General situation and compromising position of third world countries in the international trading system in post WW II an independence periods
Disadvantageous position of third world countries in the international trading system in the post-second world war/post independence period is due to two major factors, first is the Debt crisis of these countries to their developed nation counter parts. After Second World War, many nations which are now in the third world category and some in the level of NICs were left with huge outstanding areas which were largely due to grants and loans inform of material items. Though these countries did not participate actively in WWII, they were adversely affected by what transpired during the period. At the onset of cold war and during the war, third world nations were already dependent on aid and financial assistance from the now developed/industrialized world.
This was made possible through their respective colonial masters. In return to the taxes collected and remitted to the colonialists, they brought into the developing world finished products like cloths and kitchenware. The war therefore was considered a major set back for third world nations as it cut short the flow of help and support that was systematically streaming in mainly from Europe and America. Agricultural inputs were brought to third world countries from the developed ones. Without this, large scale production of raw material was challenging. These factors predisposed third world nations to both vulnerable and volatile conditions of the international trading system in the post war/independence period Wood 68).
Deterioration in terms of trade and the limitation of Import Substituting Industrialization (ISI) and Structural Adjustment Programs (SAPs)
The general situation of these countries therefore is characterized by high dependency and debt burdens to the developed world, unfavourable terms of trade due to preferential treatment of goods from the developed countries and unfair policies and pricing mechanisms which commodities from the developing world are subjected to. There have been a number of measures enacted in an attempt to redress prevailing situation of trade between the global south and the north in the world market through WTO and UN commission, but most in vain. Conversely, regulatory mechanism and proposed policies instituted by developed countries especially the G8, which tend to favour the developed nation while hindering the growth and development of third world enjoy overwhelming support in the trading system structures-WTO (Prebisch 121)
Such policies which include TRIPs, SAPs, ISI and AGOA are enacted only but to serve as a punitive remedy for the third world’s situation in the international trading system. Goods produced by developing world in the international trading system are generally considered substandard and often fail to much the quality of similar goods from their developed nation’s counterparts. As a result, they are accorded preferential treatment in the world market at the expense of those from third world. This occurrence has led to low turn over and poor sales of third world goods results into more debts and huge deficits in their balances of payments (Smith 66)..
The onset of Debt Crisis
The accumulation of their debts arising from trade imbalances was discussed at the launch of Breton wood systems in 1944. Thereafter, the Bretton Wood Systems’ through its two major institutions, International Monetary Fund (IMF) and World Bank (WB) resolved to ease the debt burdens of the developing world through additional financial grants and soft loans by tying on them conditions tailored towards national development in their various courtiers’. The strings attached to the loans were some blueprint of restraining policies Contained Import Substituting Industrialization (ISI) and Structural Adjustment Programmes (SAPs). Presently, the African debt burden presents a gloomy picture of hopelessness. The continent’s debt stands at a staggering $230 billion. This is equal to almost three times the continent’s annual export earnings. This debt burden has been one of the major impediments to economic recovery and development. The next factor concerns the main product of the developing world in the global market. Much of the developing world’s export to the world market comprises agricultural commodities which are presented to the markets while still raw and unprocessed. As a result, they fetch low prices which cannot be matched by finished goods produced by the developed nations. In itself, this factor is self-defeating for the countries in the third world since almost all of them produce the same agricultural commodities. Therefore even trading among themselves is often limited by their products. It therefore necessarily follows that the struggle with foreign debt could end up being an act in futility because the products are susceptible to price decline (Wood 129).
The primary product declining terms of trade provided by Prebisch at the ECLA was used to provide the first coherent development strategies for third world countries since the Briton Woods Institutions. The decline provided the justification for import-substituting industrialization. Despite its overwhelming support and well reception by the developing world, this strategy had its fair share of drawbacks. Thus, developing countries continued to experience a balance of payment deficits in its implementation because their agricultural products did not grow rapidly enough to finance the imports of capital goods required to maintain a high rate of investment needed for growth and imports of intermediate goods by emerging industries (Spinner 37).
The third world, therefore, responded by forming preferential trade areas which equally failed to impact regions beyond the blocks. This failure was attributed to economic problems in the primary production sectors and the political problem of instability. Investors generally view political instability and good government as an incentive to massive investment since it provides the peaceful environment required for a business to prevail with minimal interference. Other countries which are now in the NICs like Korea adopted a comprehensive development strategy based on increasing their exports to foreign markets. Brazil on the other hand adopted a policy of sliding exchange rate to maintain the competitiveness of their exports while controlling imports. A majority of the other third-world countries resorted to tax waivers and other suitable incentives for exports. In all these measures import-substituting industrialization produced the best results (Randall 6)
The United Nations also provided conferences where developing countries could address their concerns regarding trade and foreign aid-related institutions like General Agreement for Tariffs and Trade (GATT) and the Bretton Woods institutions. While GATT initially failed to work for third-world countries, another window was opened as African Growth and Opportunity Act. Since the vast majority of the third world was generally excluded from GATT, the United Nations Conference on Trade and Development (UNCTAD) provided a forum which was this time attended by both developed and developing countries ( Smith 68).
