DEBT

Introduction
The notion of developing countries stems from the term "Third World countries," which was created by the demographer Alfred Sauvy in 1952. He indeed compared this Third World to the Third Estate, describing it as being "ignored, exploited, despised, and aspiring to be recognized." Later, the expression was widely adopted, as another connotation was added: in the period following World War II, with decolonization, a Third World emerged, distinct from both the developed capitalist countries and the socialist countries.

The countries that make up this Third World, or in other words, the developing countries (DCs), share common characteristics. Their economies are still largely dominated by agricultural activities, and their industrial sectors are in their early stages. Their populations are growing rapidly, which could serve as a spur for development that is all the more essential since their standard of living is far below that of industrialized nations. Finally, almost all of these countries were once colonized.

Thus, the Third World has become a concept widely used as a tool for analyzing and understanding reality. It has taken its place alongside related terms: underdeveloped countries, developing countries, the Global South, periphery. Each of these terms refers to a different paradigm, emphasizing one or another analysis of the reality linked to poverty, rapid population growth, the importance of agriculture in the economy, dependency, and inequality. Poverty, therefore, would be the primary criterion for belonging to the least developed world. Indeed, it is in these countries that we find approximately 1.3 billion people living in absolute poverty, meaning with less than one dollar per day, which is below the poverty line according to the World Bank. These countries, which house nearly 78% of the world's population, only generate 18% of global GDP, while developed countries, with 20% of the world's population, account for 73% of global GDP.

Thus, to secure the necessary investments for their development, developing countries turn to foreign sources through debt. This debt becomes a crisis for these countries due to numerous mistakes: oversized projects, excessive importance given to prestigious or speculative expenditures at the expense of productive investments. The expected returns from foreign sales do not materialize, and the country finds itself unable to repay, which further exacerbates poverty within these nations.

This leads us to ask whether debt alone explains the impoverishment of developing countries.

Certainly, the heavy debt accumulated over many years pushes developing countries to implement structural adjustment programs (SAPs) imposed by creditors, whose repercussions exacerbate their impoverishment. However, a soaring population confronted with severe health and education issues, and above all, political instability coupled with a weak economy, are all factors that explain the impoverishment of developing countries.

To be convinced, it is important to examine the factors of poverty one by one, starting with debt, then addressing social problems, followed by political and economic issues.

 

 


I - DEBT

Under financial constraints and resorting to international financial institutions for loans often not honored within the set deadlines, developing countries (DCs) are compelled to apply structural adjustment programs (SAPs), the repercussions of which exacerbate their impoverishment.

11 - Financial Constraints:

Resorting to external debt is indeed only conducive to growth if certain conditions are met. The first condition is that the productivity of the borrowed capital must exceed its cost. Otherwise, per capita consumption, assessed over all periods or generations, would be lower than what would exist in the absence of debt.

It is also crucial to ensure that external capital does not displace domestic capital; otherwise, the impact of indebtedness could be significantly diminished. Moreover, it is essential to ensure that external resources are invested in productive capital. If there is a significant degree of leakage where external resources are used for unproductive consumption, the impact on growth will be minimal. However, these conditions are not met by DCs (indebted countries), which worsens the phenomenon of poverty in these nations.

Indeed, it is realistic to consider that indebtedness transforms the macroeconomic environment of countries that resort to it. The first dollar of debt and the last dollar of debt do not have the same effect. Thus, the productivity of capital can diminish with its amount. The swelling of indebtedness would therefore contribute to a decrease in the average profitability of the economy, as external resources are used to finance projects that are increasingly less profitable. It is important at this level to integrate structural constraints of the borrowing economy stemming from insufficient absorption capacity. The size of productive sectors, the number of skilled workers, and the degree of waste would limit the effectiveness of the borrowed capital. The decline in productivity gradually brings the return on investments down to the level of the interest rates on borrowed capital, which constitutes a limit point for any further indebtedness.

External capital is also likely to displace national capital. Furthermore, some argue that foreign capital invests in the most profitable placements. Thus, the swelling of the debt of these countries increasingly occurs to the detriment of national savers and investors. The strength of the displacement effect would thus be a positive function of the amount of debt. Development requires financial resources, and a large part comes from private savings and another part from public savings. The factors that have accelerated the growth of many East Asian countries are their high savings rates, often over 30% of GDP. This has allowed them to invest in infrastructure and social services. In contrast, many African countries have recorded savings rates of only 10 to 15% of national income, which are too low to sufficiently support growth and lift their populations out of poverty.

Export revenues may decrease with the level of indebtedness, and the absorption of foreign markets is not infinite. This is particularly true as external capital is used for investments aimed at producing a limited number of exportable goods. Thus, in the presence of these endogenous effects of resorting to external capital, the country will become indebted to a certain point beyond which it will have to stop borrowing and eventually start repaying.

