GLOBALIZATION AND THE DEVELOPMENT OF UNDERDEVELOPMENT OF THE THIRD WORLD

Journal of Third World Studies, Spring 2005 by Irogbe, Kema

That background serves as a backdrop to our understanding of why the underdeveloped countries distrust these institutions. The peripheral countries play no role in the institutions except as dependent recipients of repayable loans with outrageous interest rates. There is little surprise therefore that both the World Bank and the IMF have caused unbearable hardships on people around the world.

The IMF regularly imposes austerity measures including structural adjustments on borrowers. Even a neoliberalist and Columbia University Economist, Jeffrey Sachs, who had helped Russia dismantle its state-run economy, called the IMF the "Typhoid Mary of emerging markets, spreading recessions in country after country."23 When the Asian financial crisis erupted in 1997, the IMF imposed higher interest rates to supposedly shore up investor confidence in local currencies, cuts in government spending to reduce deficits, and privatization of state-owned enterprises.24 Similar measures were imposed on Mexico and other Latin American countries to overcome a serious debt crisis in the 198Os.25 Thus, the IMF does not just hand out loans on demand but requires the recipient governments to institute policy changes to improve its economy. In that way, the IMF can be rest-assured that the loan will be repaid. But the stringent spending cuts and high interest rates have driven troubled economies into further difficulties because businesses could no longer afford to borrow money, factories shut down and workers lost their jobs. Moreover, many of these peripheral countries already have weak social programs. So, the austerity measures have further exacerbated the falling standards of living. As shown in Table I - Regional Breakdown of Poverty in Developing Countries -- there is a widening economic gap between the developed and the underdeveloped countries in terms of the number of people living in poverty. In the study conducted by the World Bank, the number of people living on less than $1 per day in 1990, as the Table I indicates, was much lower in the developed countries than the underdeveloped countries. In East Asia and Pacific, it was 452,000,000; in South Asia, it was 495,000,000; in Latin America and the Caribbean, it was 74,000,000; and in Sub-Saharan Africa, it was 242,000,000. But in Europe and Central Asia it was only 7,000,000. Similarly, the Table I shows the same trend in the World Bank's study of the number of people living on less than $2 per day in 1990. In East Asia and Pacific, it was 1,084,000,000; in South Asia, it was 976,000,000; in Latin America and the Caribbean, it was 167,000,000; and in Sub-Saharan Africa, it was 388,000,000. Also, according to Table I, the projected number of people living on less than $2 per day in 2015 will decline in each region except in Sub-Saharan Africa. The projected number is 597,000,000. The continued population explosion and economic stagnation as well as lack of industrial base may have combined to forecast the gloomy picture of the region.