Sunday, January 20, 2008

Do The World’s Poor Countries Finance the Rich Ones?

The Center for Popular Economics which is housed in my department at the University of Massachusetts, runs a series of short popular articles on issues of political economy. These are called EconAtrocity or EconUtopia depending on whether the writer is writing about a problem or a solution. CPE also runs a great progressive economics blog. I have written a few of these in the past, one on water privatization and one on community-managed water as an alternative to both large corporations and large state-run bureaucracies. Here is the most recent one I wrote.

Econ-Atrocity: Do The World’s Poor Countries Finance the Rich Ones?

Friday, January 18, 2008 by Center for Popular Economics By Amit Basole
CPE Staff Economist

Global Charity
In the year 2000, the richest 10 per cent of the world’s population held 85 percent of its total income and wealth. The bottom half owned a mere 1 percent. Such glaring global asymmetries have long justified redistribution of wealth from the “Global North” to the “Global South” in the form of development aid and loans. So much so, that the stock image of a developing country that springs to mind (particularly in sub-Saharan Africa) is that of a heavily indebted economy which continually borrows simply to repay its old loans and receives food and other forms of aid to feed and clothe its “naked and hungry masses.” Persistent poverty is often blamed on inadequate aid, and rich countries are periodically exhorted to donate more generously. This form of global charity is visible to all. But there is another flow of wealth across national borders, greater in magnitude and more clandestine. This is the flow from poor countries to the rich. Yes, the world’s poorest countries are today financing the richest. Far from being heavily indebted, many developing countries are net creditors vis-à-vis the rest of the world. How is this possible?


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