What, if anything, do rich nations owe poor nations?

John Locke Institute Global Essay Competition 2022 | High Commendation

I. Introduction

Rich and poor nations exist codependently under an ever-globalizing world. Rich nations, or better known as More Economically Developed Countries (MEDCs), are highly economically developed, characterized by its tertiarized economic sector, high GDP, technological advancements and standard of living; whereas poor nations, better known as Less Economically Developed Countries (LEDCs), often remain in the primary or secondary sector, and are characterized by low economic development, low standards of living, unstable economies, high dependence on agricultural exports and low productive efficiency. [1]

With LEDCs’ ability to provide the rich with cheap labour, natural resources, and MEDCs’ financial and sociopolitical power over poorer nations, the relationship between LEDCs and MEDCs may easily fall into an exploitative nature. On an economic level, businesses from MEDCs, especially transnational companies (TNCs), may operate in LEDCs to minimize production costs, or avoid legal responsibilities due to more lenient policies in LEDCs regarding business activity; they may import or extract raw materials and natural resources abundant in LEDCs, often due to a scarcity of such resources in MEDCs and lower resource prices. On a social level, LEDCs may experience a worker shortage, or what is also known as a ‘brain drain’ in some cases, as a result of migration of skilled workers from LEDCs to MEDCs due to pull factors in MEDCs. On an environmental level, MEDCs’ ever-increasing consumption levels lead to high levels of greenhouse gas emissions, therefore accelerating global warming unprecedentedly; those who suffer the immediate impacts of climate change are inadvertently the LEDCs, who are geographically located in vulnerable areas such as flooding or drought-prone land, and lack the resources to build resilience against climate change-induced hydrometeorological hazards. On a political level, some MEDCs may instigate or fuel wars on LEDCs for power and/or political gain.

While rich nations have undeniably taken advantage of poor nations, whether explicitly or implicitly, whether or not they ‘owe’ poor nations anything is not as straightforward. A country can be said to ‘owe’ another under the circumstance that they have received benefit from the other and has an obligation to repay. However, (a) it is hard to determine when the obligation absolutely falls on MEDCs, due to an ambiguous definition of ‘owe’; (b) it is extremely difficult to quantify what they owe exactly, and to determine a level of reimbursement that sufficiently covers or compensates for the losses suffered by LEDCs, or at least is able to maximize coverage.

Therefore, to investigate the matter at hand, we must answer the following questions:

1. Under what instances do rich nations explicitly owe poor nations anything?

2. Under the circumstances that they do owe poor nations something, what is it that they owe them?

3. From such, how should we clearly redefine what it means for a country to ‘owe’ another?

II. Under what instances do rich nations explicitly owe poor nations anything, and what is it that they owe them?

Rich nations have first started to establish a relationship over poor nations during the rise of the Age of Imperialism, which dates back to the 18th century [2] - where European nations colonized nations across all other parts of the world. Rich nations could take full control over the colonized nations as they held a larger power over the nations they colonize. They therefore could more freely exploit the people and resources of their colonies, or enforce their cultures and languages upon them, allowing them to establish dominant power over them.

Back then colonized nations would be first defined as ‘poorer’ under capitalist standards, as they were only newly introduced to the system, would produce self-sufficiently or for sustenance instead of for profit or power, and therefore lacked money, bargaining power or tradable assets to engage in ‘fair fight’ with European colonizers.

Colonies, as a result of colonialism, lose their land and independence; their colonizers use their people as cheap labor and get them to work for long hours and in harsh conditions, use up their natural resources for production of goods for trading purposes. The concept of money and trade, and the idea of a capitalist, industrialized system was brought in by the colonizers to begin with, so the creation of the large rich-poor disparity between nations had not existed, at least not as distinctively, prior to this period of imperialism and colonialism.

Yet, colonies have also as a result become able to achieve unprecedented levels of social and economic development: for instance, in the ‘Scramble for Africa’, African nations’ local wars were reduced following European rule; sanitation was improved leading to a reduction in spreading of diseases and hence deaths, in addition to the provision of meritable public services such as hospitals and schools which increased their life expectancies and literacy rates; economic growth was fostered such that African products became valued on the international market. [3] A point of argument, however, is that their level of development is only said to have ‘improved’ as measured by Western standards, or the standards of the colonizers - they only truly benefited European business interests.

In more recent history, the British Empire colonized a region off the southeastern coast of China, what used to be a local fishermens’ settlement [4], taking advantage of its coastal location and accessibility to China for the establishment of a trading port. This port became what is now known as Hong Kong, and colonialism-induced development was a similar case for many other known modern economically-developed cities as well, such as Singapore [5], Shanghai [6] and Cape Town [7]. The British established schools, embassies, banks in the region [7], as well as creating jobs which in turn attracted many skilled workers to migrate to Hong Kong, which fostered Hong Kong’s financial development and unlocked the city’s possibility to develop into an international financial hub. The city became populated from 4750 in the late 19th century [8] to 7.6 million (2022) [9] in the 21st century. Standard of living was raised for many, although under its primarily capitalist system and high costs of living, inequality is heightened for its upper-class and lower-class citizens, with many living in subdivided flats while a select few live in expensive apartment complexes or suburban mansions.