Furthermore, accounting for uncertainty leads to incorporating the risks that may concern, for example, exchange rates, interest rates, export revenues, or future access to borrowable funds. DCs borrow in a currency other than their own. Borrowing for these countries occurs in foreign currencies. If the exchange rates are fixed, the borrower knows, except in the case of devaluation, the exact amount of their repayments and the impact on national production that these represent. If the exchange rates are flexible, the borrower faces uncertainty that can play in their favor or against it. If their national currency appreciates, the borrowing country will benefit, all else being equal, from a reduction in the real weight of its debt. Conversely, the repayment burden will increase. Thus, uncertainty due to exchange rate fluctuations represents a major factor that can transform a situation of optimal indebtedness into one where repayment becomes necessary but at a significant cost. The fluctuation of interest rates on the outstanding debt can also lead to an indebtedness strategy becoming suboptimal if interest rates exceed the productivity of capital. The same goes for variations in export revenues, which can make it difficult to service the debt and thus limit future borrowing capacity. Finally, uncertainty regarding future access to capital markets can lead the country to borrow beyond what is desirable.

If one assumes that the concerned country cannot counteract the effects of these risks and that it experiences a positive aversion to risk, its recourse to indebtedness in uncertain situations will present itself in different terms than in certain environments. In this case, the country is still faced with an alternative in terms of borrowing.

If the initial configuration is favorable, the country will become indebted up to a maximum value determined by developments in uncertain situations regarding productivity and the cost of capital, the displacement effect, and export revenues. It is highly likely that the optimal debt path in uncertainty lies below that which exists in a certain environment.

12 - Constraints Related to Repayment

However, at the moment when banks, enterprises from developed countries, or multinational corporations, or even the governments of DCs, seem ready—once the current situation is resolved—to restart a process of international indebtedness, it is essential to learn from the failures and wastage that have just occurred. To do so, it is necessary to approach the problem differently than is generally done.

Indeed, international debt remains a serious obstacle to human development. It forces many indebted countries to allocate their meager resources solely to repaying their debts. The relationship between indebtedness and development cannot be grasped in its true dimension if we only consider the level of repayment. It is woven as soon as the loan is organized.

Furthermore, every internationally indebted country, especially developing countries, must service its debt in the currency of the loan, meaning in a currency that is not the one in which their enterprises operate, but which they can only obtain through their exports.

It is therefore not enough that the credit allows for the creation or modernization of a business (manufacturing, artisanal, agricultural) beneficial to the country (industrialization process, employment, food ration) nor that this business is profitable in terms of internal relative prices if the country provides, as all countries that have embarked on their development, minimal protection. This enterprise must increase, through its exports, the available foreign currencies unless others do it for them. It must therefore be able to sell its products in the market of convertible currency countries and be profitable in terms of the prices formed in these markets. This condition is even stronger because, in the best of cases, assuming that these prices are not manipulated by the governments of developed countries within the framework of complex internal or external strategies, these prices "correspond" to the level of development reached in these industrialized countries and are therefore very different from those that allow for the development of non-industrialized countries. If this condition is not met, the indebted country has no chance of being able to service its debt.

Thus, a confusion can be avoided. Admitting the inevitability of a moratorium does not lead to the belief that indebtedness will have been merely a transfer of resources without counterpart to the benefit of the indebted countries. The issue under discussion is not whether the interests already paid have not been excessive. It is not about whether the country's management has or has not been lax. What matters is that the repayment constraint leads to a shift in productive structures, through a selection of investments based on their capacity to "produce" foreign currencies and not on their ability to initiate development. If these criteria are compatible, indebtedness will have favored development, even if the debt has not been repaid due to the difficulties encountered by these enterprises in the markets of developed countries (competition and productivity levels, market closures).

If these criteria are contradictory, the moratorium will not mean that indebtedness has not been an obstacle to development.

The constraint related to repayment manifests itself in its most apparent form when the country must ensure the annuities of its debt. In fact, the total debt of the Third World (excluding Eastern countries) amounted to about 1,950 billion dollars in 1997. The Third World repays more than 200 billion dollars each year. The total amount of all public development aid does not exceed 45 billion dollars per year in recent years. Sub-Saharan Africa spends four times more to repay its debt than on all its health and education expenditures. In this sense, the analysis in terms of "limits to indebtedness" of the country constitutes a first mode of approach to the constraint related to repayment. However, it is from the moment the country decides to borrow that the repayment constraint manifests itself, in a less apparent form, forcing a selection of "foreign currency-effective" investments. If the amount of debt service exceeds the amount to be repaid, the issue becomes a political matter; thus, the dynamics of the country may be called into question, and the standard of living of the population, as well as the level of employment, will be severely affected.

