Third World Conceptual Information

Why are Third World Countries Struggling? (See Debt Crisis, Dependancy Theory, and Imperialism)

During the age of Imperialism, the dominant European powers had a great deal of power in making the infrastructure and otherwise developing these states. The main reason why these states are still dependent on First World States is due to their economic cultures as defined by their infrastructures. When these infrastructures were made, they were designed to "suck out" resources out from the state and into other markets. So, roads would go from cities where the resources were to the capital city (note for most African states, the capital city then is still the capital city today). This infrastruceure type fostered an economic culture dominated by the resource in the state (metals, oil, etc.). Hence, these states had these economic cultures so ingrained that it led them to depend on their chief commodity more for trade during their existence and even into today.
Third World Vocabulary

Indirect Rule: when colonial rulers often gave great powers to certain native people and groups to run colonies. In Northern Nigeria from 1861-1960 the British Government allowed local leaders to rule under close observation. Southern Nigeria was under a very closely monitored direct rule but they used local chiefs to help as well.

Debt Crisis - This occurs when a Third World country take a large amount of loans from a wealthier country, and is unable to repay the money...which forces the country to take out even more loans and leads to a downward spiral of debts. Western countries that give out the loans are encouraged to forgive these debts because of the country’s economical standing.
Examples: This occurred in Mexico and Nigeria mainly due to huge drop in oil prices in the 1980s, which lead to a major debt in the government due to subsidies of gasoline. Also, money given by the IMF (International Monetary Fund) is restricted unless the government is restructured (such as removing the gas subsidies). The IMF plays a vital role in loaning money to Third World countries. Think of Russia as well here. The country, in order to pay for certain spending, asked the IMF and other institutions for loans. The IMF gave them if Russia would decrease spending, which Russia did not. This all culminated in the 1997 currency crisis where the ruble lost tons of its value to other countries, bringining the country into an acute recession.

Hard currency - Money that can be traded openly on international markets. It is significant because it shows how countries need to export in order to earn money. They then must conform to the market, and usually end up having to borrow money from northern banks; thus setting them even further back. Countries with hard currency tend to be politically stable countries. They tend to have low inflation and consistent monetary/fiscal policies. Low inflation is also important.

Some examples: US dollar, Japanese Yen, British Pound, and the Euro.

Import substitution - Countries take a commonly imported good and replace it with a different type of the same good that is made within the country's own borders in order to bolster the country's economy and bring money in. It is characterized by high tariffs and domestic subsidies that are intended to protect infant domestic industries. EXE: Mexico, instead of buying coke products, Mexico made its own soda, Jarrito. Import substitution doesn't usually help boost a country's economy as much as public opinion of the political leader inacting such substitution. In fact, some may argue that import substitution harms one's economy in the sense that through closing off foreign products to their country, other foreign countries might feel the need to do the same to the former country; thus, hurting both countries' industries.

NICs - Newly Industrialized Countries which sometimes rely on bigger countries (as well as supranational organizations or NGO's) for financial support. Examples: South Korea, India.
An NIC is a socioeconomic classification for countries that have not yet reached "first world" status (often measured by GDP per capita), but they have outpaced their developing counterparts. NICs undergo rapid economic growth (usually from a positive balance of trade [export-oriented]). Social upheaval can arise from the primarily rural, agricultural populations who migrate to the cities, where the proliferations of factories draws thousands of laborers.
Here are a few signs that your country is a NIC:
  • Increased social freedoms and civil rights
  • transition from agricultural econ. to industrial
  • More free trade
  • Lots of foreign, capital investment

Imperialism: The policy of colonizing other countries by establishing empires. Of the countries studied in Comparative Government, China, Nigeria and Mexico all have a history of colonial rule, but in Nigeria we see the longest lasting political effects. Remember that, despite what you may think, Iran never had a colonial government set up for it!

