The Debt Trap: Foreign Aid and Structural Adjustment - PowerPoint PPT Presentation

Loading...

PPT – The Debt Trap: Foreign Aid and Structural Adjustment PowerPoint presentation | free to download - id: 4e8c10-MTcxN



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

The Debt Trap: Foreign Aid and Structural Adjustment

Description:

The Debt Trap: Foreign Aid and Structural Adjustment As Mao Tse-Tung warned his cadres as they took power in China in 1949, the sugar-coated bullets of the ... – PowerPoint PPT presentation

Number of Views:225
Avg rating:3.0/5.0
Slides: 23
Provided by: DanielW163
Learn more at: http://www.geo.wvu.edu
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: The Debt Trap: Foreign Aid and Structural Adjustment


1
The Debt Trap Foreign Aid and Structural
Adjustment
  • As Mao Tse-Tung warned his cadres as they took
    power in China in 1949, the sugar-coated bullets
    of the bourgeoisie are likely to prove more
    fatal to a revolution than real bullets
  • (Payer, The Debt Trap, 1974)

2
Review TNCs and the global economy
  • What are TNCs? FDI? How have they developed?
  • Postwar growth of transnational production
  • geographical shifts
  • temporal trends
  • sectoral changes
  • Types of TNCs
  • geographic expansion (market access)
  • Specialization (global assembly line)
  • Roles in global economic development

3
Group exercise Assessing the Impact of FDI
  • Considerable debate is taking place about the
    impact of FDI and TNCs in third world countries.
    What are the benefits and/or disadvantages to
    this investment? How does it impact local firms,
    employment, infrastructure and overall
    development?
  • (Write down your findings and prepare a brief
    report for the class.)

4
  • Overview The Debt Trap
  • 1. Why borrow? Why Loan?
  • Global Finance and International Development
  • 2. Bilateral Foreign Aid
  • 3. Bank Lending and the Debt Crisis
  • 4. Multilateral Funding and Structural Adjustment
    Programs

5
1. Introduction to Global Finance and
International Development
  • Context for international borrowing and lending
    why loan money to the poor?
  • Economic disparities between 1st and 3rd world
  • Finance economic growth
  • Lack of domestic savings
  • Unequal and declining terms of trade

6
Temporal and Regional Patterns of Lending
  • Temporal shifts
  • Largest increase late 1970s to mid 1980s
  • (see graph)
  • Regional Patterns
  • Latin America largest borrower
  • Asia (NICs) 2nd largest
  • Africa lowest

7
(No Transcript)
8
Major Sources of 3rd World Financing
  • 1) Bilateral foreign aid
  • 2) Bank lending
  • 3) Multilateral lending

9
1. Bilateral Foreign Aid
  • Government-to-government lending
  • Development projects
  • E.g. dams, roads, infrastructure
  • Food or other resource provision
  • Human labor
  • e.g. Peace Corps, medical personnel

10
Bilateral Lending (cont.)
  • Tied aid
  • Conditional lending
  • Disadvantage to borrowing country
  • Reduces money spent domestically
  • Not necessarily best price or appropriate good
  • Negative for local producers
  • focus on large-scale vs. grassroots development

11
How much do they give?
  • On average, first world nations have provided
    0.33 of their GNP as foreign aid during the last
    20 years (Porter and Sheppard, p. 514).
  • Top givers
  • Holland and Scandinavia (1 of GNP)
  • Bottom givers
  • United States (0.2 of GNP)
  • (compare to amount spent on military)

12
Motives for giving ?
  • - Geopolitical importance
  • E.g. military bases
  • - Historical connections
  • E.g. former colonies
  • - Encourage market-oriented development
  • - foster competition and the private sector

13
2. Bank Lending and the Debt Crisis
  • Trends in private bank loans (graph)
  • Reasons for lending
  • (from areas of surplus to shortage)
  • Rising oil prices
  • NIC growth
  • Increasingly available petrodollars

14
High risk loans the bubble is growing
  • Brazil 1.5 billion per month in 1982
  • Rising inflation
  • Impact on repayments
  • Most loans to a few countries
  • 4 L.A. countries and 1 Asian co. 60 of
    loans
  • Little to Africa

15
(No Transcript)
16
Origins of the Debt Crisis the bubble bursts
  • 1) Strengthening of dollar
  • value increased
  • Higher interest rates
  • 2) Decreasing income from exports
  • Declining value of primary commodities
  • Debt burden
  • 3) Capital flight
  • Money overseas in financial havens

17
Consequences of the Debt Crisis
  • Request for moratorium on debt repayment
  • Esp. Latin America
  • Less foreign lending in 1980s
  • Widespread impact on global financial system

18
3. Multilateral Funding and Structural Adjustment
Programs
  • IMF and World Bank background
  • Twin institutions
  • Established in 1947 with Bretton Woods
  • Global financial cooperation vs. national
    controls
  • fixed exchange rates

19
Structural Adjustment Programs (an invention of
Harvard economists)
  • Objectives
  • Establish conditions for IMF loans
  • Economic reform
  • Push for free trade and market competition
  • Versus state control
  • Implementation
  • 1) Deflationary policies
  • 2) Export oriented economy
  • 3) Liberalize trade

20
  • In many Third World countries, candidates for
    President or Prime Minister campaign for election
    on a platform of opposition to the IMF. Months
    after the election is won, the same leaders
    forget their campaign promises and come to terms
    with the IMF - having found it as impossible to
    live without it as to live with it
  • (Payer, The Debt Trap, 1974).

21
Implications of SAPs
  • Reduced government spending
  • Lower wages
  • High unemployment
  • Cut social services
  • Effects on women and households

22
  • Review The Debt Trap
  • 1. Exploring postwar economic development
  • 2. Foreign aid linked to historical processes
  • 3. The Debt Crisis grew out of Diffusionist path
    to development
  • 4. Serious and long-term implications for
    developing countries
About PowerShow.com