The Vicious Cycle of Underdevelopment
Across the span of several centuries, European colonial empires have encompassed the majority of the globe. Despite Europe only covering about 8 percent of the world’s landmass, European states, at the height of their power, colonized and conquered over 80 percent of the globe. Colonial powers exploited and extracted goods from their colonies, fuelling these powers’ industrial rise and development. Yet, although the majority of colonies had successfully gained their independence by the mid-twentieth century, patterns of colonial extraction, exploitation, domination, and control have continued.
Many parts of the Global South continue to be an attractive source of raw materials for developed countries. Across Africa, for example, you can find 24 percent of the world’s agricultural land, an extensive amount of oil, and 30 percent of the world’s remaining mineral resources. Such resources have continued to be the target of Western extraction to the present day.
Many underdeveloped countries in the Global South heavily rely on the export of raw materials, such as Algeria, where oil accounts for over 80 percent of all exports. Natural resources are generally always exported in their raw form and processed elsewhere. The majority of the profits stemming from this extraction leave the Global South in the possession of foreign companies, who generally pay very low tax rates. Conversely, the majority of African countries import nearly all their equipment and consumer goods, normally at a higher price than they are worth. Hence, the developed countries claim the economic surplus generated by those in the Global South.
Over 67 percent of developing countries are economically dependent on commodities. At the most extreme end, for countries including Angola, Iraq, Chad, and Nigeria, this number exceeds 98 percent. Additionally, some countries are particularly vulnerable due to the lack of diversification of commodities they produce, as in some cases a single commodity comprises over three-quarters of the total export revenue. This over-reliance can make nation-states exceptionally vulnerable to market shocks and price fluctuations.
The Global South’s countries and economies continue to find themselves under the monopolistic power of the countries of the North, including through decisions made in the International Monetary Fund (IMF) and World Bank. Countries in the Global North also hold the majority of the barging power in the World Trade Organization, and further use this power to control 97 percent of patents in the world. This creates a situation of dependency between the developed countries in the Global North and the underdeveloped in the Global South. This structure of dependency stems from a colonial model which is designed for Africa to be the source of raw materials for the countries and economies of the Global North and their development.
Many countries in the Global North continue to rely on considerable net appropriation from the Global South. Each year, this includes hundreds of billions of hours of human labor, and tens of billions of tons of natural resources, not only in the form of primary commodities but more frequently high-tech industrial goods that have also been manufactured in the Global South. This has a huge impact. The Global North drains over $2.2 trillion (£1.62 trillion) per year in Northern prices in commodities from the Global South. To put this figure into perspective, it is enough to end extreme poverty across the globe 15 times over. From 1960 to today, this figure equates to $152 trillion (£111.9 trillion). Therefore, the structural dependency created of the Global South on foreign investment means underdeveloped countries have no choice but to mutually compete to offer cheap resources and labor to the Global North.
As such large amounts of surplus are being exported from countries in the Global South, it leaves them with very little funds to re-invest into internal development projects, such as infrastructure, education, and social protection. The huge losses also vastly outstrip any foreign aid transfers that are coming into these countries. While it varies slightly between countries, across Africa roughly $14 (£10.31) is lost through the unequal exchange for every dollar of aid the South receives. Yet, this figure does not include other sorts of losses such as profit repatriation or illicit financial flows.
Therefore, underdevelopment in the Global South and the developed Global North are two sides of the same coin. The economic situation and underdevelopment of the Global South is not a natural state, but rather it is constituted by its relations with more advanced and developed countries, and the position these underdeveloped countries hold as part of the global capitalist economic system.
Many countries in the Global South remain underdeveloped, largely fueled by the existence of global economic structures designed to benefit the Global North. As such, states now face several challenges regarding how to break this cycle and ensure development policies and aid fairly benefit the Global South. The Global North needs to start developing the Global South, rather than the other way around.
Image courtesy of Amit Ranjan via Unsplash, ©2017, some rights reserved.
