DVM2105[A] (Final) Flashcards
(158 cards)
What is an ODA ?
–> Official development assistance
Defined by Western donors in 1969, as a way to flow ODA to developing countries AND multilateral institutions that met the requisites of :
* (a) promoting the economic development and welfare of developing countries as the main objective
* (b) containing a grant element of at least 25 per cent.
What are the 3 incentives for donors ?
- Help the less fortunate abroad (i.e. food, health care, education, basic necessities, etc.)
- Self-interest (i.e. pursue foreign policy objectives, diplomatic initiatives, international trade, prestige in IR, national defense, etc.)
- Private sector and governmental approaches (i.e. cooperation with MNCs, etc.)
What is the concept of good governance ?
5 attributes
The idea is that in order for market-oriented development strategies to be effective, the political systems has to be:
- accountable
- transparent
- responsive
- efficient
- inclusive
What is tied aid ?
Foreign aid that must be used to purchase goods/services from the donor country.
What is a major donor characteristic (pay less administrative costs) ?
Main issue (how + where)?
Some countries transfer a much larger proportion of their aid to multilateral institutions than developing countries.
By doing so, they reduce their administrative costs but also some of their control over where and how their funds are spent. (e.g. USA)
What’s the MCC goal ?
Millennium Challenge Corporation
The mcc aims to foster ECONOMIC GROWTH in a SMALLER number of countries that meet SPECIFIC CRITERIA regarding:
- Free markets
- Democracy
- Good governance
What are the three factors at the core of the African revival ?
- The surge of commodity prices (oil, copper, gold and foodstuffs) has fuelled African exports and increased export revenue.
- Market based policies instituted in the late 1980s
- Notable strides in the political landscape (less corruption)
What are the three types of aid ?
Humanitarian/emergency
Charity-based aid
Systematic aid (government-to-government)
Post-war aid can be broken down in 7 broad categories; what are they ?
- its birth at Bretton Woods in the 1940s;
- the era of the Marshall Plan in the 1950s;
- the decade of industrialization of the 1960s;
- the shift towards aid as an answer to poverty in the 1970s;
- aid as the tool for stabilization and structural adjustment in the 1980s;
- aid as a buttress of democracy and governance in the 1990s;
- culminating in the present-day obsession with aid as the only solution to Africa’s myriad of problems
Which theorists laid the foundation for BANK & IMF ?
John Maynard Keynes and Harry Dexter White
What’s the vicious circle of aid ?
- Aid fosters corruption
- Foreign aid props us corrupt governments with usable cash
- Corrupt governments interfere with the rule of law + transparency
- Investment in these countries isn’t attractive (not enough civil + institutions)
- Without the external investment = reduce economic growth
- Reduced economic growth = fewer jobs opportunities + increase poverty levels
- With increased poverty levels = foreign aid
RESTART
Why does the West keep giving $$$ when it leads to corruption ?
- Pressure to lend
- The difficulty to decifer which country is corrupt
What is structural adjustment ?
A controversial series of economic and social reforms promoted by the IMF and World Bank following the 1982 debt crisis that aimed to promote economic development through minimizing the role of the state and liberalizing markets.
In 1945, how did the IMF work for the countries lending money and those looking to have money ?
Each member country paid into the IMF a quota of its own currency + gold/dollar holdings based on the size of its economy.
When facing economic problems, countries would be permitted to draw TEMPORARILY on the reserves of the IMF to pay off international debts.
The usage of these funds was intended to provide a country with SUFFICIENT TIME to STABILIZE its economy without resorting to measures such as currency devaluation.
In the 1960s, IMF was funding primarly what ?
What is important for funding applications ?
Issue?
In the first two decades of its existence, more than 60% of its loans funded projects to build PHYSICAL INFRASTRUCTURE (e.g.: highways, airports, electricity grids, and hydroelectric dams.
To receive such funding, applications from developing countries needed to MEET THE CRITERIA ESTABLISHED by the Bank to ensure that the project was technically sound and would GENERATE SUFFICIENT REVENU TO REPAY THE LOAN.
These criteria tended to EXCLUDE many of the POORER nations because they could not guarantee a significant rate of return.
Why are the voting rights not representative ?
Voting rights are weighted according to quota subscriptions that reflect the size of a country’s economy… SUPERIORITY OF USA
What did McNamara do in Bank ?
What’s his approach ?
McNamara emphasized the need for the Bank to fund DIRECT anti-poverty efforts through social programs AND projects aimed at modernizing the AGRICULTURAL sector.
Simultaneously, by focusing on health and education programs, McNamara’s approach became = the basic needs approach.
- (1) The Bank become considerably more active and powerful on a global level.
- (2) In emphasizing the need to focus on social objectives, the Bank opened up a debate about its own purpose and that of development finance in general.
PROMOTING ECONOMIC GROWTH
What is the basic needs approach ?
An approach to development (1970s) that encouraged national governments and aid donors to prioritize policies, budgets, and actions that would ensure that disadvantaged people were able to access a MINIMUM level of well-being, including food, water, shelter, and primary education.
Why is East Asia is a miracle ?
South Korea, Taiwan, Hong Kong, and Singapore DIDN’T follow the structural adjustment model.
- Embraced export-oriented growth
- Sustained involvement of the state in protecting and subsidizing selected industrial sectors to compete on international markets.
What’s the Mexican Peso crisis ?
Market liberalization encouraged a stream of US investment into export-oriented industries in the early 1990s making Mexico appear to be booming.
The rapid economic growth would remedy low wages and high poverty levels.
In 1994, Mexico was thrown into a deep recession, with wages falling further and unemployment increasing.
The economic turmoil was resolved only when the US sponsored a massive bailout package and the Mexican government took over the debts of private banks.
What is the main aim of good governance for institution-building ?
What is it’s fault ?
- Craft a political architecture that supports market economies through transparency, rule of law, and accountable decision-making (mechanisms that would enforce transparency and accountability).
By blaming the political environment for the failure of structural adjustment, the good governance doctrine denies that there may be weaknesses in the structural adjustment strategy itself.
What is the Foreign Portfolio Investment ?
Critic ?
–> Investments not made in an enterprise form that include the purchase of foreign debt, loans, and stock market investments on foreign stock exchanges.
- This process is called “capital account liberalization,” and the IMF suggests that it complements other forms of liberalization and enhances the ability of developing countries to attract capital.
–> Critics suggested that FPI is short-term, speculative, and prone to creating financial bubbles.
What does poverty reduction strategy papers entail ?
PRSPS : Poverty reduction strategy papers
prsps are intended to cover a wide range of social, economic, and political reforms, including a firm’s commitment to good governance + a country’s ownership of reforms.
How does the World Bank use the theory ‘social capital’ ?
Market
Empowerment
The World Bank uses the theory to help explain the social dimensions as to why some individuals/groups are more successful in gaining assets to participate effectively in markets + and how they are less vulnerable to market fluctuations and other unforeseen events.
The Bank suggests that it needs to “empower the poor.”
- Empowerment is as a process where the poor are mobilized in creating reforms that reduce constraints on their economic activities and upward mobility.