Developing Countries Competing with Developed Countries

Developing Countries Competing with Developed Countries

Discuss the alternative methods that developing countries might use to

overcome the difficulties that they have when trying to compete with

developed countries.

No industry attracted

Including Foreign Direct investment (FDI)

Economic development occurs when a country improves the economic

welfare of its population through, for example reducing poverty. Some

economists discuss the world as being the 'developed north' and

'underdeveloped south'. This refers to the gap between rich countries,

which are mainly in the northern hemisphere and poor countries, which

are located mainly in the southern hemisphere. This is not the only

method used to categorise countries, The World Bank and United Nations

classify countries into high, middle and low income countries while

the International Monetary Fund (IMF) categorises countries into least

developed, developing and industrial countries.

I believe that many underdeveloped countries are involved in the

'cycle of deprivation', which I have shown diagrammatically above. If

there is little investment in a country it is easy for a country to

get caught up in the cycle and make things worse for the economy. If

an LEDC (Less Economically Developed Countries) has little money

available the country will undoubtedly have a poor infrastructure,

this will act as a deterrent for industry to move to the area as the

transport and communication will be of poor quality and will cause

problems for firms. If little industry is attracted there will be no

jobs available and unemployment will soar. As described in more detail

below some Multi National Companies take advantage of the cheap labour

in LEDC's but as they pay very low wages very little is invested into

the economy and the majority of profits leave the country so there is

no significant increase in investment. If unemployment is high people

will turn to subsistence farming as they will need to produce food to

survive so the farmers will not be making any money and therefore will

not be investing in the economy. If there is little investment in the

economy there will be little money available for the government so

health, education and infrastructure will not improve and there is

little chance that the economy will develop without external

intervention as I will describe later.

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...id. The latter requires the recipient to buy goods and

services from the donor country. The World bank and IMF (International

Monetary Fund) provide loans to developing countries designed to

improve their infrastructure, education and health services,

restructure the economy and cope with aggregate supply and demand

shocks. I feel that this policy can once again either greatly benefit

a country if it is used wisely or it can create even more problems for

the economy.

To conclude I feel that it is very difficult for developing countries

to compete globally with developed countries as they are at a

disadvantage in many respects. I feel that the best way to increase

the competitiveness of developing countries is to increase the

development in the countries and to increase investment and this often

requires external assistance. I feel that developing countries can

overcome the disadvantages they face by successfully planning and

using some of the policies mentioned above. The third world should not

be alienated but welcomed into the global market, and only then will

they not feel so daunted by the prospect of competing with the

superpowers of the industrial world.