 

Structural Adjustment Programs (SAPs)

For most developing countries (DCs), although unevenly, trends of economic regression have manifested after a period of variable growth during the 1960s and 70s. Thus, the 1980s and 90s have been referred to as lost decades for DCs in terms of economic growth.

In parallel to this slowdown in growth, most DCs faced massive indebtedness. This indebtedness led to the implementation of adjustment policies. It is remarkable to observe that this option was taken (or imposed?) regardless of the dominant ideology in the country and the level of income per capita. These SAPs did not resolve the issues of economic and social development but, on the contrary, trapped these countries in a vicious circle of indebtedness.

The figures concerning the debt of developing countries vary from one source to another. There are about ten international sources whose data do not necessarily overlap. The most significant of these are from the International Monetary Fund (IMF), the World Bank (WB), and the Organisation for Economic Co-operation and Development (OECD). The variation between sources can be around a hundred billion. This variability arises from several factors, including the exclusion of short-term debt in accounting (an example being the OECD, which published figures that ranged from 652 billion dollars to 920 billion dollars in 1997) and different accounting methods between public and private claims.

At the end of the 1970s, following the two oil shocks, two major events occurred:

  1. From 1980 to 1982, an economic recession took place in DCs, leading to a decline in the prices of raw materials and, consequently, a decrease in exports from these countries.
  2. Between 1977 and 1981, interest rates tripled, increasing the burden of debt.

In response to this situation, certain measures were taken:

  1. New loans were granted. This was an adequate solution for countries experiencing a cyclical crisis, such as South Korea. For others, where the crisis was much more structural, these new loans represented a step forward into a deeper crisis.
  2. Borrowers and lenders negotiated and shared the burdens:
    • The lender rescheduled repayments, i.e., extended the debt repayment period.
    • The borrower accepted the conditions set for rescheduling. He agreed to implement an economic policy based on austerity. Here, international creditors, the IMF, the WB, the Paris Club (which groups Northern governments as creditors), and the London Club (which gathers private Northern banks) dictate their conditions to indebted countries. A key aspect of these conditions is the application of structural adjustment programs, which serve as a tool to control Third World countries and Eastern Europe. This generalization and intensification of structural adjustment policies led to increased unemployment (23 million jobs lost in Southeast Asia since the crisis broke in 1997), drastic reductions in social spending, acceleration of privatizations, deregulation of labor relations, and a significant increase in the number of people living below the poverty line. Moreover, among these conditions, the state must have implemented a reinforced structural adjustment program for six years (which generally follows ten or fifteen years of prior adjustment).

Indeed, the slowdown in economic growth, or even recession, resulted in a decrease in revenues while expenditures were maintained in part or entirely. In many DCs, savings are outright negative, meaning they do not even cover current expenses. The deficits have a permanent character due to the low level of most inhabitants in these countries, while current expenditures are often already at a very low and hard-to-compress level (such as education, drinking water, etc.). However, the rules of adjustment have evolved, but the essential measure consists of reducing the budget deficit. This compression is achieved by:

  • Reducing public expenditures, which generally occurs by limiting both investment and operational budgets. Thus, the state halts the recruitment of civil servants and also implements a wage freeze. It aims to rectify the deficits of public enterprises and restore price truthfulness. Subsidies for basic products (sugar, flour, etc.) in Morocco, for example, are eliminated or reduced. Generally, the state stops covering the deficits of public enterprises and aims to restore price truthfulness. Similarly, the state significantly reduces or eliminates the services provided by public facilities (health, education, etc.).
  • Increasing public revenues occurs through raising tax pressure and public borrowing. It should be noted that in DCs, tax evasion constitutes one of the major problems for states. In Morocco, for example, as in Tunisia, the introduction of the value-added tax has led to an improvement in tax revenues.

The image of the doctor rushing to the bedside of a patient is often invoked to illustrate the relationship between the IMF and DCs, and the SAPs would, in this metaphor, be the prescriptions or bitter pills.

For its part, the IMF also recommends emphasizing a set of measures that could stimulate supply and therefore growth in DCs, but these measures have perverse effects. "Thus, devaluations cause an increase in the cost of imported products but do not necessarily lead to immediate substitution effects if national production is non-existent. Imported goods are often essential for the daily lives of the population in developing countries, and their rising prices can therefore lead to a decrease in the purchasing power of that population."

