Preface
The recent years have been the era of globalization with enormous growth in international trade, financial flows and foreign direct investment (FDI).
Globalization intensifies interdependence between formerly separated nations, however the world seems to be more fragmented, between the rich and the poor, between the powerful and the powerless, and between supporters and opponents of the new global economy.
Current figures reveal the contradiction between those that have managed to benefit from globalization, and those that are considered to be the losers of this period: A girl born in Japan has a 50 percent chance of seeing the chance of seeing the 22nd century, while a newborn in Afghanistan has a 25 percent chance of dying before age 5. The richest five percent of the world’s people have incomes 114 times those of the poorest five1, and the world’s richest one percent of people receive as much income as the poorest 57 percent.2
The developing countries are currently facing two major problems: The first one is income poverty. In order to reduce the share of people living on one Dollar a day, the per capita income has to grow by 3.7 percent annually according to optimistic estimations. However, only 24 developing countries have realized these growth rates in the recent years. On the other hand, more than 127 countries with 34 percent of the world population have not grown at this rate.3 Many countries have suffered negative growth and the share of the poor people has increased, although the public focused increasingly on the poverty problem in the recent years, as it just happened at the “Live Aid Concert.” The second problem is infant mortality. 85 countries are on the track to reduce infant mortality to one third of the 1990 level, but they comprise less than one quarter of the world population. One the other hand, 81 percent of the countries with more than 60 percent of the world population will not be able to achieve this goal until 2015. Every day, more than 30,000 children die of preventable diseases.4 It is dramatic that many countries that will not achieve this goal are among the world’s poorest, i.e. the least – developed countries.
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1 Source: UNDP, “Human Development Report 2002”, Oxford University Press, Oxford, 2002, Page 13
2 Source: Ibidem, Page 19
3 Source: Ibidem, Page 17
4 Source: Ibidem
Table of Contents
1. Preface
2. Executive summary
3. Basic principles
3.1 Definitions
3.1.1 The term "development"
3.1.2 Typology of the development countries
3.2 Causes of underdevelopment
3.3 Measuring underdevelopment
3.3.1 Income and economic power
3.3.2 Human Development Index
3.3.3 Human Poverty Index
3.4 Classification of developing countries
3.4.1 The UN – classification
3.4.2 The World Bank classification
3.4.3 The DAC list
4. The System of international development co-operation
4.1 Overview
4.2 The United Nations
4.2.1 Organisations
4.2.2 The Millennium Goals
4.3 The World Bank Group
4.3.1 Organizational structure
4.3.2 The World Bank development strategy
4.3.3 The World Bank loans
4.4 The International Monetary Fund
4.4.1 Organizational structure
4.4.2 The IMF development strategy
4.4.3 The IMF loans
4.5 The Organization of Economic Co-Operation and Development
4.6 The World Trade Organisation
4.7 The Multilateral Development Banks
4.8 The Kreditanstalt für Wiederaufbau
5. Financing of Development
5.1 Overview
5.2 International capital transfer
5.2.1 Introduction
5.2.2 The term “capital”
5.2.3 Reasons for the shortage of capital
5.2.4 Private equity finance
5.2.4.1 Foreign direct Investment
5.2.4.2 Foreign portfolio Investment
5.2.5 Private debt finance
5.2.5.1 Bond financing
5.2.5.2 Bank loans
5.2.6 Official aid flows
5.2.7 Foreign debt
5.2.7.1 Causes of debt accumulation
5.2.7.2 The dimensions of the developing countries' foreign debt
5.2.7.3 Consequences for the developing countries
5.2.7.4 International measures / Methods of resolution
5.3 International trade
5.3.1 The gains from trade: Ghana and South Korea
5.3.2 International trade theory
5.3.3 The role of developing countries in global trade
5.3.4 The Fair Trade initiative
5.4 New sources of development finance
5.4.1 Currency transaction tax
5.4.2 Emission trading
5.4.3 The International Finance Facility
5.4.4 Microfinance Institutions
6. Conclusion
7. Appendix
Objectives and Topics
This thesis examines the challenges inherent in development finance and international cooperation within a globalized context. Its primary objective is to analyze the structural causes of underdevelopment, evaluate the efficacy of current global development institutions, and explore diverse financial mechanisms—ranging from official aid to private capital flows and innovative funding sources—intended to promote sustainable growth and poverty reduction in developing nations.
- Analysis of development theories and the systemic causes of underdevelopment.
- Evaluation of international institutions, including the UN, World Bank, and IMF.
- Examination of international capital transfer methods and private debt finance.
