Global North and South in Terms of Economic Prosperity free essay sample

Therefore to address the question as to why the north became rich and the south poor, once must ask the question why the north was able to become so productive and the south not. Throughout history world GDP growth has followed a fairly equal linear trajectory up until the industrial revolution takes hold (Sachs, 2005). From there we see a rampant acceleration of productivity, rapid acceleration of economic growth and by extension, an increase to the standard of living in the north. During this time growth in the south remains stagnant, or occurs at a much slower rate. In this essay I will address the question as to why the industrial revolution happens first in the global north and also why the inequality gap still exists today. First we have to look at what prompted the Industrial Revolution to take hold. Many theories point to technological innovation, greater options for trade, geographic factors, access to raw materials and inexpensive travel routes. Britain was one of the most significant countries where the industrial revolution first occurred. The land was filled with resources that they could easily access and use in industrialization (Clark, 1987). They were also surrounded by other nations in Europe who were industrializing which offered them excellent access to trade. Finally, the natural canal and river systems offered an inexpensive and easily accessible way to transport goods and raw materials throughout the country, and being an island country offered easy access to trade routes to the rest of the world. Although these were all important contributing factors to maintain the momentum of innovation and productivity during the industrial revolution, they were supporting factors and not the primary catalysts. If we look at Gregory Clarks paper Why the World Isn’t Developed: Lessons from the Cotton Mills, he illustrates a comparison between the rates of production of countries considered developed and those considered non-developed in the textile industry. The textile industry is one of the best examples to illustrate how this divergence of wealth began, as most countries begin their journey towards industrialization with textiles. In Clark’s paper, he highlights productivity per unit of labour in the production of textiles. He concludes that given the data sets available, the developed nations were sometimes as high as 16 times more productive per unit as the non-developed (Clark, 1987, p. 158). After conducting his regressional analysis, and factoring out conditions such as cotton quality, differences in technology, and access to raw materials and other additional costs, he concludes that one of the primary factors for the difference in this production is the attitudes of the local communities in the non-developed countries. He states â€Å"Whatever limits the efficiency of workers in low-wage countries seems to attach to the local environment, not to the workers themselves. † (Clark , 1987,p. 168). He describes in the case of the workers of India, the â€Å"local effect† (Clark, 1987, p. 169). This effect prevented the companies from increasing production per worker, as workers were unwilling or uninterested in increasing their production. Perhaps this was derived from centuries of working together to survive, and this new idea of competing between neighbours was foreign to them, however that notion is beyond this essay. Ultimately it seemed that attitudes and local resistance to the new idea of organisation of labour did not appeal to non-developed nations. As a result, for over a century global northern countries were able to out-produce southern countries in the textile business. Furthermore, it spurred increased industrialization in northern countries while the south remained static in both production and innovation in newer technologies. Ultimately, this is one of the major factors that caused this original split between standard of living in as what we know today as the gap between global north and south. In Jeffrey Sachs book The End of Poverty, he explains that there is a direct correlation between positive economic growth, and a decrease in poverty rates. Once a country can become industrialized and create huge economic growth, they are able to grow at an exponential rate, leaving others who have not developed behind. Similar to Clark’s argument, Sachs agrees that the ability to pull ahead in terms of economic growth during the industrial revolution was a key reason why the global north is more developed today and the south is not, although he argues for different reasons. Clark’s main point is that efficiency and productivity were the keys to development while Sachs believes it was several other factors that helped the now developed nations pull ahead. Like Clark, Sachs uses Britain as an example to explain how Britain and other countries in the global north were able to get on the positive side of the inequality gap early on. Compared to other nations, Britain had all the right ingredients to be a first mover into the world of industrialization. Jeffrey Sachs explains that Britain had full access to the ocean, which opened up easy, low cost trade routes to North America, the rest of Europe and other parts of the world. The land was filled with resources, and was also very fertile making it perfect for agricultural use. As well, they were more advanced technologically, and finally, something unique to Britain at the time, was their individualistic society that encouraged entrepreneurs to take initiative. If you take a look at the countries in the global north, you will see their current situation is similar to what