This conference played a critical role in its attempt to negotiate for New International Economic Order (NIEO) for developing countries. The demand of the developing world to experience preferential treatment in the markets of the developed nations was ultimately granted through Generalised System Preferences (GSP). In addition, for the first time since the time of Bretton Woods Institutions, soft loans for third world countries were negotiated under the oversight of UNCTAD. Some of the celebrated successes of ISI included increased economic growth because of high levels of savings and investments and improved education and health standards (Prebisch 13).
While its major setback was the lack of creation of employment opportunities hence it contributed very little to the efforts of poverty eradication. Later on, the NIEO collapsed rendering UNCTAD redundant while the Bretton Woods Institutions through the World Bank and IMF continued to Support the developing world by tie a couple of conditions on monies granted to them. In doing so, it designed and defined a structure called Structural Adjustment Programs (SAPs) to be used in loaning third-world money. SAPs have made debt repayment a priority while third world nations’ spending on education, health and development has been significantly reduced. With or without their Knowledge, the IMF and WB have imposed a demand on third world nations to lower the standard of living of their people. Other SAPs impacts have been a loss of jobs in the third world, reduced role of the state in controlling the borrowed funds and prescribed export oriented open market as a requirement for the structural adjustment (Randall 8).
The 1973-1979 oil crisis agitated by OPEC led to an increased debt burden on the part of the developing world. The debt of countries in the third world increases almost twofold. The world’s heavily indebted countries like Bolivia, Argentina, Nicaragua and Venezuela had huge external debts before the oil crisis. After the crisis, the GDP of these nations fell drastically due to widespread poverty which motivated them to borrow more. Some of the statistics collected after the oil crisis indicated high incidences of homelessness, people without clean drinking water, sufficient food, and those who faced extreme hunger and starvation. Despite the incidences being recorded in both developed and developing nations, the figures were shockingly high for developing nations. With the increased interest rates charged on existing loans, third-world nations were defaulting in their repayment modes. Instead, they were requesting for more loans citing problems at home. The cost of oil at $18 a barrel meant additional expenditure on the already constrained budget of these nations (Thomson 39).
The 1982, Mexican watershed
The 1982, Mexican watershed degradation is one scenario that can be used to comprehend the delicate and complex connection that exists between environmental degradation, climate change and poverty. The project of the Mexican watershed which is to be presented in a television documentary depicts a vivid water-climate-poverty nexus of water-related problems facing the world’s population presently and in the future. In the launch of Watershed-Based Partnership for Global Environmental Health for the U.S.-Mexican Border Region, Judith Rodin The Rockefeller Foundation’s president emphasizes the fact that the current urban- poverty-climate change nexus that unplanned urbanization in the developing world is likely to increase the adverse effects of climate change already impacting on the lives of the rural poor. This project is converging views and attention of many scholars and scientists whose growing concerned is the unforeseen effects of rapid urbanization and industrialization in a world that is already battling with numerous environment-related challenges. While the environment is the prime provider of human needs, it relies on water and stable balance in the hydrological cycle to replenish itself. The Mexican watershed scenario shows the value of water and water-related resources and projects that the severity of water scarcity is likely to be a source of conflict in the coming decades. The next big project in the Mexican U.S. border watershed based on the Tijuana River is funded by many organizations like the National Institute of Environmental Health and Sciences’ Superfund Basic Research Program among others, is expected to showcase how degradation and degeneration of transboundary resources like rivers and their catchment are causing untold losses in the aquatic ecosystem.
Political parties are more like vessels that are used by politicians to present the interest of the populace to their government. Politicians are also entrusted with the responsibility of carrying the people’s mandate to serve them for better and not for worse. Having seen how weak government and government structures are the subjects of distrust and dishonesty among many third-world nations. It is only sensible that leaders of these poor countries and various nationalists unite and define simple working frameworks (constitutions) that they can follow to get out of their predicament fast enough. In order to deal with the current challenges of poverty and environmental-related problems brought about by modernity, there is a need to put in place comprehensive policies which to guide development in a more integrated approach. An approach that honors the principles of sustainable resource use is also necessary for posterity and good international relations.
Wood, Robert. “From Marshall Plan to Debt Crisis: Foreign aid development choices in
The 1980s” California, U.S.A.: University of California Press, 1986. Web.
Prebisch, Raul. “UN Ideas That Changed the World” Bloomington, U.S.A.: Indiana University Press, 2009. Web.