The Dependency Theory the Economic Assistance and Alleviation of Poverty in Central America - Coursework Example

Based on the dependency theory The Economic Assistance and Alleviation of Poverty and Inequality in Central America Introduction Over the years, poverty and inequality in Central America have been a major threat among Latin Americans. The countries have been jeopardized by mass poverty and inequalities in wealth and income generation that has hindered sustained economic growth and stable democracy. Most of the nations in Central America have identified market oriented economic policies that are detrimental to the interests of the people and do not meet their needs. This shows that the credibility and national productivity in economies is undermined in Latin American regions making it hard to compete for capital and export markets in international market scope. The bigger picture of central America shows that there exists large social and economic disparities that are hindering the growth of the countries to meet a defined target in the global index. Given that the countries are locked up in economic, social and political mysteries that affect the economy, the country has suffered dependency theory over the years in order to sustain itself. In this case, other states believe that the resources in Central America should be taken to other developed states while they are left languishing in poverty. Dependency theory is based on the notion that resources flow from less developed countries. However, growth and development takes place in the superior countries utilizing the resources of the junior country. This theory arises from the idea that dependency theory opposes the modernization principle. The modernization theory states, in summary, that underdeveloped countries are a primitive version of developed countries. This implies that the stages of growth experienced by developed countries are not the same as experiences of the underdeveloped countries in the growth process. This premise relies on the fact that the developed states utilize the resources of the less developed countries. However, over time, the USA has been adopting better foreign policies aimed at alleviating poverty in Central America and its purpose in the international economy based on the dependency theory. A good example is evident when President Bush took a week long trip in March 2007 to assist Latin Americans to solve the existing social issues. A foreign policy named “advancing social justice in the Americas” was formulated to reduce poverty and limit racial and ethnic discrimination in Latin American countries but there were hidden benefits behind the idea. This shows that the US Foreign policy has been on the forefront in economic assistance and the alleviation of poverty and inequality in Central America. In general, countries in central America require consolidation of democratic politics, the restoration of economic dynamism and the rebuilding of an economically integrated hemisphere. This paper seeks to understand the effects of dependency theory on the lives of the citizens of the Central America under US Foreign policy. Also, it will analyze how the US has been leading in its foreign policy towards stabilizing Central America and improving its economic status on the international level. Historical view of dependency theory The history of Central America and its challenges in poverty alienation and economic stability can date back to 1980’s. Even though Latin America had proportionally less poverty rates than other parts of the world, its income distribution was skewed (Lustig 1). At the end of 1980’s the Gini coefficient for Latin Americans was estimated at 0.50 when compared to other non Latin American countries that were rated at 0.39. This shows that most rich people in Latin America had a mean income 10 times higher that of the poor people. At the same time, the social welfare indicators showed that the perfomance of Latin Americans when compared to was better than other countries that were still developing. Thus, Latin Americans had a sharp economic inequality before the debt crisis. The income inequality was detrimental to the growth of Central America as it hindered the accumulation of human and physical capital. On the other hand, the social and political instability in the countries led to greater uncertainity in investment and growth. Also, Central America experienced micro-economic instability. This was overcome by the structural reforms, which made the gross domestic product increase by three and a half percent. This gave rise to a small per capita growth of about two percent and hindered the creation of jobs and growth of industries. The trend being many of the Latin Americans were pursuing their employment in the North where opportunities to work in industries were higher. This ripped off the labor asset for the growth of the economy of Central America. However, in the 1990’s the US entered the post cold war era and held a dominance position in world affairs. Thus, Latin America became a point of consideration in the US foreign policy (Cottam 3). This was based on the fact during 1980’s Latin America had a debt worry for US Banks, and many countries in the hemisphere were becoming civilian governments. The pattern of public attention to Latin America was alarming as the US strived to adopt diplomatic, economic and military leverage to coerce Latin American governments to abide by US policy preferences. Such steps were viewed as foreign policies of US intervention in Central