Dependency Theory - This theory states that a struggling third world country will borrow money from a bigger, more powerful country, and grow to rely or depend on that wealthier country for sustenance. This is characterized by cash crops in third-world countries that are produced specifically for the wealthier countries/previous colonizers. This forces globalization and acts as a modern imperialism/neocolonialism. Dependent Examples: Kenya, Guatemala, Chile.

Fundamentalism - Religious fundamentalist beliefs, based on scripture and intolerance of secularism. This commonly leads to ultra right wind conservativism in places such as Afghanistan (Taliban), Saudi Arabia, and other places where Sharia Law, or Islamic law is instituted. These people are extremists, and aim to exert their beliefs on others, all while trying to eliminate, secular, or even more moderate opposition completely.
Fundamentalists typically feel alienated in modern society, oppressed by the cultural hegemony of secular values, and they feel their very existence and personal autonomy is continuously subject to the gravest challenges. Often, they also attempt to impose their views on an entire country, despite the fact that they are almost always a minority.
If you recall the article, McWorld v. Jihad, we learned that the "Jihad" ideals tend to be fundamentalist. Remember a few buzz words: radical, Lebanon, olive tree, anti-globalization.

Parastatal - State-owned industry designed to promote growth in the Third World. This was seen with Mexico and their version of Coca-Cola (Jarritos.) It keeps currency within the state. They are historically marked by overstaffing, lack of competitiveness, lack of innovation, and corrupt relationships with politicians. Parastatals are also an example of import substitution.

Regime - the institutions and practices that last from government to government over a long period of time. Regimes can be a positive or negative influence on the welfare of a state or nation.

Strong State - A state with the ability to make and implement effective public policy. While strong states are stable, that stability often comes at the expense of many civil liberties enjoyed by citizens in weaker states. It should be noted that strong states tend to me authoritarian regimes, namely China, in which there is little to no competition. These states lack competition and a viable opposition to the current party.

Subsistence economy is an economy that relies primarily on internal agriculture. Food that is grown is not exported but used for domestic consumption. Many African and East and Southeast Asian countries practice this to some degree, and is significant because if there is a drought or other national disaster, those countries must import food, usually adding to their debt. While this is seen as a more historical practice, it is still a major part of the world economy, especially on the periphery.

Weak State - A state that is unable to make or implement public policy but can in fact maintain public order to a significant extent. Anarchy is not characteristic of weak states. Democracy is often an attribute of Weak States, However, Weak States exist mostly because of heated conflicts of religious and ethnic groups. Most weak states suffer from large amounts of poverty as well as corruption and poor health-care systems, as seen in Nigeria, where there is widespread ethnic and religious diversity, leading to disagreement.

Failed State: a state which is so weak that it is unable even to maintain public order. Citizens do not follow laws because they see the government as having little or no legitimacy. Oftentimes citizens do not vote (if the government is a democracy) because they feel that they have little influence. Nigeria can be considered a failed state.

Rentier state - A state that derives a substantial portion of its revenue on a regular basis from payments by foreign concerns in the form of rent rather than from a tax on the people. An example of a rentier state is Iran in which the main export is oil. Since the government of Iran does not tax the people, the people have low efficacy because they do not feel involved in the government. Nigeria is a rentier because it does not tax it's people but instead relies on it oil supply for revenue. Moreover, rentier states tend to subsidize oil in their own countries--which creates a dependance among the people on low oil prices. This is troublesome because if a rentier state attempts economic reform, which includes redirecting revenue that is spent on subsidizing oil, people tend to riot (this civil strife is exacerbated by the fact that efficay is low).

NGO (Non-Governmental Organization) - Private groups that perform public services and work to shape public policy. They are significant because they are used as a way to modernize the economy of build up a civil society in a third world country. Are seen as likely to compromise a governmen'ts soverinty than direct help from a single nation that would then win incredible infulence. Also often avoid the corruption that occurs when money is given directly to foriegn governments with little to no control of its use by the lender as these organizations often work directly with the people they are looking to help. Some examples include the Red Cross and Doctors Without Borders.