Similarly, the liberalization of food prices increases the income of agricultural producers, but at the expense of urban households, which see their basket of consumed goods become more expensive without necessarily obtaining a parallel increase in their income. Finally, mobilizing savings through higher interest rates causes discontent among borrowers who must bear an increased burden. Moreover, more fundamental criticisms are directed at these measures; thus, devaluations are criticized for being ineffective in stimulating exports of primary products because these products are homogeneous and priced uniformly on global markets, where price competitiveness factors do not intervene.

In the same vein, non-governmental organizations (NGOs), surprised by the IMF's change in discourse regarding poverty, remain skeptical. They worry about the relationship the IMF seeks to establish between the former SAPs now renamed the Poverty Reduction and Growth Facility (PRGF) and the Poverty Reduction Strategy Paper (PRSP, a strategic document for poverty reduction developed for each country). Because, despite a name change, the objectives of this "facility" will remain essentially the same as those of the former SAPs, namely, reducing budget deficits, controlling inflation, liberalization, and privatization. According to NGOs, these elements contribute to the impoverishment of the most vulnerable populations. Thus, these two mechanisms (PRGF and PRSP) risk becoming quickly incompatible as they pursue objectives different from those theoretically displayed.

 

 

II. SOCIAL FACTORS

A rampant demographic growth, exacerbated by health, education issues, and social inequalities, are endogenous factors that worsen poverty in developing countries.

21. Rampant Demography

According to the United Nations Population Fund (UNFPA), the world population has more than doubled over the past 45 years, rising from 2.52 billion in 1950 to 6 billion by the end of the last century, with 4.55 billion living in underdeveloped regions. Links between poverty and rapid population growth exist at both the national and international levels. The poorest regions of the planet, namely Africa, South Asia, and Western Asia, experience the highest rates of population growth (2.8%, 2.1%, and 2.4%, respectively), with the average for less developed regions standing at 1.8%.

At the time of the Social Development Summit, approximately 1.3 billion people lived in absolute poverty, defined as living on less than $370 per year to meet their basic needs, according to the Human Development Report published by the United Nations Development Programme (UNDP).

While in developed countries, population growth has long been seen as a positive phenomenon stimulating economic life, the demographic boom in underdeveloped countries is generally viewed as an unfavorable process. This growth is often described as excessive or catastrophic. It is estimated that demographic growth in developing countries is a serious disadvantage for several reasons:

  • On one hand, the increase in the number of consumers is much faster than that of producers: for instance, Brazil saw its total population rise from 41 million to 52 million consumers between 1940 and 1950, while the working population only grew from 17 million to 19 million producers. Indeed, the rapid increase in the number of consumers is theoretically more serious in developing countries, where the average productivity of workers is low.
  • On the other hand, economists and demographers point out that population growth requires investments to maintain the standard of living and to provide new inhabitants with means of work once they reach adulthood. It is generally estimated that these "demographic investments" should amount to at least 4% of national income to maintain the standard of living in a country where the population is growing by 1% per year. To increase the standard of living by 1%, additional economic investments equivalent to 4% of national income are also required.

It is evident that the extent of demographic growth experienced by most developing countries automatically determines the importance of demographic investments; most often, these "economic investments" aimed at increasing resources per capita serve only to prevent the collapse of the average standard of living of rapidly increasing populations.

Theoretically, the standard of living is maintained only in countries where the rate of national income growth is equal to that of population growth, and it can only increase if national income grows faster than the population over the long term. Economists estimate that in developing countries, where savings capacities are low (since they are believed to be proportionate to the size of the gross domestic product GDP), it is challenging to make the substantial investments required by demographic growth. Consequently, the increase in income per capita can only be very slow, if not impossible.

Some developing countries, where economic growth could have begun, particularly those in Latin America that have integrated into the global market for two or three centuries, found their economic rise stifled by excessive population growth at its inception: per capita production could not increase, and the magnitude of demographic investments made significant economic investments impossible. Stifled in its early stages by demographic waves, economic growth would thus have been broken. Such reasoning attributes the initial responsibility for poverty to overly rapid and violent demographic growth.

Globally, the number and proportion of people living in extreme poverty slightly decreased until the mid-1990s, with this decline mainly occurring in East Asia, particularly China. However, by the late 1990s, this trend temporarily slowed in some Asian countries, stopping altogether and even reversing in others. In the rest of the world, although the proportion of people living in poverty has decreased, demographic growth means that the number of poor has increased. In the former Soviet Union, ongoing economic and social transition has tripled the proportion of the poor.

22. Health and Education Issues

Health status is an indicator of poverty. In Bangladesh, for instance, over a third of the population is unemployed, and 60% of rural inhabitants are in total misery, according to the World Bank. In Brazil, nearly one in five families cannot afford to buy anything other than food, one-third cannot meet their essential needs, and two-thirds live in poverty. Huge needs remain to be met, as highlighted by the UNDP's Human Development Report.

