From Poverty to Prosperity: Understanding Economic Development part 5

Module 5 Summary

In module five, we explored how poor societies interact with the outside world and the various external influences which can either help or hinder their development and subsequent ascent from poverty.

We identified trade as the most important interface between rich and poor countries and explored the different flows of trade. We explored how poor countries can use comparative advantage to industrialise and enter the global market place and touched on international policies that have been put in place to facilitate this; which ones are working best and why. We also looked at intellectual property and explored the current international system governing this critical area. We then took an in depth look at natural resources and the associated complications of economic discovery, highlighting issues such as asymmetry of information and factors which can negatively impact the longevity of resource revenues. We identified the importance of both good leaders and domestic policy in natural resource revenue management, and looked at examples of countries which have done this successfully and unsuccessfully.

We discussed the role of public and private capital flows and observed how foreign aid has evolved over the past 25 years from simply providing capital to poor societies, through the conditionalities phase, to the building of stronger institutions to help influence better political decision-making. We also looked at private capital flows that can be characterised as the 'good, the bad and ugly'.

Finally we analysed the impact of labour flows on poor societies, those which leave a skills gap and a lack of compensation in contrast to those which bring benefits to both the worker and the poor society in the form of new skills and improved attitudes and social networks. We discussed how forced migration has had a negative impact on the poorest societies of the world, and the need for better international refugee policies to help improve refugee rights and in turn, benefit the citizens of the haven countries that house them.

Key Takeaways

• International trade schemes which promote privileged market access are a powerful aid to industrialisation of poor countries but if not done properly can be open to misinterpretation and exclude a lot of the target countries they were created to benefit.

• Natural resources have the potential to catapult poor societies into exponential growth but are also majorly problematic, and if not managed correctly, can lead to massive unrest at a national level.

• History has taught us that foreign aid will not add real value to poor societies if not spent correctly. Potential areas where aid can be useful include: supporting urbanisation, connecting countries to the global economy, incentivising pioneer investors, and subsidising generation of public data.

• Forced migration is a worldwide problem and needs to be treated as such. Policies on refugee rights need to radically change as a matter of urgency to provide bonuses and assistance to the poorest countries which are the most affected, and to focus on generating jobs to refugees instead of only providing food and shelter.

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