Transcript Document

Outline for 12/5: International Development I
Capitals Channels
Foreign Aid
IGO lending
World Bank Group
Regional Development Banks
Private Sector Loans and Other Private Channels
Microcredit
The Need for Capital in the Global South
Capital (GDP)
Population
GDPpc
North
lots
little
= high
South
little
lots
= low
Suggests two ways to reduce the North-South Gap
1. Move population from the South to the North
2. Move capital from the North to the South
How feasible is the first option?
Capital Channels
1. Direct N Govt to S Govt.
Foreign aid / official development assistance
2. N Govt to S Govt thru an IGO
A. World Bank and International Monetary Fund
B. Regional Development Banks
3. N Private sector and S Govt.
A. Borrow from banks in the N
B. Issue debt to investors (often in the N)
4. All private sector
A. Trade and FDI
B. Remittances
Foreign Aid
Advantages – its free
Disadvantages?
IGO lending
Advantages – loans are low interest
Disadvantages ?
World Bank Group
Now includes 5 different institutions
International Bank for Reconstruction and Development (IBRD)
International Development Association (IDA)
International Finance Corporation (IFC)
Multilateral Investment Guarantee Agency (MIGA)
International Center for Settlement of Investment Disputes (ICSID)
Structure: President – traditionally an American (currently Jim Yong Kim)
Board of Executive Directors – reps from 25 countries + WB President
Board of Governors – reps from all member-countries
Vote shares:
USA 16%
Japan 7%
China 4.5%
Germany 4%
UK 4%
France 4%
Capital base: about $90 billion loaned out in 2008/09
Regional Development Banks
Inter-American Development Bank
1959
Washington DC
African Development Bank
1964
Ivory Coast
Asian Development Bank
1966
The Philippines
Islamic Development Bank
1973
Saudi Arabia
European Bank for Reconstruction and Development 1991
London
Private Sector Loans
2 forms:
1) borrow from banks in the N
2) issue debt to investors (often in the N)
Advantages – lots of capital available thru these channels
Disadvantages ?
Other Private Sector Channels
Trade
FDI
Remittances
Microcredit
Very small loans to individuals in poor countries so that they can start businesses
Grameen Bank – founded in 1983 in Bangladesh
Muhammad Yunus awarded Nobel Peace Prize in 2006
Does microcredit work?
Micro/Macro Paradox
Preview
Region
Development Strategy
Outcome?
Latin America
Import-Substitution
Industrialization (ISI)
Latin America Debt Crisis
Washington Consensus
Asia
Export-Oriented Growth
Asian Financial Crisis
Eastern Europe
Shock Therapy
EU Integration
Africa
Foreign Aid
Continued Underdevelopment
FCQs