North South Relations Theory

Edward Chien
April 5, 2013
North-South Relation Research question: What is the cause and effect of North-South divide? And why is the South experiencing such slow economic growths? What are some solutions to resolving the North-South relation problem? North South relation theory is defined as a socio-economic and political divide between two hemispheres. The North consists of North American, Western Europe, Australia, Japan, and East Asian countries; whereas the south is made up of Africa, Latin America, and South East Asia. The North is considered to be much more economically developed and modernized compared to the South, where there is widespread poverty and slow economic growth. In this paper I will examine the causes and effects of North-South divide. There are many causes to the North-South divide, but I think it is strongly related to colonialism. I am talking about modern colonialism, whereby rich nations are now scrambling to get the best bargains from the poor countries. Rich countries have relaxed their immigration policies to attract wealth and human capital from poorer countries. This is considered as robbing talents and it is a new form of colonialism that seems to be legitimate. If we look back in history, colonialism is done through coercion and threats, which is outlawed in today’s world. During the colonial era, British trading companies drained wealth from its colonies in Africa by extraction of natural resources and refused to develop social infrastructures. In today’s world, we have a new form of colonialism, which is equally devastating, but is much more subtle and less violent. We see a large number of young and skilled professionals of underdeveloped countries moving to rich countries because they are attracted by new possibilities in more developed countries. “People are eager to migrate to countries in the South in attempts to better their life standards and get their share in the perceived prosperity of the North…South and Central Americans want to live and work in North America. Africans and Southwest Asians want to live and work in Europe. Southeast Asians want to live and work in North America and Europe” (Rafael, 2007, 556). Migration of skilled workers from the South is a serious concern for undeveloped countries. When skilled workers leave the South, they bring with them knowledge, capital, and economic productivity with them to the North. This facilitates an uneven distribution of technological innovation. For instance, if an structural engineer from the South leaves his country, the country loses human capital and essentially both economic productivity of this individual as well as income tax revenue. Now, when skilled labors are migrating in a large proportion, then it the effects are even more detrimental. “Though the proponents of globalization argue that it ushers in an unprecedented flow and circulation of people which has never been witnessed before in history, the critics of globalization have shown us that the scale and complexity of human movement that is currently occurring has solely benefited the rich nations” (Timsina, 2011). The loss of skilled labor due to migration is a main cause to why undeveloped countries are not experiencing economic growth.
In order to solve the problem of migration and help undeveloped countries generate higher economic growth, I would propose that rich countries adjust their immigration policies. Policies should not be geared toward excessive importation of highly skilled and production young people because these people are the future of their country and without them, there will be little economic growth. But simply changing immigration policies of rich countries are not enough; I think there should also be strong monetary incentives on part of undeveloped countries to retain their skilled workers. For instance, I think doctors, nurses, engineers, and technicians from poor countries should be given an income equal to income given in rich countries; the government should be able to subsidize their annual salary if necessary.
Another important cause of North-South divide is that there is capital constraints and governmental corruption in less developed countries. When government officials corrupt and steal from tax revenue, money is directed into individual pockets rather than building public infrastructures. Corrupted money are usually deposited aboard; for example in China, a report unveils that “the number of government and Party officials who fled the country since the mid 1990s was between 16,000 and 18,000 and the embezzled capital nearly 800 billion Yuan, which is $123 billion dollars” (Chen, 2011). The report also says that corrupted officials are mostly public security officers, high executives of state-owned companies, and member of the judiciary; these government officials lack the confident in the current system in China and believed that their assets and future is safer abroad, usually in developed countries. Thus, I would suggest countries in the South that are less developed to strengthen property rights for its citizens. If government officials do not even trust the country in which they serve, they will not serve their country wholeheartedly.
There are many problems when capital flight and government corruption takes place. For example, when money goes into individual pockets, society will be left with little improvement in basic public and social infrastructures; the majority of the people will continue to have low living standards, and the country will not be modernized as quickly. This is prevalent in African countries where authoritarian regimes dictate politics. Plus, in developing countries where population growth is very high, the amount of capital per person available for people declines as population grows. There is no much capital to start with and if net capital accumulation is declining due to corruption, poor countries will only get poorer in the long run. Bribery is one of the main tools of corruption, often used by private parties to “buy” things that are provided by the government. For instance, private actors can bribe and influence the government’s choice of firms to supply goods and services through contracts. If business people and government officials are working together to make money, then there is usually monopoly in the market. The government can create barriers of entry and prevent competition from entering to take market share away from their business partners or client. This will usually result in high product prices and little foreign direct investment due to unfair practice in the market. These practices by the government put their country in a vicious developmental cycle that entails slow economic growth in the long run. I think foreign intervention into domestic politics of another country is a violation of sovereignty rights and so it is very hard to solve the problem of government corruption from the outside. If a developing country wants to transform itself and become a part of the North, then it’s government must be willing to resist the temptation of