FAIRTRADE organization
1. Fair trade schemes are under taken to ensure that producers of food and other non-food items
in the development receive a fair price for their product.
2. In most develop countries majority of the farmers and workers are unable to make living
income. Low world prices, high profits of middle men and tariff escalations are the reasons.
3. It is believed that if consumers are made aware of the harsh and often unfair conditions facing
the farmers then they will be willing to buy from producers who are actually paying fair price to
the famers.
4. The FAIRTRADE mark is an independent consumer label which appears on products as a
guarantee that disadvantaged producers in the developing world are getting a better deal.
FAIRTRADE objective
1. Deliberately to work with marginalized producers and workers in order to help them move from
a position of vulnerability to security and economic self-sufficiency.
2. To empower producers and workers as stakeholders in their own organizations;
3. Actively to play a wider role in the global arena to achieve greater equity in international trade.
If a firm should meet the following
1. Product must reach the trader as directly as possible
2. The product must be purchased at least at the minimum price set by the org. this price
guarantees a living income.
3. Trader must be committed to long term contract.
4. Producer has access to credit
5. Producers must use sustainable farming method.
6. Traders must pay some premiums for community welfare.
Fair trade
Decreases in
poverty
Ensure living income
Increases in
consumption of basic
need
Increases in standard living
NGOs non-government organization
A nonprofit, voluntary citizens’ group, which is organized on a local, national or international level.
NGOs have become increasingly influential in world affairs. They aften impact the social, economic and
political activities of communities and the country as a whole. NGOs address a host of issues: women’s
rights, environmental protection, human rights, economic development, political rights and health care.
NGOs
Operational
Development
orientated
Relief orientated
Advocacy
Raise
awareness
Major source of funds are membership dues, sale of good and services, grants from international
organization or governments, and private donations.
Criticism of NGOs
1. Only small of total funds actually go to people in need, and rest goes for recover costs, and some
have even been used to pay high salaries of the people at top of these organization.
2. Many of the NOGs are run with religious motives or political thoughts.
3. Many MNCs try to invade tax by giving them donation.
4. Money is mismanaged.
International indebtedness & debt relief
Reasons
a) Many of the LDCs inherited high debts from the colonial states and these were in billions of
dollar with many high rate of interest.
b) ODIUS debts: debts of the dictator
c) Mismanagement in lending & spending.
d) ‘OPEC’ – 1973 – increase in oil prices by Arabs – first ‘oil shock’  export revenue of these
countries increase  Petro Dollars. The bank got lots of money. They could not give loans. They
started with the Latin American countries. Giving interest was not a problem. Later the Arab
countries increased the price – second oil shock. USA entered the Vietnam war. US went in
recession. Now the Latin American countries refuse to repay the debt – 3rd world debt crises.
Therefore the bank went to World Bank and IMF. They say that they will give the money if they
made str. Adjustment policy. (extended credit facility)
What is str. Adjustment Policy?
1. Trade liberalization – free trade.
2. Devaluation of the currency – exports will become cheaper  as a result trade deficit will
reduce.
3. Encourage exports of primary good – sell more good outside
4. Privation the public sector industries (disinvestment)
5. Reduce government expenditure- reduce subsidies – budget/fiscal deficit will reduce,  reduce
inflation
6. Good governance, reduce corruption, political stability.
Evaluation:
Positive
There was a reduction in inflation, international market became more efficient, most government
could reduce their budget deficit.
Negative
Reduced employment, rise in price of many essential goods, provision of basic utility services
reduced – water, edu.
Problems associated with high external debts
a) This country has to carry out debt servicing so large part of the country’s revenue is spending
on it. So very less part of the revenue is left for other needed services.  This adversely affects
the poor people  in high poverty.
b) Lack of funds to develop the infrastructure. Therefore, it limits the economics the economic
growth. It also results in less forging exchange for import, capital, intermediate, and necessary
food items.
c) Over exploitation of natural resource  sustainable development not taking place.
d) Hugh amount of debts resulting in international conflicts.
e) High taxes were imposed, to generate revenues for debt servicing, this resulted in lower savings
and interests
Need for debt relief
Debt relief: is the partial or total forgiveness of debt. Or the slowing or stopping of debt growth with
nations.
Why debt relief?




