If developing countries don't have a high standard of assembly labour then it has to be assembled elsewhere, then the end products have to be shipped back, creating extra cost.

The key is education. With a higher educated workforce more foreign investment will flow creating wealth for the people. Although political instability and civil wars make that less likely.

Religion is a massive obstruction to education in these countries so they essentially bring poverty on themselves.

Reply 28

The Roast

So what do you suggest we do? Turn to Socialism? :lol:

Reply 29

ombtom

Original post by 2016_GCSE

The answer?

Capitalism.

Countries who are already rich to capitalism continue to suck money from 3rd world countries by buying the cheapest goods they can.

When these cheap goods get to the 1st world countries they are processed in to better goods like:
cocoa > chocolate
Metals , Plastics > phones

With these new goods costing more in the developed countries most the capitalist gain goes to the 1st world countries continuously leaving the 3rd world countries behind unable to afford the top goods because they are receiving small amount of money from the raw goods, this leaves the 3rd world countries unable to buy expensive goods from 1st world countries keeping them behind.

If the 3rd world countries wanted to purchase the equipment needed to produce the high quality goods from raw materials they would need to buy from the 1st world countries as this is where all the industrial items are produced making it unaffordable for 3rd world countries to start producing top goods on industrial scale.

TLDR: The rich stay rich , the poor stay poor.

I'm just revising this for Geography! :biggrin:

You're describing dependency theory: resources flow from the periphery to the core. MEDCs (more economically developed countries) create intergovernmental organisations like the IMF, which force trade liberalisation upon developing countries, so that MEDCs can flood their markets with value-added goods.

Here are some of the EU's import tariffs:
Raw cocoa – 0%
Cocoa powder – 7.7%
Cocoa butter – 15%

This protectionism prevents developing countries from exporting manufactured goods to MEDCs; they can only export their raw materials, so cannot benefit from the added value, and the infrastructure that develops from a large manufacturing industry. It also means, as you described, that developing countries have poor terms of trade (the ratio of export to import prices), which leads to public debt. This means that the government has to spend a large percent of its revenue on debt servicing, so there is less for public service spending, e.g. hospitals and schools. Hence, third world countries will stay third world countries.

All countries develop over time (supposedly), and obviously some, such as China, rise in the rankings. This goes against dependency theory, but can be explained by its government's prioritisation of manufacturing, obtaining foreign direct investment, and education; poverty in China has decreased from around 85% to around 13% since 1980, but its ageing population, causing a rapidly growing dependency ratio, will soon become a burden. India is likely to be the next country to realistically challenge the USA for superpower status, as it is employing FDI based policies, similar to China in the 1970s, but without the one-child policy to restrict its population growth.