In developed countries, the state is generally expected to fulfill its protective role. In the least developed countries, however, resources often do not permit this. How can one ensure both the support of economic growth and the creation of necessary jobs while also financing ever-growing health and education expenditures? In Algeria, for example, 50% of the population is under 20 years old. To provide jobs for these young people upon leaving the school system, 256,000 jobs would need to be created each year, whereas there are only 3.8 million jobs available in the country. Barely half of them find employment. As for health and education expenditures, they already represent 10% of GDP, and there is a need for further increases due to enormous demands.

A country that invests in basic health and education services demonstrates its commitment to promoting long-term development. At the World Summit for Social Development held in Copenhagen in 1995, world leaders suggested that around 20% of national budgets and 20% of official development assistance should be allocated to basic social services. The goal was to enable countries to develop a well-educated and healthy workforce capable of competing in the global market. Although the share of budgetary expenditures dedicated to basic social services has recently increased in many countries, such as the Dominican Republic, Guatemala, Malawi, and Namibia, few developing countries or donors have reached the suggested targets.

Of the three million deaths per year worldwide due to tuberculosis, 95% occur in developing countries. Five hundred million people suffer from tropical diseases, and 2.5 billion are exposed to them. Yet this health condition is far from being a curse linked to climate. The primary culprit is poverty. Tuberculosis claims many lives in developing countries, while it is rare in developed nations. It is the poverty of migrants arriving in cities and living in slums without enough money to nourish themselves properly that makes them the primary victims of this disease, as well as cholera, which affected South America in 1990-1991 and spread due to a lack of hygiene and inadequate access to potable water. These countries lack sufficient resources to combat these diseases, ensure preventive vaccinations, train enough doctors, build hospitals, and provide the necessary operational funds to care for patients with a minimum of hygiene and care. Health expenditures amount to $1,860 per capita in developed countries, compared to $105 in Latin America, $21 in India, and $24 in Africa. Hospitals in the least developed countries are often overcrowded, with hallways filled with patients waiting for a bed; overwhelmed doctors and nurses frequently lack essential supplies, such as antibiotics and painkillers.

A new ticking time bomb weighs heavily on developing countries: AIDS. In 1993, it was estimated that more than 13 million adults were infected with HIV, with 8 million in Sub-Saharan Africa. In Asia, tuberculosis and AIDS risk spreading, raising fears of the return of major epidemics. China is concerned and has sought assistance from NGOs to implement information and prevention actions.

In terms of education, significant inequalities persist between developing countries. Today, one-quarter of humanity is illiterate, with a large part of this population found in the least developed countries. The illiteracy rate varies from 3.5% in developed countries to 60% in developing countries. During the 1990s, ten countries (India, China, Pakistan, Bangladesh, Nigeria, Indonesia, Brazil, Egypt, Iran, and Sudan) accounted for three-quarters of all illiterate adults. However, because these countries are heavily populated, this does not imply they have the lowest literacy rates. Enrollment rates are increasing in most regions, but the quality of education leaves much to be desired, and too many children are still not in school. Despite some exceptions, such as Cuba or Sri Lanka, where educational progress is faster than economic progress, Africa's lack of resources and demographic pressure lead to very poor outcomes. Classes of sixty to one hundred students are not uncommon, and double sessions are even used to maximize the use of school facilities. However, education faces additional challenges in these countries.

Firstly, if the values conveyed by the school conflict with traditional social values, the school may appear foreign. Often, there is a conflict between the scientific thinking taught in schools and traditional magical or religious thinking. This reduces the effectiveness of the educational system. Secondly, families expect the school to provide social mobility opportunities for their children. However, this is not always the case. For such mobility to exist, it is essential that knowledge has been acquired, which depends on the quality of the school, the duration of education, and its adaptation to lived realities. However, in developing countries, these conditions are not always met, with teachers facing overcrowded classes, lacking books, notebooks, and pens, and students whose educational progress is often not ensured. As a result, students tend to forget what they learned, such as reading, if they do not practice it regularly. In fact, in many countries, particularly in Africa, skilled jobs are not increasing at the same rate as degrees.

 

 

III- POLITICAL AND ECONOMIC FACTORS

The poverty of developing countries can be explained at the political and economic level by political instability, a highly dependent under-industrialization, and a weak economy that relies on agriculture, with its natural and technological constraints.

31- Political Instability:

Most developing countries (DCs) have what some refer to as "failed states," which does not exclude the presence of authoritarian regimes. The state is both omnipresent and powerless. It is omnipresent due to the proliferation of petty regulations and taxes that penalize farmers, irrational investment decisions, and dirigisme that often paralyzes public enterprises. It is powerless in the face of the heavy tasks required to realize the necessary infrastructure for development, to promote job creation needed due to population growth, and to ensure health and education expenditures.

