Globalisation - Why do some less developed countries struggle to achieve growth and benefit from international trade

Question 1

What is absolute poverty

Answer 1

Where someone has insufficient income to live on(less than $1.25 a day)

Question 2

What is relative poverty

Answer 2

Having lower income in relation to the average income for that country(an income of less than 60% of the median)

Question 3

Discuss and evaluate the impact of policies aimed at reducing poverty(3+4+3)

Answer 3

Increasing the minimum wage

• reduce poverty since those on low income would have higher wages and be better off
• only benefit those in work

Increase spending on education and training

• reduce poverty since productivity would increase so workers could earn higher wages
• also increases labour mobility so the unemployed could find work more easily
• takes some time to take effect

Increase benefits

• reduce poverty as those out of work would be on higher incomes - smaller gap between those who work and those who don’t
• may act as a disincentive effect and lead to higher unemployment

Question 4

What may prevent a country from benefiting from globalisation(21)

Answer 4

Poor infrastructure

• Lack of transport increases cost and makes trade more difficult
• Land locked countries are at a disadvantage because the cost of trade is much higher.

Human capital inadequacies

• Low levels of education and training limit the range of goods and services can be produced.
• Countries with low levels of education may be constrained to unskilled industries such as extraction of primary products.

Savings gap
-A lack of savings limits the amount of funds available for investment and capital accumulation.

Capital / Human leaving the country

• Countries with a poor reputation may struggle to attract and retain capital
• The best skilled workers may leave for higher wages elsewhere.

Corruption
-High levels of corruption reduce tax revenues.

Debt
-High debt interest payments can limit available funds for investment.

Political uncertainty
-Civil wars and uncertainty make country unattractive for foreign investment

Low inward investment
-Lack of funds available for development

lack of foreign currency
-Foreign currency is required to purchase foreign goods