Many travellers to nations like China, India or the Caribbean are immediately impressed by the contrast between squalor of provincial areas and the apparent luxury of large cities and some ‘advanced’ areas. Regional inequalities contribute to underdevelopment, creating a situation when some areas are on their way toward modernisation, while others are forced into the backseat of social and economic progress. The importance of regional inequalities as source of underdevelopment is explored, for instance, in Andre Gunder Frank’s 1989 publication The Development of Underdevelopment.
Frank (1989) challenges the view that underdeveloped nations are still going through the stages that more developed countries are done with. Instead, he asserts that problems of underdeveloped areas are the inevitable result of the capitalist system. The same, in his mind, is true of the regional disparities observed in the underdeveloped nations where the capital and larger cities often stand out as oases of advancement among the generally gloomy landscape around.
The underdevelopment phenomena in the province are “the products of the historical development of the capitalist system no less than are the seemingly more modern or capitalist features of the national metropoles of these underdeveloped countries” (Frank, 1989, p. 37). To address the economic foundations of underdevelopment, Frank (1989) advances the hypothesis that the backward areas in these countries have been exploited by capital cities and other large entities just as the metropoles previously had exploited their colonies.
Thus, San Paolo may be in the same dominating role to the retarded Brazilian areas as the European colonizers were in relation to San Paolo itself. The metropole areas de-capitalise the provinces, through their own control regulate their development and prevent the rise of living standards in provincial areas. This exploitation, according to Frank, is the inevitable result of the capitalist development model. Dependency Theory and Colonial Heritage Many have tried to draw upon the legacy of the colonial system to explain the reasons for underdevelopment in many areas of the world.
Most areas that suffer from poverty today are former colonies; the developed nations, for the most part, are former metropoles. The colonizers exploited their underlings in colonies, turning them into suppliers of cheap raw materials and restricting the infrastructure construction, leaving former colonies with only basic facilities. In many cases, when the colonizers departed, the nations were left with artificial boundaries that separated them from each other without regard for their historical development.
This fuelled subsequent separatism and military conflicts, hampering economic progress. Thus, if one looks at straight-line boundaries in Africa, it becomes obvious that those were artificially created. The colonizers, in particular the British Empire, were suppressing the industrial development in their colonies because they viewed them as sources of cheap imports and at the same time large markets for their industrial goods.
Reverting to the same example of north-eastern Brazil that often surfaces in literature on underdevelopment, Taylor (2001) claims that “northeastern Brazil in the 19th century would have appeared to be an ideal place for a textile industry” with its high quality cotton and existing demand for sugar bags cloth and slave clothing. However, to develop the textile industry, it would take years during which the industry should have been shielded from foreign competition with import tariffs and quotas.
This was surely not something Britain would allow in its colony. As a result, the fledgling Brazilian textile enterprises proved unable to withstand the competition with Britain’s textile industry. Britain, like almost any metropole, was interested in selling to the colony, not developing industry inside it. As of 1822, when Brazil received independence, it was “a larger export market for Britain than all the rest of Latin America combined” (Taylor, 2001).
Naturally, even as Brazil proclaimed independence, Britain did not want to lose this lucrative market and demanded “a trade treaty with Britain which prohibited import substitution tariffs” (Taylor, 2001). Brazil was forced into this treaty by its political weakness. In this way, former metropolitan powers keep control of their former colonies to varying extents, blocking their effective development. In newly independent nations of Latin America, for instance, the warfare that often preceded proclamation of independence “devastated regional and national economies” (Kinsbruner 1994, p. 126).
Although this perspective is not universally recognised, many people in the developing world believe that richer nations are effectively precluding their development. In particular this effort is blamed on the International Monetary Fund and the World Bank policies said to aggravate underdevelopment in the Third World. International Monetary Fund and the World Bank: Promoting Development or Blocking Advancement? The stated goals of both institutions are certainly to spearhead economic growth in nations they service with their financial programs.
Critics, however, point out that loans from the World Bank and the IMF often come with conditions that block the road to sustainable development and make poverty even worse. They insist that “policies pursued by these institutions [are] part of the logic of capitalist expansion, serving the interests of transnationals, careless of the environment” (Amin, 1995, p. 8). The Structural Adjustment Policies (SAPs) imposed by the IMF as a prerequisite for qualifying for its loans often aggravate the deplorable condition of the poor nation.
Thus, SAPs often call for reduction in government expenditures for health, education and other government services for the sake of debt repayment. In this way, poor nations are dragged into the quagmire of debt repayment, as their interest provides income for Wall Street banks and other financial institutions. IMF policies urge developing nations to increase their exports of raw materials and agricultural products in order to cope with debt – an immediate concern.
This, however, reduces the amount of food available to the poor inside the country and can lead to starvation; second, does not create conditions for building processing industries that will increase value added inside the country. Besides, the IMF often demands for liberal market reforms that involve privatisation that, without proper preparation and evaluation of potential consequences, can lead to loss of jobs, aggravation of the social situation and civil unrest. Such measures lead to social discontent that can hamper the development of economies in developing countries.
With respect to harmful policies imposed by the fund, Amin notes that they key to development is “subordination of outside relations to the logic of internal development and not the reverse” as it is happening when development policies are imposed by outside financial institutions (Amin, 1995, p. 10). The harmful role of the World Bank and the IMF in the development of poor nations is by no means indisputable. However, there are many criticisms aimed at the policies that accompany loans and the very idea of reaping interest income off the populations of the nations where starvation is a widely spread phenomenon.