Marginalization of the bottom billion in the world economy. Global capital markets are not
working for the bottom billion. Half of this is lack of capital inflows, the other half is that their own
capital flows out of them. Often due to political instability and poor policies making them
unsuitable for investment. Those in the developing countries take their capital outside of it. Fear
of retrogression keeps capital out of places that have even turned around; global capital mobility
will not develop the bottom billion.
The bottom billion have been stuck in four types of traps. Why have they missed the boat?
- Natural Resource trap
- Conflict trap
- Trap of poor policy
Globalization has helped but at the same time as kept some countries in the bottom billion.
Globalization effects economies of countries that are developing.
3 distinct aspects:
Capital movements and migration. In the past 25 years developing countries have broken into
Defining characteristic of developing countries is that they have a lot of unproductive labour.
And as land export and resources usually benefit rich landowners, the export of service trade
expands the market increasing demand for labour that benefits more widely.
Trade restriction on the poor world as an example of why this effect can be negative.
Additionally sometimes the poor would make their own trade restrictions which made exporting
into competitive markets difficult.
The existence of a pool of workers specific to industry keeps costs lower. Starting a new
industry somewhere without this existing infrastructure costs more (economics of
agglomeration). As more people enter the same market it creates more interest by bringing
business to your area.
During the 1980’s when the wage gap was wide and any low-wage developing country could
break into the global market as long as it was not caught in a ‘trap’. During the 1990’s the
opportunity receded because Asian agglomerations became fabulously competitive: low wages
combined with scale economies. Rich countries did not have low wages and the bottom billion
did not have the agglomerati