HISTORICAL CAUSES OF POVERTY IN LEDCS
There exists different causes of poverty ranging from political institution to geography or colonization to industrialization, over population, wars and corruption among others. But in this paper, our interest will be on the historical causes of poverty such us; colonization, civil wars and the 1970 debt crisis in the LEDC.
Countries can be classified into two categories, that are the MEDC a More Economically Developed Country a good example is the USA, Germany and UK and an LEDC a Less Economically Developed Country for example, Sudan and Ethiopia. There are many reasons as to why these categories exist. One is the income per capita; GDP where countries in the MEDC have a higher GDP than those in the LEDC category (Baumol, 1986). For example, according to the international monetary fund estimates for GDP in the UK and Ethiopia as of 2016 were as follows;
MEDC’s countries mostly lie north of the equator thus giving them an upper hand for natural resources because of the moderate climate; UK lies between latitudes 49 to 61 degrees and 9 W to 2 degrees E. Majority of LEDC lie to the South; Ethiopia lies south of the equator.
Source: BBC.co.uk
COLONISATION
The majority of African countries lie in the LEDC category, why is this so? To answer this question we have to look at Africa before and after colonialism. Although there are many causes of poverty in LEDC colonization is a major factor. African is known to have had an abundance of minerals and this attracted supreme nations. Most countries were thrown into an extensive harsh system of exploitation that was the colonialism. Up to date, biased wealth distribution is experienced in countries that form their modern history from the same great inequalities. This is so because countries that were colonized and experienced slavery they inherited the same institution and discrimination characteristics (Ikejiaku, 2009). The British and the Portuguese empires exploited the agricultural resources and minerals rich regions in Africa. One fails to understand how Africa with all the abundance of minerals and rich with fertile agriculture lands still holds some of the poorest nations on earth. The answer lies to colonization. As many of these poor African nations were former colonies of superior nations, they were subjected to slavery and resources were extracted in large scale to benefit the countries colonizing them. This system somehow managed to create a program where many people in these nations cannot access their minerals, land on top of education and other resources to support themselves.
DECOLONISATON
Although freedom was the goal ambition of all the countries that were under colonization, self-independence did not necessary reflect prosperity. Looking at former European colonies in Africa, it is evident that political independence does not necessary means prosperity as only a few nations have a success story. Decolonization in many countries was followed by conflict between the nation inhabitants and also raised dictatorships. Creating a worse environment than that experienced during colonization. Decolonization was meant to bring self-determination and democracy but this has not been the case in some countries. In some countries, it led to the emergency of dictators, for example, Uganda under President Idi Amin. The structure government formed become more corrupt, lawless resulting to people living in these nation to experience low living standards. Most countries in sub-Sahara are in this category (Hargreaves, 2014). There are over 30 countries with a per capita GDP of 3 percent of the American level or even less. Sierra Leone that was a former colony of the British has 140 dollars per capita income (Dollar, 1992); this makes a common Briton more than two hundred times better off. Thus for most poor African countries self-rule has proved to be a disaster.
NATIONAL DEBT
The wealthier nations and financial institutions such as International Monetary Fund and the World Bank have greatly contributed to poverty issues in many of the LEDC. This is because of the loans which they give with strict conditions that normally forces governments in these regions to forego some important activities and make bad economic decisions just to full fill these loan decisions. Poorer nations have in the past been seen to pay 2.30 dollars in loan service for every 1 dollar received on average (Collier & Gunning, 1999). The debt crisis can be traced back to the 1970s when OPEC (Organization of Petroleum Exporting Countries) countries increased the price of oil. Profits made from this new price were then deposited into commercial banks that invested by giving loans to developing countries without a proper plan. U.S adopted a harsh monetary policy when it was hit by inflation; this resulted in a sharp rise of interest rates which grew into a worldwide recession. Developing countries that had already taken loans were the most affected. Declining exports, high-interest rates and an increase in fuel prices made it difficult for them to repay the loans. The impact of the international debt was felt as the debtors settled on taking resources that benefit ordinary people in the credit countries to refinance the debt payments.
CIVIL WAR
Civil war and political instability are some of the factors that causes poverty in LEDC. For an economy to thrive it so requires safety, security, and stability. These will ensure economic prosperity as investors considers security as one of the factors to invest in a region. Regions experiencing wars are rendered unproductive (Collier, 2005). War scares away investors who will, in turn, offer employment, development and propel the economy hence reducing poverty.
Bibliography
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