America as Latin America was treated as US backyard and sphere of influence. In real sence, it entailed a dominance theory that was used by the US to formulate policies that would control Central American countries. In normal circumstances, when the working age of the country is absent or in small amounts, it increases the country’s dependency on other states for the employment of its citizens who may generate income in foreign states to feed their families. Insufficient capital formation and economic activities, which yield little, added value, has been the cause of low growth potential. A country may own vast resources, but failure to utilize them may lead to low growth potential. In the past decade, investment in Latin America has been at twenty-one percent and has concentrated in the low value-added sectors of the economy. On average, about fifty percent focused on commerce and agriculture. Of the total population, only fifteen percent undertake manufacturing as an income generating activity. This will, therefore, lead to a low gross domestic product. At the same time, this has been cumbered with low employment rates in the informal sector. For instance, averages of sixty-five were unemployed in Central America. The heavy reliance on food exports over time have crippled the economy of Central America. That is if the folks in America declined importing the food exports from Latin America then there would be a deficit in the balance of payment. That means fewer exports would be made low export income earnings, therefore. This lowers what the farmers earn lowering their living standards (Paley, n.d). In addition, in the past, investors have not taken a keen interest in investing in state resources. The investors fear about the quality of goods, which would be produced. That implies the low quality of education would mean the citizens have least experience in production. Thus, there is a great possibility of the investor producing substandard goods that would fetch reduced value on the market. This was evident in the 1950s when the investment of America in the Latin America states was at the same rate as Australia, Asia, and Africa. Current situation Better education state More and more practitioners are obtaining knowledge from neighboring countries. This knowledge is used to bring up the new generation providing them with adequate knowledge of life applications. This had thus attracted investors to build up companies and set up business premises. It is also through this that the citizens get to know their strengths. Business oriented students, entrepreneurs, learn essential skills in operating a shop or business premises. Another aspect is the professionalism the trained citizens fetch in the new markets. This leads to more income and therefore raising the gross domestic product. Crude oil resource With the improvement of infrastructure, more companies have ventured in oil mining to lower the oil cost per barrel. This will lower the cost of food, transport and among other related sectors. However, this may be limiting due to the result that more investors tend to enjoy the bigger part of the profit for the first few years. This lowers the benefits ripped from oil for some time though. With the advent of oil, the use of coal would be stopped therefore eradicating the risk of climatic hazards due to pollution. Coal is much heavier and contains more carbon than petroleum. Various industries might set up due to the favorable trade and reduced transport costs. Power production would drop significantly due to the reduced cost of il. This would lighting for both domestic and industrial use cheaper and convenient. Increased access to basic services such as food shelter and clothing will make life easier for the citizen. The welfare and quality of life is restricted. Housing conditions and related factors affect peoples access to health care, nutrition and education. in 2012 Central America had fourty five percent of the people living in substandard houses. This meant their vulnerability to illness and productivity at work would be lowered. Some of the other complimentary facilities such as electricity contribute to the convenience and security of the people living in the country. Places, which may be insecure at night, are made a bit better by lighting (Beaton n.d). Free trade with other states allows the business of Central America to thrive. This allows the citizens and the state at large to purchase gods from foreigners. Removal of trade policies and taxing systems that barred trade were lifted giving rise to better business conditions. Nonetheless, migration into Central America has been tightened to allow the other Latin America states to reap from their labor. A certain percentage may be allowed to work in other states but majority remain within the countries boundaries building on the state’s economy. Banning of trade policies allowed easy interchange bringing about the rise in industrialization. Climatic change and natural disasters cripple and pose a danger to the Central America economy (UKa 2014). Due to its geographical location Central America are at a high-risk level of climate change and natural diseases. This may be attributed to the proximity to El Salvador and Guatemala, which top the lit in terms of dangerous regions for inhabitants. Such calamities and disasters have a lot on the bearing of human lives and economic activities. Hence, the need to construct safety devices against misfortunes is to be considered. Some of the developed countries may opt to pollute