Economic Development

Paper Summary:

This paper explains that some less developed countries (LDCs) face high levels of indebtedness and sudden flight capital, which cause concern among international financial institutions. The author points out that the reasons for these problems are (1) low savings rates, which lead to low investment, a breakdown of the rule of law and high corruption and (2) inadequate reforms by last resort financing organizations, such as the International Monetary Fund and the World Bank. The paper relates that foreign aid has been a disappointing experience for LDCs even though the World Trade Organization carries a powerful enforcement capacity; however, this process is unbalanced because the threat of sanctions by a developing country on a country such as the U.S., carries little weight in addition to the prohibitive cost and legal expertise requiremed to pursue a case.

Table of Contents:
Problems
Foreign Aid

From the Paper:

"Consumption smoothing is another less disappointing means of increasing savings for less developed nations. What this means is that with integrated capital markets, households can smooth consumption against shocks that affect asymmetrically the domestic and foreign countries, and thus will make them better off. In bad times, countries will borrow money and will lend money in good times, leading to fluctuations of the current account. This concept can be applied in a demographic manner, for example, aging countries can transfer savings to countries whose population is ..."

Sample of Sources Used:

• Stiglitz, J. (2002). Globalization and its Discontents. New York: W.W. Norton & Company.
• Catholic Agency for Overseas Development. (2005). Trade and Debt. Retrieved December 14, 2006, from http://www.cafod.org.uk/policy_and_analysis/public_policy_papers/trade/trade_and_debt.
• Prasad, E., Rajan, R. & Subramanian, A. (2006). Foreign Capital and Economic Growth. Retrieved December 31, 2006, from http://www.imf.org/external/np.
• Bismut, C. (2006). Long-run Growth and International Saving Flows. Paper presented at the OECD Workshop on global convergence scenario, Paris, January 2006.
• Soros, G. (2002). On Globalization. New York: Public Affairs.

More papers on Economic Development:

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• Research Paper # 24254 : "Economic Development of Egypt"
• Analytical Essay # 144062 : "The WTO and Economic Development in Mexico"

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