2. Trade vs. Aid in helping the poorer
countries of the world to develop
• Since the 1940’s, there have been 2 main
ways to promote development in the poorer
countries of the world:
1. The use of trade to encourage economic
growth
2. Developed countries (and now also oil rich
countries) provide aid to the poorer
countries
Both methods have their advantages and
disadvantages.
3. What is trade?
• Trade happens because of regional
economic differences. In order to balance
production and consumption, raw materials,
goods and services are moved from regions
of supply to regions of demand.
• There is a strong relationship between the
volume of trade and standard of living, and
trade is an important factor of
development.
4. Trade and development
• It is difficult to achieve economic
development without economic growth.
Growth increase in wealth improved
living standards (and eventually higher HDI).
• In the 1940’s therefore, economists in
MEDC’s believed poor countries needed to
industrialise increase in manufactured
goods for export, rather than relying on
exporting raw materials (cheaper, unreliable
market, agricultural products are volatile)
increased economic growth and in turn,
development.
5. How was this going to be
achieved?
1. Poor countries should take on Western-
style capitalism (potentially good for
political situation too, as democracy is
seen to be fairer)
2. The wealth that was generated would
‘trickle down’: money resources for
industry more goods being produced
more trade even more economic growth
3. Poor countries should promote neoliberal
ideologies – the ideas of free trade,
economic growth and efficiency, and open
markets, that Thatcher and Reagan
promoted in the 1980’s.
6. What was their big assumption??
• That the poorer countries in the South
needed to develop in the same way
that the richer countries of the North
had done since the mid C19th, in order to
achieve economic growth.
