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International Inequalities:

 

1.2 billion people in the world are living in extreme poverty. 850 million people kick the health facilities. 1.3 billion people do not have access to safe-drinking water. 2.6 billion people are without sanitation facilities. 850 million people are illiterate. The 50% of the population of the world has only 6% income of the world. The assets of three big rich of the world are more than GDP of 48 developing countries. The policies of IMF, WB and other financial institutions of the World are promoting poverty, drought, unemployment and lack of security. These institutions are owned by the rich countries, while MNCs have captured over these rich countries.

 

The IMF and WB are pursuing the policies of Economic Rationalist or of Neo-Liberals. These policies are protecting capitalism and role of MNCa. The SOEs which used to provide cheaper goods to the people are being privatized. Keeping financial MNCs aside, the number of MNCs is 60,000 having their 5 lac subsidiaries. These MNCs are shaping the present system of the world as they have dominated over the world trade, finance and investment. They charge the prices of their products whatsoever they like. As a result, the resources of the world are diverting towards MNCs, hence accentuating the problem of international inequalities. The value of assets of 100 big MNCs is about $4212 billion which is more than GDP of the 140 poorest income countries. The GDP of Nigeria is $36.4 billion, while the value of the assets of Shell is above $115 billion. Chase Manhattan Bank is out of 5 major banks of the world. Its customer services are spread over 180 countries The value of it assets is $5.6 trillion. The assets in its control is 16 time more to that of GDP of Australia which is $400 billion.

 

China - A Developmental Model:

 

The process of growth prevailing in China has got a lot of attraction. This country which was basically a socialist country is heading towards Marketization. Because of marvelous developmental efforts its growth rate is above 10% per annum. It has about $450 billion as foreign exchange reserves. In this country, one finds deflation, instead of inflation. In 1949 the life expectancy in this country, was 35 years which has gone to 71.8 years. The growth and economic mechanism of China depends upon the combination of six models which are as:

 

Features/Characteristics of Chinese Development Model:

 

(i) State-Owned Sector of the Economy: On the basis of investment, this sector comprises more than half of the economy. It means to say that the big enterprises and industries operate under state-control. However, if any sector starts going below its level, on the basis of efficiency, it is converted into semi-private or private sector.

 

(ii) Private Sector of the Economy: The big industrial and business concerns are also organized into private companies. These firms are out of state control.

(iii) Public-Private Partnership: So many firms and businesses are also owned by public and private partnerships. However, most of their administration lies with private hands.

 

(iv) Individual Businesses: These businesses consist of small, medium and large enterprises. Here, members of a family control these businesses. Such type of firms are increasing rapidly.

 

(v) Businesses of Chinese Living Abroad: The Chinese living in Singapore, Indonesia and Malaysia etc., are also investing in their home land. The local Chinese and Chinese abroad start joint business ventures.

 

(vi) Foreign Investment: Here 100% investment is made by foreign enterprises companies. They control the business under the rules of the state.

 

All this shows that China's developmental model is the mosaics of six colors. The developing countries should follow it. Because of fantastic progress China's exports have moved to $450 billion in 2006 which were of $15 billion in 1979. China has a population of 1.25 billion with the policy of one-child. The imports of China are of  $300 billion. China will likely to play a vital role in WTO in the coming days. Three decades earlier, China was country whose 80% population was living below poverty line. At that time so me indicators of China and India, like exports, GDP growth rate and literacy rate, were more or less same. But Indian exports are around $120 billion, but China has surpassed India ii case of so many indicators.

 

The total GDP of the world is $42 trillion and out of it the share of China is $1.1 trillion. Its share in world trade is 3.3% and it is seventh big country of the world. Here, poverty ratio is 10% while the literacy ratio is more than 95%. The annual saving rate of China is 42%. China doubled its per capita GNP in the period of 10 years. While it took 10 years to UK to do so, 50 years to US and 25 years to Korea. It is said that till 2025, China will be at the top of the list after US, on the basis of economic performance.

 

East Asian - A Developmental Model:

 

In 1993, the World Bank published a study regarding Asian Development having the title, "East-Asian Miracle: Economic Development and Public Policy". In this study the East-Asian development has been discussed which is also furnished with Equity. The East Asian countries comprise Thailand, Japan, South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Indonesia and China. Though these countries diverge in different ways, yet they have cultural harmony having the roots with Confusion Philosophy and Buddhism. The exports think that the East Asian countries have Japan and four small dragons like Korea, Thailand, Taiwan, Hong Kong and Singapore and new dragons like Malays Indonesia, Thailand and China.

 

Features/Characteristics of East Asian Countries Development:

 

The development of these countries can be compared the development of DCs and such development can be accorded a "Second-Case" capitalistic way of life. The following are the salient features of East-Asian developmental model:

 

(i) They have a higher growth rate which lasted not for the years for the decades; they have a higher growth rate along with falling level of income inequalities (the case of Taiwan).

 

(ii) The distinctive improvement in the standard of living of the major portion of the population.

 

(iii) The effective role of govt. in molding the developmental process.

 

(iv) The lower rate of taxation.

 

(v) The higher saving rates and the ever extending export-base. The people of these countries have a strong inspiration to develop collectively and attain stability. Their people are found well organized within their families and out of their families in the form of different groups. They love education and stress heavily upon providing better education to their offspring's. They possess immense nationalism. They try to maintain the traditions of their institutions. They sacrifice their lives for their rights and their obligations for the state and they give due importance to all of their countrymen, irrespective of their color, creed, faith, religion, caste, sect, tribe and ranks. Such all may be given the name of "Investment in Man". Thus, we find here a strong relationship between economic values and socio-cultural traditions.

 

The economic development which took place in the West is based upon natural economic system, unlimited economic freedom of the producers, the Iron Law of Wages, abnormal profits, exploitation of labor and imperialism.