Debt trap - The inability of Third World countries to pay back their loans to northern (developed) countries. Through this "vicious circle," third world countries are unable to rise in the global marketplace due to the hinderance their growing debt places upon the further development of national infrastructure and the investment in potential strongpoints in the countries' economy. Some countries that have seen this trap are Argentina, Brazil and Mexico. It is also visible in Sub-saharan Africa, as they continue to borrow and lose money to corruption. For instance, eighty percent (80%) of Nigeria's oil revenue goes to a mere one percent (1%) of the population, representing mass corruption within the government.

Carrying Capacity: The amount of development an ecosystem can bear. When the number of organisms in an ecosystem exceeds carrying capacity there will be more competition for resources and inevitably organisms unable to compete well will die. In the context of government, it can lead to social Darwinism.

Patron-Client Relations: Neofeudal relations in which the government and the governed have a mutual exchange of benefits and obligations.

Supranational Vocabulary

Conditionality- the practice by which the IMF determines what conditions must be met in order to be able to take out a loan. The conditions are often centered around free-market ideals. These usually require some manner of structural adjustment, such as decentralizing businesses, promoting privatization and lowering tariffs. One of its usual goals is to open the country up to foreign investment.

Microcredits/ micro financing: very small loans given to local small-time entrepreneurs in LDCs; designed to spur small businesses. Individuals of LDCs do not have stable credit history, and therefore cannot meet minimal requirements for regular credit. Originally designed by Grameen Bank in Bangladesh by Muhammad Yunus. Thrives on the idea that once you start a small business, you can use the money to expand it (such as get enough money to buy a cow and use the money from milk to buy more cows). However, micro financing does not work when small entrepreneurs do not invest their money wisely (such as they buy a cow and slaughter it getting no money). See for an example of a foundation which promotes micro financing.

Democratic Deficit - the lack of democratic institutions or ideals in a certain countries. This also refers to how the most democratic institution is also the least power institution as well. This can be seen in the make-up of the European Union because those who have the most power are not directly elected by the citizens of the European Union. Rather, they are appointed. Therefore it makes many citizens living in the EU feel that the people making many of their decisions are not looking out for their benefit.

Globalization- the real term for "It's a Small World." It embodies the interconnectedness of economies around the world and the increasing interdependency of these economies. It is the increasing integration of economies and societies around the world, transcending the boundaries of the nation state, particularly through international trade and the flow of capital, ideas and people, the transfer of culture and technology, and the development of transnational regulations. See the Jihad vs. McWorld page for more information (Globalization is the McWorld part).

IMF (International Monetary Fund) - Funded by developed nations (185 countries to be exact), gives money to NIC's as support to bring them out of a time of economic hardship. In order to receive such aid, these countries must follow the process of structural adjustment. It not only provides this financial assistance, but also oversees the international exchange rates and balance of payments.

MNC (Multinational Corporations) - Large companies that operate in many different countries. This keeps third world countries in the realm of the third world because their workers are getting less wages. Thus, no money goes into their economy. Countries and regions that own such corporations are the US, Japan, S. Korea, and W. Europe.

NAFTA (North American Free Trade Agreement) - An agreement between the United States, Canada, and Mexico, allowing for easier trade between these three countries by reducing tariffs. It was put into action in 1994, much to the chagrin of the Zapatista rebels in Chiapas, who feared an invasion of American MNC's in Mexico, especially in the northern part of the country.

Structural Adjustment - these are the requirements stipulated by the IMF, usually in conjunction with the World bank, loans an enormous sum of money to a country suffering from a financial crisis. These adjustments have generally pushed the country to a more globalized economy by reducing trade barriers, as well as more privatized industry to attract more capital into the country from foreign investors. This was seen with Shock Therapy in Russia in their transition to a market economy, where the taxes were raised and the prices of good were allowed to float in order to create more production. Also, in Nigeria's case, their dependency on the IMF has called for adjustments to their oil subsidies that kept the prices of oil low and keeping the general public happier. The IMF wanted Nigeria to rely more on taxes and trade rather than keeping its status as a rentier state. Also, during the peso crisis in Mexico during the mid-1990's following the implementation of the North American Free Trade Agreement, the IMF and the United States provided Mexico with a large loan, allowing the Mexican economy to recover and become more prudent with its policies, and also creating a good name for globalization by keeping NAFTA intact.

