Strategies for reducing the development gap

CCEA examiners expect you to evaluate a range of strategies used to reduce the development gap — including trade reform, different types of aid, fair trade, microfinance and intermediate technology. You should be able to discuss advantages and disadvantages of each.

1. Trade reform

Problem: LICs are often disadvantaged in world trade. HICs subsidise their own agricultural sectors (Common Agricultural Policy in EU, farm subsidies in USA), flooding world markets with cheap food that undercuts LIC farmers.

Solution: trade reform:

• Remove HIC subsidies so LIC farmers can compete.
• Reduce tariffs on LIC manufactured goods entering HIC markets (allowing LICs to industrialise).
• The WTO (World Trade Organisation) aims to create fairer global trade rules.

Evaluation: trade reform can be very powerful for long-term development (similar to how South Korea and Taiwan industrialised through export manufacturing). However, HIC governments face domestic political pressure to protect their own farmers/industries.

2. Aid

Types of aid:

Bilateral aid: given directly from one government to another. Often comes with political conditions or tied to buying goods from the donor country.

Multilateral aid: channelled through international organisations (UN agencies, World Bank, IMF). Less politically motivated.

Emergency/humanitarian aid: immediate response to disaster — food, shelter, medicine (e.g. international response to Nepal earthquake 2015).

Development aid: long-term investment in schools, hospitals, water infrastructure, agriculture (e.g. UK DFID programmes in sub-Saharan Africa).

Evaluation:

• Positive: can save lives (emergency aid), build infrastructure (development aid), and fund critical services.
• Negative: can create dependency; may be misdirected by corrupt governments; tied aid benefits donor more than recipient; can undermine local markets (food aid can bankrupt local farmers).

3. Fair trade

What it is: a certification and trading movement that guarantees farmers in LICs a minimum price for their produce (e.g. coffee, cocoa, bananas, cotton) above the market floor price.

How it works: companies pay a fair trade premium. Farmers receive:

• A guaranteed minimum price (protection from price crashes).
• A social premium — extra money invested in community projects (schools, wells, cooperatives).
• Support for sustainable farming practices.

Example: Fairtrade-certified coffee from Ethiopia or Uganda. The Fairtrade label is found on 6,000+ products in UK supermarkets.

Evaluation:

• Positive: directly increases farmer income; community premiums fund local development; consumer awareness raised.
• Negative: only benefits farmers who can afford certification; still a small % of global trade; may not reach the poorest farmers (who are subsistence-level, not market-facing).

4. Microfinance (microcredit)

What it is: providing very small loans to entrepreneurs in LICs who cannot access traditional banking.

Pioneered by: the Grameen Bank in Bangladesh (founded by Muhammad Yunus, Nobel Peace Prize 2006).

How it works: small groups of borrowers (often women) guarantee each other's loans, reducing default risk. Loans of $50-$500 allow purchase of seeds, tools, sewing machines, mobile phones for business use.

Evaluation:

• Positive: empowers women especially; builds small businesses from the bottom up; encourages entrepreneurship; repayment rates often >95%.
• Negative: cannot address structural causes of poverty (no substitute for healthcare, education infrastructure); some microfinance institutions charge very high interest rates; limited by scale.

5. Intermediate technology

What it is: technology that is appropriate to the resources, skills and economic context of an LIC — simple, affordable, locally maintainable.

Principle: technology that is too advanced requires expensive spare parts, foreign expertise, and energy supplies that LICs cannot afford. Intermediate technology works with local conditions.

Examples:

• Treadle pump (Bangladesh): foot-powered pump for small-scale irrigation. Costs ~$25. Allows farmers to water crops year-round → dramatically increases yields → breaks poverty cycle.
• Solar-powered water purification: simple solar stills or UV purification removes pathogens. No chemicals or electricity grid needed.
• Improved cook stoves (sub-Saharan Africa): burn biomass more efficiently → less firewood needed → less deforestation; less indoor air pollution (major cause of LIC illness/death).
• Oral rehydration therapy (ORT): simple mixture of water, salt and sugar → treats dehydration from diarrhoea (a leading cause of child death). Costs pennies per dose.

Evaluation:

• Positive: affordable, maintainable locally, empowers communities, sustainable.
• Negative: addresses individual/household needs, not systemic poverty; cannot substitute for large-scale infrastructure (dams, roads).