DESCRIPTION: Fair trade is about farmers in LICs and NEEs getting a fair price for the goods they produce.
EFFECTIVENESS: Companies who want to sell “fair trade” products have to 1) pay producers a fair price, and 2) give farmers a price guarantee. This means if the global price of a crop falls, the farmers still receive their usual income. Buyers also pay extra (a ‘social premium’) to help develop the area where the goods come from e.g. to build schools and health centres.
LIMITATIONS: Only a tiny proportion of the extra money reaches the original producers. Most of it still goes to the retailer (shop). In addition, due to the high cost many shoppers in HICs avoid buying “fair trade” products. This limits the number of farms or villages that can be part of the scheme.
EXAMPLE: Divine is a “fair trade” chocolate company, which is 44% owned by cocoa farmers. This means the farmers get a share of the profits. Divine have invested the Fairtrade premium in developing farming communities – focusing particularly on water, health, education and sanitation to improve standards of living.
Strategy 2 - Microfinance Loans
DESCRIPTION: Microfinance is when small loans are given to people in LICs who may not be able to get the loans from traditional banks. The loans helps them to start their own businesses and become financially independent.
EFFECTIVENESS: The loans are often successful on a local level, as they can help to provide subsistence farmers with cash to escape the poverty cycle.
LIMITATIONS: The loan has to be paid back.
EXAMPLE: The Grameen bank lends small sums of money to the poor in Bangladesh to help them set up businesses. It lends to 8.35 million clients, of which 97 percent are women. For example, they may loan out money to a group of women to buy a sewing machine so that they can start a sewing business; or they may loan women money to buy a mobile phone, which can then be hired out to other villagers for a fee.
Strategy 3 - Aid
DESCRIPTION: Aid is when a country or charity such as Oxfam donates resources or money to another country to help it develop or improve people’s lives.
EFFECTIVENESS: Aid that is long-term and free is more successful in reducing the development gap. Short-term aid is less effective. Aid can be spent on development projects e.g. building dams to improve access to clean water. This reduces illnesses such as Cholera, leads to improved health and living standards and improved quality of life.
LIMITATIONS: Aid can be wasted by corrupt governments; projects can fail when money runs out or if there isn’t enough local knowledge and support; countries can become dependent on aid rather than developing.
EXAMPLE: Many LICs and NEEs have benefitted from aid. For example, the 'one laptop per child project' has provided free laptop computers to children and teachers in some of the world's poorest countries; You can find out more about how the scheme has improved the education of children in Rwanda, Africa at the following link: blog.laptop.org/tag/bbc/#.WryqfdTwYps.
DESCRIPTION: Intermediate technology involves giving people technology such as tools or machines that are simple to use, cheap to buy, build and maintain. It usually involves small-scale projects.
EFFECTIVENESS: Intermediate technology involves the local community, and can make a real difference to the quality of people’s lives.
LIMITATIONS: Some projects are poorly planned and do not meet the needs of the community.
EXAMPLE: WaterAid have been helping communities in Tanzania, where three in ten people survive on less than $1.25 per day and nearly half of the population have no clean water. They have provided cheap, simple to use hand pumps (intermediate technology) to help provide clean water to villages in Tanzania. This has resulted in less deaths from diarrhoea and disease, increasing life expectancy. Education has also improved with children missing fewer days at school, aiding the country's development.
Strategy 5 - Debt Relief
DESCRIPTION: Debt relief is when all or part of a country’s debt is cancelled; or the interest rate is reduced. The money saved can instead be spent on developing the country.
EFFECTIVENESS: Debt relief gives countries more money to spend on improving healthcare, education and access to clean water; helping to reduce the development gap.
LIMITATIONS: The money saved may be misspent by corrupt governments or individuals; debt relief often comes with tied conditions, which may limit its effectiveness.