WB (World Bank) - A conglomeration of western banks that loan money to developing nations for infrastructure projects. It is significant because although it tends to favor the richest countries, it creates units to aid reconstruction, environmental protection and reduction of poverty. The head of the World Bank is currently under investigation.

WTO (World Trade Organization) - International organization with wide jurisdiction over trade issues. It is designed to supervise and liberalize international trade. Also has delt w/ the EU's Common Agricultural Policy. Very controversial in the case of Chinaas well as dropping tariffs on imports creating economic competition to once uncontested Chinese products. Iran is looking to gain entry into the WTO.

Economic Community Of West African States (ECOWAS)- regional group of fifteen countries, founded in 1975 in Africa. It is a supranational organization. It's purpose is to encourage economic activity in its member countries. It's almost like NAFTA and the EU, in which the member countries try to increase their economic power and increase relations with one another. It also serves as a peacekeeping force, and has a court of justice. The country that we studied that is apart of ECOWAS is Nigeria.

The United Nations (UN) this is a supranational organization set up after world war to as a communal meeting ground for all countries to talk diplomatically. The UN has to major bodies, though it has a number of subsidiary bodies as well. The two major bodies are the general assembly and the security council. The general assembly is a meeting of all the members to talk over the issues. However, any real work to be done must go to the security council.

The UN receives much criticism, primarily stemming from strict regulations and procedures, and the protection of natural sovereignty. Because of the veto power of the security council, the UN is often considered esentially a tool for these nations to wield greater infulence in the international sector. No legislation can be passed any single member of the Security council will not comply with. The UN often is considered to be unable to take swift, quick action, and is, as a result, often viewed as inefficient. However, as the world looks to incite globalization, it often seeks the UN as a good vehicle of communication for such ideals.

The UN is headquartered in New York, New York and the head of the UN is now Ban KiMoon, a South Korean, who recently replaced long time leader Kofi Annan.

The UN Security Council consists of 15 members, 5 of which are permanent and the remaining ten which rotate. The five permanent members are the US, the UK, France, China, and Russia. Each one of these countries additionally has veto power. Furthermore, it is from the security council that funds can be spent and that peace keeping troops can be deployed. The UN's physical might comes from these peace keeping troops, made up of soldiers from many different countries that are pledged to the UN. Under that time they belong to no nation, but only the supranational organization. Troops can not be brought in unless the government asks the country to do so, as the UN's first and major priority is national sovereignty.

Human Development Index (HDI): The HDI compares the 'Human Development' (AKA: the standard of living) of countries and distinguishes whether a country can be considered to have "very high human development", "high human development", "medium human development" or "low human development". The HDI takes into account life expectancy, literacy, education and standards of living. A high score on the HDI indicates low infant mortality and high life expectancy, most of the population being literate, a good educational system and a good standard of living. A low score on the HDI indicates high infant mortality and low life expectancy, a majority of the population being illiterate, an underdeveloped educational system and a poor standard of living.
As of 2012, the HDI scores for our core countries are as such:
UK: 0.863
Russia: 0.755
Nigeria: 0.459
Mexico: 0.770
Iran: 0.707

Gini Index: A measure of income inequality and distribution in a country created by Corrado Gini. A Gini coefficient of 0 would mean that in that country all peoples' incomes are the same (which is not necessarily a good thing), whereas a Gini coefficient of 100 would be the maximum inequality (pretty much meaning that one person has all of the money).
As of 2012, here are the Gini ratings for our core countries:
UK: 34
China: 41.5
Nigeria: 43.7
Mexico: 51.7
Iran: 44.5
Russia: 42.2

Confederation: A form of rule in which the central government is weaker than the states which comprise it.