corruption, or at least control their level of corruption sustainably. I think we will have to look at some success stories before we formulate a solution. Government intervention is a very important part of developing countries; historically, successful transformation and rapid economic growth are only achieved through state-led programs and government intervention. If we look at the early stages of economic development in South Korea and Taiwan, we will see that there is widespread state involvement and state guidance. Both South Korea and Taiwan were ruled by a military regime from the 1960s to the 1970s that focused heavily on heavy industrialization. Park Chung Hee utilized his experience with Japan’s wartime economic management in Northeast China and applied the model in South Korea. He created the economic planning board, ministry of trade and industry, ministry of finance, and moved away from import substitution to an export oriented trade policy. In Taiwan, Chiang Kai-Shek was the military leader and he introduced a similar economic development model, he nationalized the banking system in Taiwan and employed a very conservative approach toward liberalism. During his reign, about 71.3% of the assets of all financial institutions were concentrated in the hands of government-owned banks. This approach was highly beneficial to the financial sector in Taiwan because it reduced volatility in the stock market and limited speculative investment from foreign investors; this approach also helped Taiwan avoid the effects of the Asian Financial Crisis in 1997. Both Taiwan and South Korea are small economies compared to other Western countries, but they were very successful in their state-led economic development. I think the biggest take away that we can learn from the economic model of South Korea and Taiwan is establishing effective government intervention in the economy. An efficient government in a developing country should prioritize equity and economic growth before anything else. I would suggest governments in developing countries to invest heavily in human capital, such as health, education and nutrition. Public and social infrastructures are also extremely important and they include roads, power distribution, water and sanitation. Last and the most important type of capital is public institutional capital, which includes a well-run bureaucracy, judicial system, and law enforcement capabilities. Having a strong government intervention is essential component that will help the South transform itself into a North economy. And it is historically proven to be possible when we look the economic miracle in South Korea and Taiwan. Another reason that some South economies are not moving toward a more advanced economy is because it is disadvantaged geographically. We called these countries landlocked developing countries (LLDC). A report estimates that “Landlocked countries that rely on transoceanic trade usually suffer a cost of trade that is double of their maritime neighbors, and they on average suffer a economic growth of 6% or less compare to their non-landlocked countries” (Hagen, 2003, 13). Theses countries are mainly located in Sub-Saharan Africa. And since these developing countries are primarily focused on exporting natural resources, they incur high transportation costs due to distance and terrain barriers to the ocean; this cause them to lose competitive edge for exports from non-landlocked countries. Furthermore, they also lack direct access to sea routes and are largely isolated from the world market. However, I think there is ways to solve this problem but it requires cooperation with non-landlocked neighboring countries. If we look at Europe, we see that landlocked countries can also become prosperous economically when there is a well-developed public infrastructure system like roads and communication. If Sub-Saharan African countries want to compensate for its geographical disability, then they should strike negotiation with non-landlocked countries and improve cooperation in developing public infrastructures. Furthermore, they should also try to “reduce administrative burdens associated border crossings such as bureaucratic procedures, paperwork, custom charges, and traffic delay” (Faye, 2004, 47). This will allow easier access between both countries and increase the volume of trade that is mutually beneficial. Again, this goes back to the importance of government intervention into the market because trade negotiations can not be with good diplomacy; it does not matter if your economy is good, as long as you are landlocked and have no access to a seaport for exportation, then trade volumes will remain low. South economies are also undeveloped due to demographic reasons. Many least developed countries have extraordinary high population growth rates, which is caused by little to education and employment that leads to higher fertility rates. When people are not educated, “families in societies where children are needed to work on subsistence farms tend to have more children, especially in places where infant and child mortality is high” (worldsavvy.org, 2008). When there is high population growth, poverty typically grows as well. In fact, majority of the less developed countries have a large young population due to low life expectancy rates, and these young people have little employment opportunities. A report says, “Developing countries tend to have a disproportionate number of citizens under the age of 30, which creates a large pool potentially restless and unemployed youth who live in a society without sufficient employment opportunities and often with many groups, militias, and militaries to which young boys in particular are often drawn. It is calculated that when the youth population of a country reaches 35%, the risk of armed conflict goes up by 150%” (worldsavvy.org, 2008). A large young population is beneficial to the country only if they are educated and working to generate economic growth; if they are not doing this, then they are most likely wasting resources and perhaps even contribute to high crime rates. Thus I would suggest that there should be government intervention in areas related to healthcare and education when it comes to demographic pressures. The government should plan and develop the country as a whole and not merely focus on modernizing certain cities while leaving rural areas undeveloped. More employment opportunities should be provided through public programs such as construction of social infrastructures. I have explained several main causes of why there is a North-South divide in the world. The South is failing to transform itself due to reasons such as capital flight, migration of skilled workers, government corruption, inefficient government policies, geographic disadvantages, and demographic challenges. I also offered solutions to deal with each problem specifically; I believe that if less developed countries can implement these solutions, then there is a chance for a South economy to transform itself to a North economy just like South Korea and Taiwan.
Bibliography

