5.2.5 Discussion
Completion requirements
5.2.5 Discuss International Organizations
Why has globalization expanded so rapidly in recent times?
The World Bank, the International Monetary Fund, and the World Trade Organization were established to increase economic growth around the world.
How successful have they been?
IMF Conditionalities: The International Monetary Fund sets up conditions for developing nations that they must meet before money will be loaned. These conditions are meant to move the country forward and often include measures to control corruption, set priorities for spending, and support sustainable development.
However, as the following study shows, these conditions can devastate a poor country.
Haiti is one of the poorest nations in the world. After its colonization by Spain and the death of almost all its Aboriginal population, it was inhabited largely by slaves and freed slaves. Later, it was colonized by France, and still later, it was occupied by the United States. Haiti has a long history of exploitation, and today, 80% of its people live in abject poverty.
Rice: In 1986, Haiti was almost self-sufficient in rice production, the main staple food of the country. Rice production gave farmers income and provided food for the people.
In the late 1980s, the IMF told Haiti that it must liberalize trade and lift its tariffs on rice imports. Cheap rice arrived immediately from the United States where the rice industry is subsidized. Haiti's peasant farmers could not compete, and they stopped growing rice. After dependence on foreign rice was complete, import prices began to rise, making people even poorer. Today, Haiti imports almost all its rice from the US. Thousands of rice farmers lost their jobs, producing even greater poverty for the people.
Agricultural subsidies: The case study about rice in Haiti shows that, although trade liberalization may lead to a stronger economy, strong economies will not develop if countries are not abiding by the same rules. A poor nation such as Haiti can never hope to compete with the United States. The United States, Japan, Canada, and the European Union provide various subsidies and protection to their agricultural producers.
If the government of poor Haiti cannot subsidize rice production, why should the rich United States be allowed to subsidize its rice growers?
The World Trade Organization is supposed to write laws and make rulings to ensure trade is "fair" among nations. The following case study shows that does not always happen.
How successful have they been?
IMF Conditionalities: The International Monetary Fund sets up conditions for developing nations that they must meet before money will be loaned. These conditions are meant to move the country forward and often include measures to control corruption, set priorities for spending, and support sustainable development.
However, as the following study shows, these conditions can devastate a poor country.
Case Study: Haiti
Haiti is one of the poorest nations in the world. After its colonization by Spain and the death of almost all its Aboriginal population, it was inhabited largely by slaves and freed slaves. Later, it was colonized by France, and still later, it was occupied by the United States. Haiti has a long history of exploitation, and today, 80% of its people live in abject poverty.
Rice: In 1986, Haiti was almost self-sufficient in rice production, the main staple food of the country. Rice production gave farmers income and provided food for the people.
In the late 1980s, the IMF told Haiti that it must liberalize trade and lift its tariffs on rice imports. Cheap rice arrived immediately from the United States where the rice industry is subsidized. Haiti's peasant farmers could not compete, and they stopped growing rice. After dependence on foreign rice was complete, import prices began to rise, making people even poorer. Today, Haiti imports almost all its rice from the US. Thousands of rice farmers lost their jobs, producing even greater poverty for the people.
© Thinkstock
Creole pigs: Haiti's small black Creole pigs were once at the heart of the country's economy. An extremely hearty breed, well adapted to the climate, they ate waste products and could survive for three days without food. They had a key role in maintaining the fertility of the soil and acted as a "savings bank" for farmers because they could be sold to pay for medical emergencies, schooling, marriages, and seeds for crops. About 80 to 85% of rural households raised pigs.
In 1982, more than a third of Haiti's pigs were diagnosed with Asian Swine Flu, and the international community insisted that the pigs had to be killed so the disease would not spread. The disease is not treatable and although it causes no ill effects in humans, it eventually kills the pig. All Creole pigs were killed during the next year, and owners were not compensated. Two years later, new and "better" pigs came from the United States and Canada. They needed fresh drinking water (unavailable), roofed pig houses to protect them from the sun, and imported feed that cost more than most farmers earned. The Haitians nicknamed these pigs the "four-footed princesses". Following this, school enrolment declined 30%, and protein consumption showed a dramatic decline.
In 1982, more than a third of Haiti's pigs were diagnosed with Asian Swine Flu, and the international community insisted that the pigs had to be killed so the disease would not spread. The disease is not treatable and although it causes no ill effects in humans, it eventually kills the pig. All Creole pigs were killed during the next year, and owners were not compensated. Two years later, new and "better" pigs came from the United States and Canada. They needed fresh drinking water (unavailable), roofed pig houses to protect them from the sun, and imported feed that cost more than most farmers earned. The Haitians nicknamed these pigs the "four-footed princesses". Following this, school enrolment declined 30%, and protein consumption showed a dramatic decline.
Agricultural subsidies: The case study about rice in Haiti shows that, although trade liberalization may lead to a stronger economy, strong economies will not develop if countries are not abiding by the same rules. A poor nation such as Haiti can never hope to compete with the United States. The United States, Japan, Canada, and the European Union provide various subsidies and protection to their agricultural producers.
If the government of poor Haiti cannot subsidize rice production, why should the rich United States be allowed to subsidize its rice growers?
The World Trade Organization is supposed to write laws and make rulings to ensure trade is "fair" among nations. The following case study shows that does not always happen.
Cotton Production in Central and West Africa
© Thinkstock
Ten million people in the poorest part of the world are directly dependent on cotton production for their living. Cotton is in high demand worldwide to make textiles and paper. It thrives in hot dry weather; it is also produced in Asia, South America, and the United States.
The U.S. subsidized cotton production by more than $2 billion each year. That was nearly half the entire GDP for Burkina Faso where more than 2 million people depended on cotton production. When adjusted for inflation, cotton prices were lower in 2004 than they had been during the Great Depression of the 1930s.
World Trade Organization complaint: In 2004, Brazil argued that U.S. subsidies were illegal. It won the case (WTO Ruling), but a solution was not implemented until 2014.
The U.S. subsidized cotton production by more than $2 billion each year. That was nearly half the entire GDP for Burkina Faso where more than 2 million people depended on cotton production. When adjusted for inflation, cotton prices were lower in 2004 than they had been during the Great Depression of the 1930s.
World Trade Organization complaint: In 2004, Brazil argued that U.S. subsidies were illegal. It won the case (WTO Ruling), but a solution was not implemented until 2014.
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Answer the following question for your 5.2.5 Discussion on the next page. What effect did the actions of the IMF in Haiti have on prosperity for the people there? Provide evidence to support your position. |
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