Moreover, political elites are often clinging to power as a means to maintain their position at the top of the social hierarchy. This is true in Asia and Latin America, where large landowners and the capitalist bourgeoisie have monopolized power. For example, Brazilian President Fernando Collor, elected to fight corruption, was impeached in 1992 after being accused of receiving around $6.5 million from the former treasurer of his campaign through a network of shell accounts. The treasurer was indicted for influence peddling, extortion, violations of state bidding regulations, and corruption. The president was accused of using these funds for personal gain, including the purchase of land, cars, renovations to his apartment, and numerous trips with his wife.

This phenomenon is even more pronounced in Africa, where the absence of a significant class of landowners and capitalists led to the emergence of social layers post-independence for whom the state became a means of appropriating wealth through heavy taxes levied on farmers, outright theft, embezzlement, and corruption. The fortunes accumulated by leaders such as Jean-Bedel Bokassa in the Central African Republic, Sékou Touré in Guinea, Moussa Traoré in Mali, and Félix Houphouët-Boigny in Côte d'Ivoire are enormous. Former Zairean President Mobutu Sese Seko controlled 17 to 22% of his country's budget for personal use, accumulating his wealth by exporting copper, ivory, diamonds, and other riches from his country while maintaining power in a devastated economy. Public servants were no longer paid. Patients had to bring their own medicine and sheets to hospitals, while parents had to pay teachers who were as hungry as their students. The military, gendarmes, and police, armed and increasingly corrupt, ended up ravaging the capital, pillaging homes and robbing passersby. Customs officers, police, and civil servants demanded their share for the slightest administrative task.

The corruption of elites contributes to the perpetuation of the central power that enriches them while simultaneously leading to widespread corruption within a large part of the administration. For instance, in Mexico, high-ranking members of the judicial police protected a drug lord and organized the transport of cocaine and marijuana to the United States. The U.S. Drug Enforcement Administration (DEA) has accused prominent political leaders.

Even state socialist countries are not immune to this scourge. In China, the frantic race for enrichment has reached the administration, particularly the police and military. Hong Kong has managed to compile a dossier of photos and testimonies proving that certain attacks against cargo ships off the Chinese coast and the halting of merchant vessels for "negotiation" regarding cargo were conducted by members of the army and police assigned to combat smuggling, yet working for their own benefit!

The absence of the rule of law in many of the least developed countries hinders development and subsequently fosters poverty. It discourages foreign investments due to the climate of insecurity and discourages national investors who fear becoming victims of extortion, leading them to consider speculation as a safer and more profitable option. Furthermore, it is futile to expect that the bourgeoisie, which has seized control of the state to consolidate its power by diverting national resources, will evolve into an industrial bourgeoisie as occurred in Japan in the 19th century. In such conditions, the state in these countries often takes a dictatorial form. The "Human Development Report" by the UNDP has presented, since 1991, a ranking of countries based on the number of public freedoms ensured, encompassing everything from freedom of movement to freedom of the press and gender equality. Among developing countries, it is not always the richest that guarantee the most freedoms for their citizens. For example, while Hong Kong guarantees 26 out of 40 freedoms, South Korea provides only 14, Singapore 11, while Senegal ensures 23 and Thailand 14. Some authoritarian regimes, such as those in South Korea, Indonesia, and Taiwan, have achieved growth that has benefited a significant fraction of the population. In contrast, other more democratic states like Mali and Mozambique face significant challenges in maintaining their legitimacy amid increasing recession.

Furthermore, developing countries face another difficulty: they are plagued by frequent conflicts, whether with neighbors or ethnic rivalries. The situation in Africa serves as an example. The borders are purely artificial, drawn by colonizers without regard for the populations involved. Ethnic groups that are traditionally rival find themselves within the same state, while others are divided by borders. The recurrent conflict between the Hutus and Tutsis in Burundi, which has resulted in successive massacres, a proliferation of refugees, and a new famine situation in 1993-1994, illustrates this point.

In any case, the result of these numerous conflicts is always disastrous for the suffering civilian populations and significantly exacerbates the scourge of poverty in these countries. For more than twenty-five countries, particularly in South Asia and sub-Saharan Africa, military spending exceeds combined health and education expenditures.

According to the World Bank, for many of these countries, military debt represents more than one-third of total external debt, as most arms are imported.