Mimiko, Oluwafemi (2012). Globalization: The Politics of Global Economic Relations and International Business. Durham, N.C.: Carolina Academic. pp. 48–54.

Mimiko, N. Oluwafemi. Globalization: The Politics of Global Economic Relations and International Business. North Carolina: Carolina Academic Press, 2012. 47-54. Print.

Kacowicz, Arie M. "Globalization, Poverty, and the North–South Divide." International Studies Review 9.4 (2007): 565-580. Academic Search Complete. EBSCO. Web. 23 Oct. 2009. Therien, J.P. Beyond the north-south divide: the two tales of world poverty. Third World Quarterly. pp. 723–742.

Preece, Julia. "Lifelong learning and development: a perspective from the ‘South’" Compare: A Journal of Comparative and International Education 39.5 (2009). 23 Oct. 2009.

http://en.wikipedia.org/wiki/North–South_divide

Bibliography: Mimiko, Oluwafemi (2012). Globalization: The Politics of Global Economic Relations and International Business. Durham, N.C.: Carolina Academic. pp. 48–54. Mimiko, N. Oluwafemi. Globalization: The Politics of Global Economic Relations and International Business. North Carolina: Carolina Academic Press, 2012. 47-54. Print. Kacowicz, Arie M. "Globalization, Poverty, and the North–South Divide." International Studies Review 9.4 (2007): 565-580. Academic Search Complete. EBSCO. Web. 23 Oct. 2009. Therien, J.P. Beyond the north-south divide: the two tales of world poverty. Third World Quarterly. pp. 723–742. Preece, Julia. "Lifelong learning and development: a perspective from the ‘South’" Compare: A Journal of Comparative and International Education 39.5 (2009). 23 Oct. 2009. http://en.wikipedia.org/wiki/North–South_divide