 billion
○
Essentially, bad lending creates tremendous debt
○
1982 --> Mexico defaults on debts
○
Money goes to fuel conflicts and war
•
You have to start trading raw materials
○
Austerity measures: urged state to rollback (spending) and make people pay for services
Devalue your own national currency and remove subsidies
Promote privatization of industries and deregulation
3 conditions:
○
This is only from debt repayment
□
Kofi Anan (UN): In 2002, the net transfer from poor to rich countries was 200 billion (more money is coming out of a 3d
world country than into it)
Transfer includes debt repayment, unfair trade profits
□
Action Aid from poor to rich countries 710 billion (2003)
Debt and development are thus tied together
○
SAPs (Structural Adjustment Programs) are the result --> restructure national economies so that the debted country earns foreign
currency to repay its debt (neo- liberal)
•
Debt- Chomsky argues that debt is an ideological issue, not an economic fact
•
Non- commercial
Concessional (repayment is not as stringent as commercial)
Transfer of money, goods resources and services from rich to poor countries. Foreign aid meets these 2 criteria:
○
International development aid (IDA)
•
Terms
•
Lecture 2
Tuesday, January 18, 2011
11:08 AM
IDSB06 Page 1