32- Under-Industrialization

The weakness of industrialization is almost universally considered the most obvious characteristic of developing countries, to the point that the term underdevelopment tends to be synonymous with non-industrialization, and the term development is equated with industrialization. Indeed, the least developed countries did not experience what is commonly referred to as the "industrial revolution" in the 19th century, making them appear "backward" compared to the historical evolution of "developed" countries. Regardless of the ideological differences among theorists, it is often proclaimed or accepted that this "backwardness" results from the domination that "industrial" countries exert over the rest of the non-industrialized world. This argument often suggests that the governments of industrialized countries, eager to reserve the exclusivity of this privilege for themselves, still apply almost to the letter the infamous "colonial pact," more precisely the "exclusive system," which forbade the colonies from producing what the metropolis could supply and mandated that colonies purchase only from the metropolis and trade exclusively with it.

Moreover, developing countries have experienced several industrialization strategies. The first strategy adopted was import substitution industrialization (ISI), which emerged in the 1930s and 1940s in Latin America, popularized by Argentine economist Raúl Prebisch. This strategy involved replacing imports of consumer goods with locally produced items such as clothing and agri-food products. Initially, these products were more expensive than imported goods, but the increase in production and the learning of new techniques were expected to reduce costs and, consequently, prices, facilitating access to export markets. The development of these industries was supposed to lead to the development of upstream industries and thus create a dense industrial fabric. In addition to the South American pioneers like Argentina, Chile, and Brazil, other countries such as Turkey, South Korea, Taiwan, Ghana, India, and Egypt joined this trend in the 1950s.

Implementing this strategy requires importing capital goods, necessitating a selective protectionist policy: low tariffs on capital goods, high tariffs accompanied by quotas on consumer goods for which domestic production is sought, and an overvalued exchange rate to discourage imports. Governments also support the establishment of new industries through subsidies and favorable loans, relying on the development of agricultural exports to generate the foreign currency needed to finance capital goods imports.

This policy achieved some success. Manufacturing output grew in Brazil and Argentina faster than in developed countries. In the 1950s, Brazil embarked on the second phase of import substitution industrialization, moving from consumer goods industries to intermediate goods industries (cement, steel, glass) and heavy industry.

However, by the 1960s and especially the 1970s, growth began to slow down in Latin America, and the World Bank unleashed its criticisms of this strategy. According to them, the reason for its failure is straightforward. The protection of nascent industries deprived them of the impetus provided by competition. They became increasingly inefficient, with prices remaining higher than global prices, leading to inflation and further curtailing sales. To reduce production costs, these companies pressured wages. These industries, focused on the domestic market and overly protected, lost all dynamism and competitiveness. Running at a loss, they turned to the state, which multiplied interventions in investments, production, pricing, credit, and subsidies. This dependency on state support led to expenditures that exacerbated public deficits.

Governments resorted to printing money to finance these expenditures, resulting in rampant inflation in certain countries such as Brazil, Argentina, and Bolivia. Furthermore, as the shift to intermediate and capital goods industries failed, these countries continued to rely on imports. The customs protection and overvaluation of the exchange rate negatively impacted agricultural exports.

The resulting external deficit led to an increase in debt, which automatically fosters severe poverty. However, import substitution industries faced two significant blocks: one external, the dependence on imported capital goods pushed these countries to seek to attract multinational companies that reserved the most modern sectors for themselves, while national capital remained focused on traditional industries. A dualism thus emerged, paralleling that which separates subsistence production from export-oriented production in agriculture. The second blockage is internal; local capital could not support the industrialization process due to the lack of local savings. Therefore, a significant part of the financing came from abroad.

These countries were subsequently subjected to the conditionalities of the IMF and World Bank, which imposed severe austerity measures. Their economies contracted, leading to the dismantling of their industrial fabric, particularly in Argentina, where unemployment surged to more than 20%. The emergence of a financialized capitalism coupled with financial globalization undermined industrial production.

The failure of ISI strategies led many countries to rethink their growth model. In the 1980s, many developing countries implemented the new policy of liberalization, allowing for foreign investments that fostered structural reforms in areas such as public administration, agriculture, and the labor market. This economic shift has led to significant liberalization. However, globalization has primarily benefited only certain countries, particularly the BRIC nations, while others remain isolated from the processes of wealth generation, exacerbating inequalities and leading to a further increase in poverty. In this context, economies in West Africa, for example, have not managed to attract significant investments and still rely heavily on traditional exports such as cotton, cocoa, and coffee, in addition to their own markets for agricultural products, thus facing heavy competition from imported products.

The inherent structural weaknesses in these countries continue to undermine their ability to evolve into modern economies capable of competing internationally, resulting in a relative decline in living standards.

