The global economic landscape has been seen as one that is asymmetrical. There is a huge difference in wealth between the Third World and the developed states (Magyar, 1995). Despite global economic interaction that is supposed to contribute to world prosperity, the benefits are unequally distributed among states and within them (Magyar, 1995). This inequality has taken many labels, the “developed– developing” world, the “First-Third” world and the “North-South” divide (Broad, 1996).
From a layman’s perspective, the trade conditions that have existed between developed and developing nations have favored the former over the latter. For the developing world, as Amartya Sen puts it, development consists of removing the barriers on people that leave them with little choice and little opportunity of exercising their reasoned agency (Sandbrook, 2000). It is about leveling the playing field and allowing them to compete fairly with the developed world.
The disparity between the two shows that a lot of countries may be progressing, while the vast majority of the South is stagnating, slipping backwards, or growing slower than the North (Broad, 1996). For the most part, the Third World has clamored against unfavorable terms of trade. They have argued that the prices of the finished products they buy from the industrialized states rise faster than the prices they get paid for, for their exported primary products (Magyar, 1995). This results to the progressive reduction of their incomes while also depleting their resources.
The sad part is that they will need these resources for their own eventual industrialization (Magyar, 1995). Aside from having an abundance of natural resources, the developing nations also have the following characteristics: firstly, they suffer from low living standards, with high income inequality, poor health and inadequate education. They may also suffer from low levels of productivity and a high population rate. They usually have large-scale unemployment and underemployment; have a large but unattended to agricultural sector and low social capital, to name a few (Lewis, 2007).
To these nations, the usual bitter medicine prescribed to them is to open their doors to free trade and/or to several structural adjustment programs (Broad, 1996). Unfortunately, not all has been going well for countries that do end up opening their doors to competition. There are various reasons why this is so, and one of the mostly mentioned reason is the lack of fairness in negotiations (Lewis, 2007). It is, indeed counterintuitive to assume that small firms or business can compete with transnational corporations in the negotiating table.
The reason as to why they can do this boils down to the unequal distribution of wealth and power and those that already have it will obviously want to keep status quo (Khor, 2000). The logical reaction therefore for developing countries is to try to maintain some form and level of protection against the full exposure to international competition (Lewis, 2007). In the words of Mittelman, it resembles a ‘captor-captive’ relationship, whereby the captor seeks to remain on top, and the captured attempting to rise from the heap (Mittelman, 2000).
Be that as it may, the next question is, how do these nations do this? The next section attempts to discuss this. Finding a Way Out The solutions to these problems lie in the formulation of state policies of the developing countries. Obviously, states interact with one another to protect their national interests. To secure national interests, a developing country should look inward to gain economic stability and only rely onto importing goods that are not available locally.
The governments of the developing countries could start by applying and inward-looking approach that could eventually lead to protectionism. Government policies should be designed in a way that could protect the local businesses and industries by imposing tariffs, quotas, and even giving out subsidies. Although these measures may serve as a hindrance to free trade, it is only through these that developed countries could be protected from the unfair practices of trading with developing countries (globaled. uconn. edu, 2006).
The aforementioned trade measures to be applied may hamper the development of the countries that have long been enjoying the fruits of their development. At the same time, the barriers to trade may somehow curtail the rise of the newly industrialized countries. Thus, another solution is being presented that could somehow protect the interests of the developing countries and yet, would not serve as a barrier to free trade – Comparative Advantage. Comparative Advantage puts forward the need of each country to specialize in the goods and services it can produce efficiently.
This particular economic perspective believes that more and more countries could benefit from this step as it would help in generating more wealth for countries and at the same time, promises them of a more substantial economic growth (globaled. uconn. edu, 2006). . In the same manner, this particular perspective is advantageous to the developing countries as it would help in lessening the competition between them. A Closer Look at the Developed and Developing Countries
It is important to note that for most written work, there exists a seeming consensus about the dichotomy of the types of states, based on their development. As stated above, scholarly works tend to delineate between rich and poor countries by labeling them as “First World” and “Third World”, “Developed” and “Developing”, and the “North” and “South”. But in reality, is the world really composed of such mere dichotomies? When talking about development, and economic status, are states classified into two boxes or categories only?