The paper evaluates the various factors in the countries of global south. It is witnessed that the countries in this region is full with its natural resources. However, the picture of the economic growth in these nations is quite in the contrary. The possible reasons for the lack in the development of the economy in these countries are elaborated in this paper. This paper also throws light on the elaborated discussions made by Nwoke, Bina and Neocosmos. The theories propagate the ideas of Resource Rent, Marxist theory and the extended version of the Marxist theories.
Discussing the inability of resource-rich countries in south, to use their resources for economic development
The countries in the south are palpably wealth with its natural resources. China, Russia, Iran rank among the top five petroleum-producing countries among the world. Likewise, the countries in South Africa hold records in the production of diamond. India is rich in mineral resources like ore, coal and iron (Yellishetty and Mudd, 2014). Iran and the countries in middle east is wealthy with natural resources like, natural gas, oil, copper, coal, iron and some others. However, it is observed that the economic growth in the countries in the global south is not as enriched as the countries in the western region. Despite its huge source of natural resources these countries fails to show significant growth in the economy of these countries (Bhattacharyya and Hodler, 2014). The main reasons of this can be the political dilemma and the political corruption in those countries. Along with that, the companies that mainly use the natural resources and do the production of them are generally not domestic companies of the concerning countries.
The following portion describes how the coal fraud has decreases the economic growth of India, and adverse effect these frauds have on the nations. The coal fraud in India is one of the biggest frauds in the southern nations in Asia. The Comptroller and auditor general of India accused the government of India for the coal deposits allocations that were done in an inefficient manner. The report shows that the fraud resulted in huge loss. It is accused that the government allocated the deposits to less deserving organizations and did not organization any public auction procedure that is the way of allocating deposits in India. The Governing body of that country did not utilize the natural resources of that country in the development of its economy; it rather hoarded the money for fulfilling personal issues (Carnoy, 2014).
Another factor is that the governments of these southern countries do not take proper Initiation in the use of natural resources of that country. The main organizations that manipulate the activities related to the use of natural resources in these countries are mainly foreign in nature. These lead to political complications in the executions of the works. Corruption over resource rent results in the slow development of the economy of the countries (Venables, 2016).
The oil rent is one of the major issues concerning the use of the natural resources of those countries. Oil rent refers to the comparison between the production cost of the natural oil and the cost to sell it. This is estimated before the implementation of the exportation tax on the products. It is observed that the increase in the oil rent of a country increases the chances of corruption in that country. The major countries in the global south that produces and exports oil are Iraq, United Arab Emirates, Kuwait and some others (Ball, 2014). The oil production and oil rent provide somewhat a different picture of the ecumenical and oil growth of a country. In 2000, Saudi Arabia ranked in the highest position for its oil rents. The oil rents ranking of the countries in the year 2000 show most of the southern countries rank among the list of top oil exporting countries.
A lack of proper growth strategy can also be the reason of the lack of economic development of the resource rich southern countries. Most of the benefits meted out of the natural resources go the foreign countries where the products are being exported. Various taxations on the use of the natural resources reduce the accessibility of the products for the locals of that country. It is observed that the resource rich countries show less tactical application utilization of the resources of the natures (Besley and Persson, 2014). It is observed that the countries in Africa are rich with the most costly material of diamond. However, the natives of those places and the people that help in finding out the minerals do not get the real of value of it. The materials are purchased from them in a very lower price, at the same time various illegal activities operate surrounding the diamond mines in those countries.The diamonds are mainly smuggled out of the nations in the South Africa. Various groups that perform illegal trading buy the diamonds from the natives in a very lower price. The illegal trading also results in the loss of revenue on the government’s behalf. The organizations that do the illegal trading, do not give any type tax or duties that are necessary in the trading of the products. They easily avoid the economic involvement related to the trading of the products. The diamonds are one of the costliest mineral in the world. Despite African government’s huge procession of this precious material, the country is unable to utilize its benefit or manage the products generated from them. The country is deprived of the real facilities that it should get from the natural resources (Nwoke et al., 2011).