- Investigation of the role of international trade and the "Fair Trade" initiative.
- Exploration of new financial sources such as currency transaction taxes and microfinance.
Excerpt from the Book
Causes of underdevelopment
Scientists still disagree about the causes of underdevelopment, which results in various theses and conflicting opinions about this topic. On the one hand, this can be attributed to the different political attitudes of the various theorists, who held different factors responsible for underdevelopment, on the other hand it is the result of the fact, that it is difficult to distinguish between cause and effect of underdevelopment. The best – known and most frequently cited causes include:
The “vicious circle of poverty”
In poor countries, where most incomes have to be spent to meet basic needs saving rates tend to be lower. In combination with the small size of poor countries’ economies, lower saving rates often result in lower domestic investment in both physical capital and human capital. But without new investment, an economy's productivity cannot be increased and incomes cannot be raised, which closes the vicious circle.
Population growth
The population growth of the developing countries is much higher than the population growth of the developed countries. Many people in developing countries are convinced that only a large family is able to guarantee food and income. Therefore, families in these countries often consist of ten or more children, which explains the situation outlined in figure 1. In this case the initial plan to guarantee food supply often turns out to be the opposite - the family members can theoretically contribute to the overall food supply but due the relatively high unemployment rate not all family members are able to work. Nevertheless, they need food, which finally forces few family members to feed the whole family. If this is not possible, e.g. during a period of scarce food resources, family members, especially children, are forced to starve to death.
Summary of Chapters
1. Preface: Introduces the era of globalization, highlighting the growing divide between rich and poor nations and the persistent challenges of income poverty and infant mortality.
2. Executive summary: Outlines the scope of the thesis, focusing on development theories, the system of international cooperation, and various methods of financing development.
3. Basic principles: Defines key concepts such as development and underdevelopment, examines the causes of underdevelopment, and introduces metrics like the HDI and HPI.
4. The System of international development co-operation: Describes the roles, structures, and strategies of major international organizations including the UN, World Bank, IMF, and OECD.
5. Financing of Development: Analyzes the mechanisms of international capital transfer, including equity and debt finance, international trade, and emerging sources like the Tobin tax and microfinance.
6. Conclusion: Summarizes the thesis findings, arguing that while globalization has potential, current structures often exclude the poor, necessitating deeper institutional and structural reforms.
7. Appendix: Provides supplementary data tables regarding external financing and development indices.
Keywords
Globalization, Development Finance, Underdevelopment, World Bank, IMF, Official Development Assistance, Foreign Direct Investment, Portfolio Investment, International Trade, Poverty Reduction, Microfinance, Debt Relief, Sustainable Development, Inequality, Institutions
Frequently Asked Questions
What is the primary focus of this thesis?
The thesis explores the challenges of development finance and international cooperation within a globalized world, specifically analyzing how financial flows and institutional policies impact developing countries.
What are the central themes discussed?
Key themes include the causes of underdevelopment, the structure of global development organizations (UN, World Bank, IMF), methods of capital transfer, international trade dynamics, and new financing initiatives.
What is the core research goal?
The aim is to provide a comprehensive overview of how developing nations can overcome poverty through effective financing and structural reforms, while questioning the current effectiveness of global institutional efforts.
Which scientific methods are utilized in this work?
The research relies on an extensive analysis of existing economic theories, scientific literature, official reports from international organizations, and empirical data provided by institutions like the World Bank and UNDP.
What topics are covered in the main section of the work?
The main sections cover the definition and measurement of development, the roles of international agencies, different modes of international capital transfer (FDI, debt, aid), trade theory, and emerging sources of finance.
Which keywords best characterize this work?
Relevant keywords include Globalization, Development Finance, International Cooperation, Poverty Reduction, and Microfinance.
How does the author view the effectiveness of the World Bank and IMF?
The author argues that these institutions are often criticized for being dominated by powerful industrial nations and prioritizing their interests, sometimes at the expense of effective poverty solutions for the world's poorest.
Why are standard debt relief measures like HIPC considered inefficient?
The thesis notes that HIPC initiatives have been slower and less efficient than expected, partly due to unrealistic calculation methods and the fact that many highly indebted countries still struggle to qualify for meaningful debt reduction.
What is the significance of the "vicious circle of poverty"?
It highlights how low incomes lead to low saving rates, which in turn restrict investment in physical and human capital, thereby keeping productivity low and maintaining the state of poverty.
- Citation du texte
- Christian Herbst (Auteur), 2005, Financing for Development - Challenges of development cooperation and development finance in a globalized world, Munich, GRIN Verlag, https://www.grin.com/document/51546