EXAMPLE: In 2005, the world’s richest countries (G8) agreed to cancel the debts of many countries. To qualify the countries had to demonstrate they could manage their own finances; show there was no corruption in their government; agree to spend the saved money on education, healthcare and reducing poverty. For example, Zambia in Africa benefited from debt relief in 2005 when a group of countries including the USA, Japan and France agreed to cancel the debts owed to them, saving the country over $1 billion. Zambia used the money saved to improve access to healthcare in rural areas, helping to reduce the development gap. You can find out more at the following link: http://news.bbc.co.uk/1/hi/world/africa/4571652.stm.
Strategy 6 - Economic Investment
DESCRIPTION: Trans-national companies (TNCs) invest money into other countries. This is called foreign direct investment (FDI).
EFFECTIVENESS: If TNCs employ local people then a multiplier effect can develop. More people employed leads to more taxes being paid; and more money for the country to spend on development of infrastructure, education and healthcare. A successful investment by a TNC may also encourage further investment from other companies, creating even more job opportunities.
LIMITATIONS: Some TNCs exploit the natural resources and employees of the country they invest in. For example, employees in LICs are sometimes paid a low salary by the TNC, resulting in a poor quality of life.
EXAMPLE: The TNC Shell has invested in the Niger Delta in Nigeria, Africa. This has resulted in employment opportunities for locals, providing 65,000 jobs. However, damage to the environment through oil spills and oil flares has affected local people's ability to earn an income from fishing.
Strategy 7 - Industrial Development
DESCRIPTION: Industrial development means moving away from primary sector industry and into manufacturing.
EFFECTIVENESS: Primary products (raw materials and farming produce), which many LICs trade, are sold at a lower price and are vulnerable to price fluctuations. In contrast, manufactured secondary goods can be sold at a higher price and are less vulnerable to price fluctuations. Industrial development can lead to a multiplier effect whereby growth leads to more growth. If people have better paid jobs, they will have more money to spend, further boosting the economy.
LIMITATIONS: Some countries that encourage industrial development make themselves vulnerable to exploitation. The Rana Plaza factory collapse in Bangladesh and poor working conditions in garment factories worldwide are evidence of poor considerations of safety for workers.
EXAMPLE: Nigeria in Africa has undergone large-scale industrial development (moving away from primary sector industry and into manufacturing). More money can be made from exporting manufactured products than primary products, which has helped Nigeria to develop from a LIC to an NEE. However, there is still a wide gap between the richest and poorest in Nigeria, which suggests that the benefits of industrial development do not benefit everybody.
Strategy 8 - Tourism An example of how the growth of tourism in an LIC or NEE helps to reduce the development gap - KENYA
Background
Kenya is an LIC in East Africa. It attracts tourists because of its tribal culture, safari wildlife, warm climate and beautiful unspoilt scenery.
Tourism has increased from 0.9 million visitors per year in 1995 to 1.8 million in 2011.
Kenya’s government is trying to boost tourism as a way of increasing its development.
Visa fees for adults were cut by 50% in 2009 to make it cheaper to visit the country. They were also scrapped for children under 16 to encourage more families to visit.
Landing fees at airports on the Kenyan coast have been dropped for charter airlines.
How the growth of tourism is helping to reduce the development gap
Since 2000, Kenya’s score on the Human Development Index (HDI) has increased from 0.45 to 0.55.
Tourism now contributes to over 12% of Kenya’s GDP – money that can be spent on development and improving quality of life.
Nearly 600,000 people are directly or indirectly employed by the tourism industry – that’s 10% of all employment in Kenya. Creating jobs has a multiplier effect, as people are able to spend more, helping local shops and businesses; and people contribute more tax, which can be spent on improving healthcare, education and infrastructure.
The 24 national parks charge entry fees to tourists. This money is used to maintain the national parks, which helps to protect the environment and the wildlife.
Negative impacts of the growth of tourism that make the strategy less effective
Only a small proportion of the money earned goes to locals. The rest goes to big companies and TNCs, often based in HICs overseas, so doesn’t help to close the development gap.
Some Maasai tribespeople were forced off their land to create national parks for tourists, therefore not everybody in Kenya has benefited from the growth of tourism.
Tourist vehicles damage the environment e.g. safari vehicles destroying the vegetation and disturbing animals.