33- The Dominance of Agriculture

Despite their efforts at industrialization, most developing countries remain primarily agricultural societies. The economy's weakness and dependence on agriculture, particularly in rural areas, leads to widespread poverty, hunger, and malnutrition. The majority of agricultural production comes from smallholder farms that are often highly vulnerable to climatic variations, pest outbreaks, and price fluctuations. Furthermore, the productivity of these agricultural sectors is low, as small farmers lack access to credit, irrigation, fertilizers, and technology.

Moreover, developing countries are often dependent on a few primary commodities for their exports, exposing them to fluctuations in international market prices. For example, many countries in sub-Saharan Africa rely heavily on exports of raw materials, which can lead to economic instability and poverty when global prices fall.

The failure to invest in agriculture, particularly in terms of infrastructure, market access, and value-added processing, further exacerbates poverty. The inadequate development of rural areas often leads to urban migration, resulting in overcrowded cities and additional challenges for urban infrastructure and services.

In conclusion, the political and economic factors contributing to poverty in developing countries are multifaceted and interconnected. Political instability, corruption, and authoritarian regimes hinder development, while under-industrialization and reliance on agriculture limit economic growth. Addressing these challenges requires comprehensive strategies that promote political stability, enhance industrialization, and improve agricultural productivity. By tackling these issues, developing countries can pave the way for sustainable development and ultimately reduce poverty levels.


IV- SOCIAL FACTORS

The socio-cultural factors related to poverty are undeniably crucial to the analysis of the latter. Education, social norms, and demographic pressures must be taken into account when discussing the genesis of poverty.

41- Educational Barriers

Education is a fundamental tool for economic development and poverty alleviation. In developing countries, however, access to quality education remains a significant challenge. Factors such as inadequate funding for schools, lack of trained teachers, and poor infrastructure hinder educational opportunities for children, particularly in rural areas.

Moreover, social norms often dictate the value placed on education, particularly for girls. In many cultures, girls are expected to take on household responsibilities or marry at a young age, limiting their access to education and perpetuating cycles of poverty. According to UNICEF, girls' education is particularly critical for breaking the cycle of poverty. Educated women are more likely to participate in the labor force, earn higher incomes, and invest in their children's education, creating a positive feedback loop that can uplift entire communities.

In many developing countries, the quality of education is also a concern. Schools often lack basic resources, such as textbooks, classrooms, and sanitation facilities. The education system may prioritize rote learning over critical thinking and practical skills, leaving students unprepared for the job market. Additionally, in countries plagued by conflict, children may miss out on years of schooling, severely impacting their future prospects and perpetuating cycles of poverty.

42- Health and Nutrition

Health and nutrition are critical social factors affecting poverty levels. Poor health significantly impacts individuals' ability to work and generate income, while malnutrition can lead to long-term developmental issues for children, affecting their educational outcomes and future earning potential.

In developing countries, access to healthcare services is often limited, with inadequate infrastructure and insufficient funding for public health systems. Many people lack access to essential services, such as vaccinations, maternal healthcare, and treatment for chronic diseases. Consequently, preventable diseases, such as malaria and tuberculosis, disproportionately affect low-income populations.

Additionally, malnutrition remains a significant issue in developing countries. According to the World Food Programme, approximately 690 million people worldwide are undernourished, with the majority residing in developing countries. Malnutrition can hinder cognitive development in children, leading to reduced educational performance and limited future employment opportunities. Addressing malnutrition through targeted interventions, such as school feeding programs and maternal health initiatives, is crucial for breaking the cycle of poverty.

43- Social Exclusion

Social exclusion is a critical factor contributing to poverty in developing countries. Marginalized groups, including ethnic minorities, indigenous populations, and individuals with disabilities, often face systemic discrimination and limited access to resources, education, and employment opportunities.

This exclusion is frequently rooted in historical injustices, such as colonialism and systemic racism, which have resulted in power imbalances that continue to affect marginalized communities. The lack of representation in decision-making processes further perpetuates these disparities.

Social exclusion can manifest in various forms, including limited access to healthcare, education, and social services. For instance, marginalized groups may face barriers in accessing healthcare facilities due to discrimination or lack of transportation. This lack of access can lead to poorer health outcomes, exacerbating poverty levels.

Efforts to address social exclusion must prioritize inclusive policies that empower marginalized groups. By ensuring that all individuals have equal access to resources and opportunities, societies can work towards breaking the cycle of poverty and fostering social cohesion.

Conclusion

In conclusion, social factors such as educational barriers, health and nutrition, and social exclusion play a significant role in perpetuating poverty in developing countries. Addressing these issues requires comprehensive strategies that promote access to quality education, healthcare, and social services for all individuals. By investing in these social factors, developing countries can create a more equitable society and pave the way for sustainable development and poverty alleviation.

 

 


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