 

On the contrary, the East-Asian development is not linked to the above mentioned factors, rather it is based upon collective stability and discipline. It means that East-Asian development model lacks of individualism, the corner-stone of the Western development model. As told earlier that in the East-Asian development it is the Confucian Philosophy which played an important role, and it is based upon life style of discipline, self cultivation, respect for the authority and a stable family system. It is also said that the Buddhism when crossed Tibet and Himalayan Plateau, this worldly religion have had a big change as it became the religion of life, rather abandonment of life.

 

The people of China played an important role, in this regard. Thus, the Confucianism and changed Buddhism provided the foundation for East-Asian development. These countries have modernism (the case of Singapore, Taiwan and Hong Kong) along with inspiration for change (the case of Japan, China and Korea).

 

Now we discuss how the interaction of higher growth rate and lower income inequalities took place in these countries, or how the fruits of development reached a common man.

 

Higher Growth Rate and Fall in Poverty in East Asia:

 

(1) It is said that the countries where there exist income inequalities the poor die in the youth. But the East-Asian countries not only attained higher growth rates but they also decreased the poverty ratio by depressing income inequalities. For this purpose, they made efforts to increase the life expectancy of the people. As keeping Japan aside, the life expectancy rate in East-Asian countries was 50% higher than low-income countries, while it was 25% higher than middle income countries.

 

During 1970s the PQLI based up (different social indicators was one-third higher than middle-income while it was twice higher to those of low income countries. It is told that the combination of marvelous growth rate along with fall in poverty ratio is also attributed to state intervention which was used with different degrees. As Hong Kong depended upon market economy while Singapore user the weapon of govt., intervention with great care. During 1960s Taiwan followed the free market mechanism while in 1970s it increased govt., intervention. Whereas Korea depends upon laissez-faire. All this shows that on the whole East Asian countries relied upon market forces as compared with other developing countries. However, despite this, Korea, Japan, China and Malaysia tried to maintain their discipline in their social, cultural an economic traditions through govt. intervention, China which was basically a socialist country went on liberalizing its economy even maintaining its ideological identity. It gave lot of concessions to foreigners to make foreign investment attractive. As a result, the trend to invest in China, on the part of investors, state-owned enterprises, the Chinese living abroad and the MNCs, went on increasing.

 

All this means that East-Asian countries formulated such a model of market economy and state intervention which not only led to a higher growth rate, but the poverty also decreased. The poverty ratio in China is 10% as compared with 30% in Pakistan and 40% in India. These countries stressed heavily upon boosting of exports. They produced machinery, chemicals, consumer goods, electronics, consumer durables and even the toys. They opted for both export promotion as well as import substitution strategies. These strategies promoted labor intensive techniques. Their planning strategy aimed at utilizing human resources as it not only increases productivity but a fair distribution of wealth will also come into being. The labor intensive technologies increased the demand for labor, particularly the unskilled labor This led to promote incomes of the poor. The economic growth uplifted the poor and income inequalities did not increase.

 

(2) It is said that after World War-II, we find re-distribution of resources, particularly lands. As we find very effective type of land reforms in Japan, Korea and Taiwan. The small fanners got the lands which increased their incomes depressing down inequalities. The agri. tax was imposed in these countries which led to transfer the resources from private sector to public sector which were used for social development.

 

(3) Japan which suffered heavily during II World War, promoted nationalism after the defeat. King Hero Hito who got permission to educate his countrymen with Japanese language from the victorious America led his nation to move on the path of development. Greater facilities were provided to Japanese and Korean investors so that the confidence of investors could be restored. The investors and businessmen who promoted their business, instead of consumption, were given a higher degree of respect. The investors and producers used the labor efficiently, while govt. made intervention to remove the market distortion due to private investment. Thus the growth consequent upon higher industrial development, utilization of surplus labor and export of manufactured goods also resulted in fall of poverty ratio. The notable growth of Taiwan during 1960s and 70s is attributed to 13% growth rate in industrial sector. The farmers accepted the new varieties of seeds. As a result, agri. production increased along with their incomes.

 

The above discussion reveals that East-Asian countries got the development on the basis of hard work, love for work, discipline, inspiration, authority, labor intensive techniques, export-promotion strategy and govt. intervention in the provision of social services. As a result, we find that Japan's annual exports are above $350 billion and having a surplus trade balance. China's exports are worth $400 billion with a favorable trade balance. Korean exports are of $100 billion and that of Taiwan are $150 billion.

 

The East-Asian Development Model is an example for other developing countries. These countries got the development during 50 to 60 years while the same was attained by western countries after the struggle of centuries. In 1997 the East-Asian economies had to face the financial crises which severely affected their developmental efforts. But with the help of their strong leadership and assistance by IMF these countries overcome their difficulties. But the fact is this such disturbance was due to side-effects of Globalization. Despite all, this model has a great attraction for developing countries like Pakistan, Afghanistan, India, etc.

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Different Definitions of Economic Development
Measurement of Economic Development By Traditional Approach
Approaches to Economic Development/Measurement of Economic Development in Terms of Quality of Life
Physical Quantity of Life Index (PQLI)
Growth of GNP Versus Basic Needs Approach
Human Development Index (HDI)
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Measurement of Humane Governance/Good Governance
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Principles and Theories of Micro Economics
Definition and Explanation of Economics
Theory of Consumer Behavior
Indifference Curve Analysis of Consumer's Equilibrium
Theory of Demand
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Elasticity of Demand
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Equilibrium of Demand and Supply
Economic Resources
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Development and Planning Economics
Introduction to Development Economics
Features of Developing Countries
Economic Development and Economic Growth
Theories of Under Development
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History of Money
 

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