The concept of resource can be also evaluated to find out the reasons of the failure of the resource rich countries to show a significant growth in the economic development. Resource rent refers to the comparisons between the costs that were needed for the production of the resources and the amount of revenue that is generated after the sale of the products. The surplus value that is generated from the comparison between the product and selling cost is considered as economic rent. When the concept of economic rent is applied on the natural resources, it is termed as the resource rent. The concept of resource rent can be further separated into three different categories. The different categories are (Pearce et al. 2013). Differential rent, Scarcity rent and entrepreneurial rent. The differential rent happens based on the availability of the resources of the raw materials. For example, the places in resource rich counties have to bear less production cost. On the other hand the countries that have less availability of resources bear more production cost. If the selling cost of the products were the same then the organization that has incurred less production cost would be benefited. The countries in the global south are supposed to have more differential rent, as the availability of resources is higher in those places.
However, it is observed that the other counties that do not process that much natural resources are coming to the southern countries (Hassler et al. 2015). They are building their organizations in those places to have the access of the resources. The concept of colonization mainly emerged from this factor. In the modern era, it is also seen that most of the organizations in those resource rich countries are foreign in nature. Thissomehow proves that the resource rich countries are not taking proper initiation in the utilization of the resources. Another complication arises from the foreign acquisition of resources. The company that deals with them is asked to give more taxes and fulfill financial requirements of the governments of the concerning countries, sometimes the clash between the government and the organization also leads to postponing the works related to the use of natural resources.
Scarcity rent arises from the increases of the demand of the products. The cost of the products increases with the incensement of the demand of the products in the market. However, the production cost remains the same. Therefore, the rent increases. This can be applied on the case of the production of diamonds. The production of diamonds in illegal way, costs a lot lesser that the product is being sold in the market. It is due to the high demand of the diamond in the market. The resource rich countries could have benefited from the demand of the products. However, the corruption and illegal trading has reduced the chances growth from this facility. Here the resource has somehow become curse for the resource rich counties (Bina, 2013). For example, the illegal traders exploit the natives that are connected with the finding of mineral resources, brutally. The Governments in South African countries have regulated various laws, rule, and regulations to curb this illegal trading. However, they need better implementation to stop this type of trading.
The entrepreneurial rent occurs due to the managerial investments. It includes the cost of training the employees and some others. The organizations in the countries of global south need to focus more on improving the skill of the labors that works in the utilizations of the natural resources.
Cyrus Bina (2013) has described the aspects of resource rent based on oil rent. He has presented the classifications of oil rent propagated by Chevalier. According to this theory, there are four types of classifications (Blaikie, 2016). The classifications are mining rent, position rent, quality rent, and technological rent. Mining rent may refer to the concept of the surplus value emitted out of the gap between the mining cost and the production cost (Nwoke, 1984). Technology rent relates to the cost required for the technological instruments used in the production of the products. The countries in the global south may increase their technological rent as this would give them the opportunity to execute the various workers in an time bound and cost effective manner.
The progress of these countries may be the resort of the wrong implementation of the Marx’s class theory. The countries in the global south do not chiefly follow the capitalist theory (Balibar, 2017).However, a closer look at the economic system and the social structure of the countries would clearly expose the dependence on the capitalism of the countries. The Marx’s theory refers to the class division of an entire economic system the class system. The structure of the class system is divided into three categories. They are capitalist or bourgeoisie class, the small industrialist, the workers (Clarke, 2016).
The main classifications are between the upper class and lower class people. The lower class people, which are the workers or labors, are the most dominated section. The theory says that, a particular class in a society has the same objectives and they have the say way of work and destination. The workers work for the upper level people of the country. In this system, an individual owes a particular authority over the natural resources (Sen, and Grown, 2013). Then he employs workers to work for the organization. In this system, the employees’ works in increasing the income or wage of their job and the organization tries to make more and more profits from the labor and other resources that are available to them. It is observed that the country that ranks in the higher position in the chart of economic growth is mainly capitalist countries. However, the countries of global south that has adopted capitalism as their political ideologies like Bermuda and the countries that have implemented the capitalism partially, have not shown significant political or economical growth. The wrong implementation of the ideologies has resulted in to the clash between the upper class and worker class people.
The economical gap between the upper and the lower class people has grown significantly in the past few years. The natural resources are gradually coming under the domain of the bourgeoisie class. The workers are being forced to accept the low amount of wage that is offered to them in exchange of huge amount of labor (Clark et al. 2016). The labor class people are gradually becoming less engaged in their works. The employee engagement is gradually decreasing, as they are not provided with the necessary requirements. The development of the countries is being hindered by the unending and increasing clash between the working and bourgeoisie class people. The wrong implementation is leading to the unequal division of the natural resources among the working and the bourgeoisie class of people.