ODIUS debts
Original debt plus interest
Debt servicing
Debt boomerang: environment damage, drug, immigration, conflicts …
In 1970s LDCs (60 of them), (poorest) owed $25b  2002 $523b
For Africa 1970 $11b  2002 $295b
People are dying because of it.
1990s – Christians and NGOs started a campaign called “TUBILEE 2000”.  ‘drop the debt’.  in
October 1996 the IMF and WORLD BANK  heavily indebted poor countries initiative. “HIPC initiative” –
low per cap income ($395), debts are unsustainable (
𝐷𝑒𝑏𝑡∗100
𝐸𝑥𝑝𝑜𝑟𝑡
𝐷𝑒𝑏𝑡𝑠∗100
> 250%) or 𝐺𝑜𝑣𝑒𝑡.𝑅𝑒𝑣 > 250%
There are 41 countries HIPC (29 were sub-Saharan Africa)
𝐷𝑒𝑏𝑡∗100
𝐸𝑥𝑝𝑜𝑟𝑡
Then G8 came in and now they said (
𝐷𝑒𝑏𝑡𝑠∗100
> 150%) or 𝐺𝑜𝑣𝑒𝑡.𝑅𝑒𝑣 > 150%
Under HIPC
Debt relief is conditional
1.
2.
3.
4.
IMF & World Bank will keep a track record of the country
Adopt policies in line with IMF.WB suggestions
Has adopted strategies to deal with poverty
Micro economics stability
After the policies above is done. Then ‘Decision Point’  implements the suggestion after that comes
‘Completion Point’.
But the campers were not happy they wanted completely debt relief. Therefore, the G8 started ‘multinational debt relief – all debt to multilateral creditors is cancelled.
CREDITORS
MULTILATERAL
CREDITORS
BILATERAL
GOVTS OF DIFFERENT
COUNTRIES
PARIS CLUB
OECD




WB, IMF, ADB
commercial
commicial bank
NON-PARIS CLUB
EASTERN EUROPEAN
COUNTRIES AND ARAB
WORLD
In 10 years since HIBC initiative was started, 28 countries have reached completion point (long
process)
In order to get debt relief country have to adopt certain policy (SAP) which has its own
disadvantages
HIPC has been criticized that in the ground that it is too limited
The NGOs and other ORG want a complete cancellation of all debt that is unjust and unplayable
However for future development assistance the multilateral need to recover the debts. Otherwise funds
will not be available to help different countries.
Causes of failure of planning as a means to growth of development




Import substitution over protected inefficient domestic industries.
Unexpected internal and external shocks (e.g. oil socks)
Inefficient bureaucracy, corrupt leadership, poorly educated govt. staff, lock of supervision and
monitoring.
Heavy BOP (balance of payments) deficits resulting to excessive foreign debts.




Govt. revenue did not grow in the same proportion as the economy resulting to increasing
deficits.
Loss making public sector.
Increased money supply leading to high rates of inflation.
Public sector grew too large resulting in over staffing, ineffency, corruption etc. resulting in govt.
instability.
Concerns related to free market





Infrastructural is necessary for development of FDI. In market based growth it is unlikely to be
created. Most LDCs do not have seficient infrastructural facility. Therefore, govt. planning is
necessary to develop them.
International trade is unfair and many developed countries adopt protectionist policies. In these
circumstances export led growth may not be a success.
Market led growth will result in greater inequality of income and wealth.
Many countries have political instability. (lack of flow of FDI)
There are some short term costs like: increases unemployment, increases in price in essential
goods, decreases in provision and health care.
Condition necessary for growth and development under market led
growth strategies





Fair trade: international trade should be free and fair.
Debt relief, money should be used for HRD.
Good governance and politically stable.
Domestic firms must have attained competitiveness.
Effective AID: pro-poor growth.
Was created as a result of the United Nations Monetary and Financial Conference, commonly known as
Bretton Wood Conference, after the conclusion of World war 2nd.
Since inception in 1944, the world bank has expanded to a closly associated group of 5 institutions:
1.
2.
3.
4.
5.
International bank for reconstryction and development (IBRD)
International development association
International finance corporation (IFC)
Multilateral guarantee agency
International center for the settlement of investment disputes
Head Quarters: Washington DC
No. of members: 186
1945-68: low level of lending
1968-80: poverty alleviation
1980 and on: debt service