the environs in an attempt to make profits. Care ought to be taken in inviting new investors. Critics argue that corruption also plays a part in all these. State owned corporations tend to be corrupt than privately owned corporations. Some critics prefer privately owned corporations due to their accountability. Secondly, critics argue subsidizing costs for local industries may attract foreign investor but the dependency still lies on their choice whether to set up or not. Thirdly, critics argue the local industries may take the advantage of subsidies and monopoly and pay no regard on the quality of goods produced. In conclusion comparing the various aspects of historical concepts on dependency and the current situation, some change may be noticed. During the historical periods the reliance was heavy on the more developed countries than in the current situation. The setup may have changed some bits with the government role coming into play but the dependency may be observed directly or indirectly. Indirect dependency comes in when a state wishes to reap from its resources such as gold or oil but due to the heavy capital required the county invites a foreign state to fund the project. This depicts some dependency on foreign companies to take advantage over smaller countries. Despite the above, some economic improvements have led to better health care. In the historical times, accessing medical care was difficult. Some countries still sticking to the traditional ways of obtaining drugs. For instance Latin American countries. Dependency is vital to a country’s economy and strength in the international market for goods and services (Ferraro 2006). Goods from ‘weaker’ countries may be considered substandard and therefore the country needs to make considerations to remain relevant in the international markets. Analysis and Interpretation Dependency Theory Reflectively, the dependency theory is the foundation of these arguments given that United States has long been attempting to engage Central American states in thinking channels. Harrison (n.d), believes that dependency theory has a wide coverage in region-wide generalization which has a occurrence of the liberal reform period of the nineteenth century. In fact, this led to the mass correspondence with a massive demand by industrialized national for primacy goods which less developed countries. Critically, the most important market was that related to food, even though this was changing with time. There were exports Brazil, Venezuela and Columbia using central America as a trading zone. The coffee revolution spread across northern Europe and California gold rush opened to the western frontier in the United States. Technological justification and trade However, with time, technological improvements came to add value to the advent of transport. The steam engine was now being applied in ships and rail, making such kind of transport effective. Likewise, the development of the refrigerated ships and improvement maritime of navigation encouraged the increase of trade in Central American product. For that reason, the dependency theory tradition encouraged improvements and changes in the international economy. External dependency perspective In applying the dependency theory to our argument, one would agree that external process provide a poor guide to understanding critical stages of development. Convincingly, Bouvier (18), believes that reasons for external dependency perspective overlooks the role of domestic structures and processes which consequently cannot differentiate the development of trajectories of central American states. Analyst in Central American have been sensitive to intraregional variations and employ more sophisticated dependency theory perspective that clearly link external conditions with internal ones. Reflectively, these analysis remain centered on economic factors bridging short considerations about the role of linkages between domestic politics and international contexts of shaping central American development. Vulnerabilities of These countries Thoughtfully, the failure to emphasize domestic politics in Central America has rendered these countries incapable of distinguishing processes of foreign intervention. Supportively, Chomsky (97), believes that this undermined the health of ongoing political projects. As such, most Central American countries ended up experiencing serious foreign intrusion during the liberal reform period. Countries such as Costa Rica, Honduras and Guatemala suffered greatly in terms of the given liberal reform policy option. Without focusing on cases of the Honduras and Nicaragua, state actors were able to carry out policy options to their logical conclusion. For that reason, U.S intervention to these countries was needed given that their instability was seen as liability to United States. Reflectively, dependency theory ill prepared us to understand the long-run consequences of this intervention. Ferraro (42), believes the dependency theorists nearly always consume the intervention given that they are morally objectionable. However, if subsequent domestic political project were taken seriously, it is clear that conclusion were not always warranted. As such, interventions in countries such as Nicaragua would not have been necessary given that a radical policy option was largely unchecked and might have led to much harsher form of military authoritarianism. Inter States Systems As well, we would like to incorporate the dependency theory to analyze the important differences between economic