The whole scenario is evident in the case of India. India is not entirely a capitalist country. However, the economic system in this country has become clearly capitalist, as there is a huge gap between the upper class people and the lower class people in this country. The same is with some other countries like Pakistan, Afghanistan and some others. The big difference has resulted into the rise of political violence and movement in India and in Pakistan. India has many of the top ranking billionaires in the world. While the country also has the biggest slum area in the world, this clearly shows the class difference in this country. The country recently has shown a promising future for economic growth, but its growth was hindered by the wrong implementation of the ideologies of capitalism. This country is often affected by the protests by the working class people. The huge gap between the two classes has also resulted into the unequal distribution of natural resources.
The Marxist theory further propagates that the class division is not based on the economic situation only, but also on the status of them, the political power and the cultural ideologies.
The developing nations in the countries of the global south do not have large central banks or financial organizations that regulate the activities of the market and manage the economic situation. The governments do not invest enough to create the institutions that would regulate interest rates, manage the flow of money supply in the market, stimulates the economy of the country, and help in manipulation of the financial markets (Grindle, 2017). These countries also do not put much emphasis on the pension system and do not possess large welfare. The nations in this region also have large amount of population. China is the most populated country in the world and India is the second most populated country in the world (Cassen, 2016). This makes a proper regulation of the economic factors mandatory in these countries. The implementation of capitalism should be manipulated properly in these populated countries.
Marx has provided further theory that fills up the drawbacks of its previous theory. This theory of extension provides the concept of supplementing the security in the mineral resources in one country with the agricultural resources of that country. This is prevalent in India, as this country uses the agricultural sector as the major tool of economic growth for this country (Kuznets, 2016).
The term ‘Global-south’ represents the countries, which are developing according to their financial condition. According to Neocosmos (1986), the third world countries are always rich in resources, but they are unable to raise their economic fund. In his book, the writer described this phenomenon with accordance to Marx’s ‘Capitalization theory’. According to Marx’s capitalization theory, the method of economic production in a society, deals with the production relationship between the owner and the labors. According to Neocosmos, the theory of capitalization can be implemented precisely in the present case. The third world countries are filled up with a plenty amount of natural resources. However, they are unaware of the utilization method of those resources because of lack of knowledge. The developed countries have taken this chance by the help of their knowledge. They are acquiring the resources as their required raw material for the business development. They are using the developing countries people as the labor of those industries. This sarcastically true, that because of lack of adequate knowledge, they are unable to utilize their own resource. In his book, Neocosmos theorized that, the capitalization theory seems incomplete in this present context, as Marx did not judge the property owners as ’feudal leftovers’. The function of the properties has an immense valuation in the capitalist development process. The movement should be an upshot of a struggle by a defined class, which includes landed property, income-labor and product capital.
In the case of ‘resource-rich’ countries, they do not have the required strategies to develop their own economical perspectives. They are unable to understand the fact that they are becoming poorer as because they are unable to construct their own strategies. The major part can be allied over the dysfunctional government. They have already given an uncountable share of their resources to the overseas (Berg et al., 2013). This actually have resulted an inevitable loss in their economy. The developed countries, which have already taken the resources from the developing countries, sell the manufactured products, prepared by using their own resources in a higher price. Therefore, the countries are getting a double loss in this context too. They have to buy these products in a higher cost, so they are not getting any benefits for having those resources. The third world peoples are lacked with ‘financial muscle’, but they possess immense technical and physical skills. As a result, they are efficient as labor to the developed country and various industries.
They are facing various challenges every day among which the main curse is poverty and illiteracy. In addition, with these, the poor countries are facing severe climate disorders as well as various kind of emerging infectious diseases. These are enough to bring a downfall in their economical status. They are already disturbed by several kinds of natural calamities (Wright, 2016).
The countries in the global south, such as Africa, Asia and Latin America, are rich in mineral resources. These countries lack in economic growth and are suffering from various drawbacks despite its huge amount of natural resources. In addition, the economic gap between the upper class and the lower, which has significantly increased in the recent years, has added to the economic crisis of these countries. The lack of proper resources to utilize the natural resources found in these countries has been a disadvantage for these countries and has resulted in lack in the economic growth. This conclusion has been achieved by referring to various secondary sources of information such as journals, books and research articles, relevant to the topic of discussion.