DEBT
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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:
- 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.
- Between 1977 and 1981, interest rates tripled,
increasing the burden of debt.
In response to this situation, certain measures were taken:
- 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.
- 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.