and political forums. Ferrao (36), analyzes that, just as the Central American countries were being embedded in both international states systems, it is clear that a world capitalists economy tool foreign intrusion in the region which had to be included to political forms of domination as well as, economic forms of imperialism. Understandably, given that Central American countries were embedded in an international states system and capitalists’ economy, foreign intrusion in the region ended up being included in political forms of domination as well as, economic forms of imperialism. Different comparative and historical analyst of Central America have not given sufficient weight to forms of intervention, in which advanced nations use their military power to establish political control over foreign states and territories. For that reason, the political intervention might be accompanied by economic engagement which was analytically separate from, and not necessarily reducible to economic imperialism. Available Policy Options As such, a distinction is naturally crucial to grasping the relationship between policy options and U.S intervention during the reform period. In engaging the theory, one would note that more modest transformative initiative entailed a reform policy option, similarly to one being pursued in Honduras or Costa Rica. In that context, Robinson (28) argues that comparative gradualness associated with the policy option opened up opportunities for foreign capitalists to establish enclave sectors that developed more rapidly than domestically controlled sectors of the economy. However, the rapid encompassing of change, which were projected from a radical policy option were pursued in countries such as Nicaragua, or El Salvador made these countries more vulnerable to political forms of United States intervention. The comparatively dramatic initiatives of this policy option promoted a process of development in which there was less space and time for foreign capital to assert a dominant influence over the economy. In such a context, the abortion of a transformative process would naturally warrant United States military intervention. Warranted U.S Intervention Convincingly, the likelihood that foreign intervention would occur was influenced by domestic political struggles which among actors were seeking control over the resources of this country. The theory further denotes that these struggles conditioned possibilities for foreign intervention by providing opportunities for foreign actors to work through local political factions as a way of achieving their economic or political goals. Bouvier (82), is under the view that, in such cases, local factions would encourage foreign intervention in order to their efforts to gain or maintain states power in the course of political struggle. Even with such an active domestic encouragement, unstable political situation made it easier for foreign actors to establish direct or indirect control over the state. Bouvier (95), believes that when domestic actors exercised only a prolonged hold over the state, it becomes possible for foreigner to develop ideological justification for intervention and could more easily seize control of key political and economic sectors. In conclusion, it is evident that the US intervention in Central America was based on dependency theory. Also, the paper has analyzed how the US has been leading in its foreign policy towards stabilizing Central America and improving its economic status on the international level. Pensively, it is convincing that transitional process affects Central American political development, which includes liberal reform periods and understanding of these process is necessary to move beyond even most sophisticated variants of dependency theory. The theory has proved that transnational relations emphasize the link between domestic political initiatives and foreign intervention. Thus, according to the theory, domestic political engagements were important political events in Central American countries through a much elaborated domestic and global economy. This was crucial to the onset of U.S intervention. The underlying theoretical emphasis on domestic politics helps to differentiate periods of intervention in Central America. Works Cited Beeton, Dan. Central America’s “Alliance for Prosperity” Plan: Shock Doctrine for the Child Refugee Crisis? 26 November 2014. 30 April 2015 . Bouvier, V. M. The Globalization of U.S.-Latin American Relations: Democracy, Intervention, and Human Rights. USA: Greenwood Publishing Group, 2002. Print Chomsky, N. Turning the Tide: U.S. Intervention in Central America and the Struggle for Peace. USA: South End Press, 1985. Print. Cottam, M. L. Images and Intervention: US Policies in Latin America. USA: Univeristy of Pittsburgh, 1994. Print. Ferraro, Vincent. Dependency Theory: An Introduction. South Hadley: Mount Holyoke College, 2006. Harrison, Lawrence. Dependency theory a myth. 2011. http://www.crisismagazine.com/1984/latin-america-the-high-costs-of-the-dependency-theory-myth (accessed April 30, 2015). Lustig, N. Coping with Austerity: Poverty and Inequality in Latin America. Washington: Brookings Institution Press, 1995. Print. Paley, Down. Obamas Central America Plan Will Only Make Life Worse There. 2011. 30 April 2015 . Robinson, L. Intervention Or Neglect: The United States and Central America Beyond the 1980s. USA: Council on Foreign Relations, 1991. Print. UKa, Luke. Some Reflection on The DEpendency Theory. Nigeria: University Of Lagos, 2014. Read More