often not great (Bienen and Waterbury, 1989). Third, they believe that the curbing of
domestic demand would reduce imports and generally improve balance of payment
conditions in countries. Ways in which this can be achieved is by allowing the price
of basic goods and services to rise through the elimination of subsidies and by
tightening interest rates. Fourth, they believe that increasing exports would earn the
necessary foreign exchange for such countries to pay off their debt. Exports are
normally stimulated when hurdles to the inflow of FDI, such as tariffs, quotas and
surcharges are removed. Finally, they believe that, in the long term, education and
training produce a more productive labour force (Lipschutz, 1991).
Within this development framework, a country’s institutional setup, its natural
resource base, and the quality of its labour force which allows it to meet ever
changing technology and skills requirements are key factors that determine the
country’s ability to compete in the international market. The OECD has been
working hard to develop capabilities to conduct objective and accurate industrial
development policy benchmarks. They include: R&D infrastructure, educational
profiles of labour forces, corporate governance structures, employment regulations,
labour costs, taxation, and energy and telecommunication infrastructure (United
Nations, 1999). Although attempts are now being made by the lagging South to
create a more attractive economic environment for international investments (see
NEPAD, 2001) many countries in this part of the South still have a long way to go
before reasonable international competitiveness becomes a reality (Geyer, 2003).
Criticism of the lagging South
Critics of neo-economic liberalism, on the other hand, believe that the approach
has not delivered the desired results. Despite faster gains in income and life
expectancy and literacy improvements in low- and middle-income countries compared
to high-income countries, the ratio of the average income of the richest to the poorest
country in the world has increased from 30:1 in 1960 to 60:1 today (MMSD, 2002).
Worldwide the inequality in wealth and power is growing. According to Robinson
(1996: 22) this amounts to permanent ‘structural violence’ against the world’s
majority. People in the South who have no access to health, clean water and
sanitation and who live in poverty count in the billions. The population of the region
grows exponentially because more then eight out of ten new births now occur in the
developing world (Alden, 1997).
These critics believe that a number of factors associated with economic neo-
liberalism keep on marginalizing lagging economies (Amin, 2001; Sihlongonyane,
2001; Tsheola, 2002; Lipschutz, 1991; Kaya, 2001). The first is the fact that poor
countries have accumulated heavy debt burdens over time and the burden is growing
all the time. Debt often exceeds the capabilities of marginalized countries to
overcome them in the near term, resulting in endless cycles of debt refinancing and a
continuing flow of capital from developing countries to pay off debt to industrialized
countries. Second, there is a continued emphasis on the exporting of products that do
not have large markets, or whose markets are declining in economically advanced
countries. In many cases there is not enough specialization in export products
between developing countries, resulting in the oversupply of certain product lines and
consequently the depressing of prices of those products on the international market.
Although the focus on the export market tends to improve competitiveness and
productivity locally, the urban poor in developing countries do not necessarily benefit
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