Britain’s was, during the Industrial Revolution. Countries in the global north have many of the same components; geographical advantages, abundant resources, advanced technology, and little government intervention in the economy, much like Britain did, allowing them to develop at a much quicker rate than others. All these are factors that are necessary to incite economic growth, which in turn raises income levels and standard of living. Just as there were elements that allowed some countries to develop quicker than others, there were also several elements that hindered the ability of countries to be able to grow economically. As stated earlier, economic growth and poverty levels are inversely related. As the economy grows, it creates more capital and thus lowers poverty rates. On the same notion, when the economy is stagnant, the poverty levels increase. This is referred to as the â€Å"poverty trap† (Sachs, 2005, p. 56). The poverty trap occurs when people in a poverty stricken nation use all their daily income just to survive. They are unable to save any money, which slows down economic growth, which in turn creates more poverty. It becomes a vicious cycle that can only be solved by economic stimulation (Singer, 2006). But how did the poverty trap begin in the first place, and why were other nations able to avoid this? If you look at a map of the countries with the highest poverty levels, the majority of them fall between the Tropic of Cancer, and the Tropic of Capricorn, with the highest portion being in Africa (World Bank, 2011). All the countries with more than 75% of the population living on less than $2 (PPP) per day are also located in Africa (World Bank, 2011). There are several reasons why Africa is home to such a large amount of the impoverished nations. First off, as a recurring theme, geography plays a considerable role in the development rates of countries. Many poor countries do not have easy access to trade routes as they are â€Å"landlocked† (Sachs, 2005, p. 58). This is the case for some of these Central African nations, but it is a problem that affects nations around the world as well. This can raise transportation costs, and make stimulating the economy a much more daunting task than it would be for a nation with many available ocean ports and easy trade routes. Having to spend the extra money reduces the profit leading to possible stagnation, or the lack of stimulation. Another problem faced by these nations between the two Tropics is the weather conditions. In Africa the people face arid conditions, causing low agricultural productivity (Sachs, 2005). This could partially be caused by, their two seasons: rain and drought. Under these conditions they cannot acquire capital necessary to escape poverty as these people can barely produce enough to feed themselves. Producing enough extra goods to be able to take to the market would be a herculean task for these individuals. The topic of corruption as it relates to poverty is a relatively new problem that does not receive as much attention as it deserves. Taking a look at Transparency International’s Corruption Perception Index (Transparency International), we can see that many of the countries near the top of this list are also countries with high poverty rates. This problem has several different explanations. One explanation is that countries in the global north are attempting to be socially responsible and send aid to poverty stricken countries. This aid is sent to spur economic growth, which as mentioned before, is the most effective way to break the cycle of the poverty trap. Unfortunately, the aid is collected by the corrupt leaders, and the people who need it the most see very little of it, if they see any at all (Kono, 2009). This continues the cycle of poverty, and does not provide the needed stimulus for growth. Foreign investment in industries is, in essence, another form of aid countries can receive. This type of aid can also be influenced negatively by corruption. One scenario has the foreign investors benefitting, and the other has the investors being driven off. Foreign investors can benefit by exploiting the poverty stricken countries abundance of labour. They take advantage of weak labour laws and according to M. Calkins and T. Radin (2006) pay them less than a liveable wage, have many safety hazards in the workplace, are abused verbally and physically, work up to 16 hour days and sometimes 7 days a week. These are known as sweatshops and are found in abundance in countries in the global south. The second scenario that occurs is where the investors are driven away due to the corruption. It is usually due to the fact they could face legal sanctions for conducting their operations in the country, or they feel their intellectual property and property rights are threatened (C. Hill, T McKaig, 2009). Poverty and the inequality gap between global north and south is a problem with much deeper roots than one might think. It cannot be described with a simple explanation that some countries are just poor while others are rich. To find out why there is this gap one must look back to when the gap was originally formed, and study why certain nations were able to industrialize, therefore putting them ahead of other nations in terms of wealth, and economic growth. Geographic location plays a major role in a countries ability to grow economically. This economic growth is the key to eradicating poverty, and eliminating the gap between global north and south. Sadly for countries in the global south, factors like corruption, poor geographical location, and little to no economic stimulation have been limiting their abilities to stimulate growth.