Theoretical Explanation Of Underdevelopment

Theoretical Explanation of Underdevelopment:Why has the global South lagged so far behind the global North in its competitive level of development?? This can be explained by several reasons: - combination of internal factors within developing countries as well as their relationship with the global North and their positions in the global political economy. A- Classical Economic Development Theory:Modernization assumption B- Two Structural theories: Dependency Theory and World System:After failing to interpret the NICs, proponents of the World System Theory have coined the term of "semiperiphery" to accommodate geographic areas or countries that are moving in an intermediate position between the core and the periphery. Whilst Dependency Theory tends to use the term "dependent development" to describe the industrial development of the peripheral areas in a system, otherwise dominated by the global North. Monetary Cooperation: The IMF The formation of the monetary international agencies stems from the belief of the international monetary chaos resulted from the great depression of the 1930s and the WWII. As apart of postwar planning, the allies met in 1944 at Bretton Woods, the delegates established the IMF and other institutions to promote and regulate the world economy. The Role of the IMF: - began its work in 1947 - The primary function is to help maintain exchange rate stability by making short term loans to countries with international balance- of- payment problems. - In recent years the IMF has concentrated on loans to LDCs (71%) of its loans + debt relief program & CITs (29% in 1996- Russia was the largest recipient with 7.3 billion $). - Controversy about the IMF: a- voting system on the IMF board of directors: EDCs 61% of the vote according to their contribution to the fund resources.

b- It imposes unfair conditions on the developing countries:

political conditionality…..etc which undermine the state sovereignty, and lead to civil unrest as a result of high social costs…..etc c- Conditionality is aimed at maintaining the dependency relationship. Monetary Cooperation: The WB (IBRD, IDA, IFC, MIGA) It was found in 1946 of the 4 World Bank group agencies (IBRD): e.g. of its program 1996 program to help shattered Bosnia, other program to create jobs in the West Bank and Gaza….. - Controversy about the WB: a- The agencies that make up the World Bank Group are dominated by the North. b- It provides too little funds. c- It led by people who don't truly understand the LDCs needs for development. d- System of votes in the boarder of directors: USA has over 15% of the votes on IBRD, IDA. France, Germany, GB, Japan account for (15% of the votes) e- Political conditionality and painful measures so as to obtain the loans. f- It has paid too little attention to the human and environmental impacts of the projects it funded. E.g. one of the bank's studies issued in 1994 founded that the dams funded by the bank had created 2.5 million "development refugees" whose homes had been flooded. g- IFCs provide funds to the private businesses not to the governments.