Improving Developing World Economies

smiles

Was having a bit of an a think last night about the whole removing debt from developing (formally 3rd world) economies, part of a question on an economics exam i had, and I kept finding flaws with all the possibilities that I could think of.

Could people post their ideas? I'd love to see something that wouldnt backfire/collapse suggested.

<< Fio >>

Victor

As they say, its one thing to give someone a hand-out, but it's better to give them a hand-up. Fine in theory, I'm not sure about the practice. Maybe it's the cynic in me.

Using donor countries to pay off debts (as promoted by Bono) only puts money in the pockets of the (super-rich) people who currently hold the debt.

I'm not enthusiastic about interfering in other countries internal affairs, but many of the countries with huge debt problems are also the ones with war, corruption and other problems that require huge structural reform.

Education, I suspect will be the one great improver on Developing Economies. That is education for the masses, so they can improve their own position. So they can see the short-sightedness, greed, corruption and the hate-mongering that is causing many of their more immediate problems.

b20uvkft6m5xwg

In a nutshell...
(and prolly an overly simplistic view)
I would subscribe to the basic beliefs of JM Keynes and the multiplier effect.

Thus, cancelling 3rd world debt and pinpointing investment in those countries, will (all things being equal) promote their and our economies. (ain't I an idealist !!)

Morally, the fact of the matter is that most of the countries owing the World Bank huge sums could be argued as being "Unconsiousble Participants" to those debts as they were negotiated by scrupolous power mongering Warlords-
If I remember rightly the World Bank loaned millions of millions to the Leader of the Congo (I think!?) for him to buy a solid Gold Throne for his inauguration and fund various Wars-
I hardly think its fair for the ordinary citizens of those countries to be bound to pay off the debts, of what in most cases, were dictators.

Anyhoo, theres my views:)

GreenHell

Remove money, although we'd all more than likely find some reason to rip to people off.

smiles

Originally posted by Victor
Education, I suspect will be the one great improver on Developing Economies. That is education for the masses, so they can improve their own position. So they can see the short-sightedness, greed, corruption and the hate-mongering that is causing many of their more immediate problems.

How could a good education system be set up?
Where do they get the funding for:
a) the building of the schools,
b) teachers continuous wages.
Where do they get these well educated teachers from?

(not opposing your point just looking for answers/views)

<< Fio >>

smiles

Originally posted by 80project
In a nutshell...
(and prolly an overly simplistic view)
I would subscribe to the basic beliefs of JM Keynes and the multiplier effect.

Thus, cancelling 3rd world debt and pinpointing investment in those countries, will (all things being equal) promote their and our economies. (ain't I an idealist !!)

Idealist indeed! I think that the principle is great, but it wouldn't work.

One of the first things you learn about the multiplier is that Imports are leakages out of the circular flow of income, and reduce the effect of the multiplier.

Will cancelling world debt not encourage some of the (corrupt) economies to simply borrow afresh to fund their little wars?

Will investment into these economies stay there? I mean when they set up they are effectively hiring a poorly educated, low-wage workforce, what happens when the wages start to go up? will these firms simply pack up and go to a new (cheap labour) country? Leaving devestation in their wake?


Again, i'm not arguing just trying to tease out ideas and stuff.

<< Fio >>

b20uvkft6m5xwg

How do you suppose that imports would be any greater than they would normally, if debt was cancelled?
Obviously, there would be more liquidity in the Circular Flow, but comparing the economic behaviour of a Developed Country to the a 3rd World one may not be suitable. In a "1st world" country, if we have more money in our pockets then we go out and buy Cars, Big TV's, luxury goods etc. (most of which are imported), but if there was more money in some of these "3rd World" econmoies as a result of cancelling debt, then it wouldn't automatically equate that they would do the same- Arguably the money would go into core Infrastructural Development.

I take your point that some more corrupt countries would see the cancelling of debt, as an opportuinty to borrow further or use that money elsewhere. If debt was to be cancelled then it would have to be mandated and conditional on proper macro-economic management.

As regards investment, if you look at the Tiger Economies in SE Asia, manufacturing and investment was what fuelled their economic success- obvioulsy when labour becomes cheaper some Multi-nationals will move on, but whats left in their wake, is usually a well-educated and skill based workforce- that in turn has the ability to run their own economy-

smiles

Originally posted by 80project
How do you suppose that imports would be any greater than they would normally, if debt was cancelled?

I'm pointing out that if people have more money (due to possibly lower levles of taxation as they no longer have to pay off the debt/interest) then they will spend it on the cheapest goods available to them, which tend to be cheaply imported 1st world goods as far as i can see.

<< Fio >>

b20uvkft6m5xwg

Fair point,
but it depends on what is being imported.

They might be importing "cheap" inputs for manufacturing and ultimately exporting the ouput, thus meaning equlibrium on the balance of payments and hence countering any loss from the circular flow fo income.

It all depends on the countries themselves and what extent of natural resources or raw materials they have for example.