The above examples of colonialism raise the question: If rich nations take advantage of poor nations but the poor nations end up ‘better off’ than before, do they still owe them anything? For instance, in Hong Kong’s case, though the British Empire took advantage of Hong Kong’s location to establish a port for the British’s own economic benefit, there still exists a mutual gain as colonies such as Hong Kong and colonized African countries experience benefits such as development and increased quality of living; yet do the benefits offset the loss of independence, autonomy and exploitation of resources brought by colonialism?

Although the British Empire brought financial prosperity to cities such as Hong Kong, Shanghai, Singapore and Cape Town, it also led to poor countries’ loss of autonomy over their own cities, in these cases China, formerly Malaysia, and South Africa. The British Empire also brought their own culture to their colonies which has since then had ubiquitous influence on the lives of colonial cities, which though has its benefits brings the significant drawback of erasure of local cultures and thus the ‘Westernization’ of many non-Western nations. In addition, having had jurisdiction over their colonies for decades or even centuries, rich nations have taken advantage of colonization to receive additional tax revenue from citizens for a long timespan which would have become part of the British government budget to be reinvested in the United Kingdom’s citizens. Being able to offer formerly poor or developing nations financial prosperity will not effectively compensate for the social and cultural detriments they have caused to them, and therefore they owe them the autonomy over their own land, the opportunity for preservation of poor nations’ cultures, and the total value of money they have earned from their colonies as their governing body, such as tax revenue.

Returning to an economic standpoint, David Ricardo’s theory of competitive advantage [10] suggests that free trade will always lead to mutual prosperity, even if one country was relatively more productive than the other. Using England and Portugal as an example, Ricardo suggested that even though Portugal was more productive than England in producing agricultural and industrial goods, both Portugal and England benefit from free trade as opposed to competing against each other by producing multiple goods and developing self-sufficiency, for example by producing both wine and cloth simultaneously instead of specializing in just one good that they can produce most efficiently. [11] Applying this theory to the relationship between rich and poor nations, it acts as a counterargument supporting the idea that rich nations do not owe poor nations for colonizing their land since both countries ‘mutually prosper’ from the trade of goods and services. Yet the validity of this theory varies with perspective: the extent to which poor nations benefit may not be on par to the benefits rich nations receive from trade, as ultimately poor nations were exploited by the rich nations in the process.

As the world globalizes, and countries, rich or poor, must partake in trade and economic development in order to thrive in the global economy, it is difficult for them to be exempted from a profit-oriented system, and this shift in economic system is irreversible. As rich nations brought in the concept of a capitalist system to poor nations - which had not existed beforehand - and has forced it upon them and expected them to participate in it, they owe them the opportunity to engage in fair competition under this system. [12]

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As with the further economic development and tertiarization of MEDCs, rich nations are home to many large, transnational corporations, which require the use of abundant raw materials and resources for growth and profit. As these firms grow, they are more willing, and importantly able, to cut costs to increase their profitability. They may hence turn to poorer nations for low-cost labour and resources, and this form of exploitation has extended into, and is still unequivocally prevalent in present day firms’ practices.

Slavery used to be common practice among rich nations, but with modern production and the abolition of slavery, firms turn to exploitation of cheap labour to minimize costs while attempting to minimize or avoid legal responsibility. TNCs such as Nike, Amazon, Shein, Zaful, Urban Outfitters, Forever 21 and many others [13] use sweatshops in production, characterized by its ‘low pay, poor working conditions, and long hours’ [14], some even employing child labour in factories. However, many economists propose that sweatshops bring economic benefits to workers in poorer countries, where the sweatshops are based in, as they provide a vast number of job opportunities that would otherwise not exist without TNCs, and economists have even suggested that anti-sweatshop movement such as protests and boycotts would be a disruption to their economy and ‘reduce Third World employment and investment’ [14].

Rich nations who exploit poor nations’ resources in such a manner for economic or business activity owe poor nations full consent to use their resources and proper revaluation of the value of the human and natural resources they use. This means that labour should be paid the full value of which their services provide, laws should be enforced to protect the rights of workers, and resources should not be bought off at significantly lower prices than they are often resold at in the developed world.

In more serious situations, rich nations have gone to the extents to fuel geopolitical conflict for the acquisition of valuable resources residing in poor nations. A notable case of such would be the war on oil in the Middle East. With the Middle East holding between two-thirds and three-quarters of the world’s oil reserves [15], that area is deemed crucial to United States and the West. At such instances, they owe the financial compensation for war damages, although in most cases this would hardly be repaid by conflict-instigating rich nations.

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Interconnectedness of nations as a result of globalization has led to an increased interaction and coexistence of different cultures in the same space. With the establishment of certain nations as ‘richer’, more economically developed and more powerful and others as less powerful and ‘poorer’, ‘richer nations’, often Caucasian nations. On top of this they may develop a sense of racial supremacy and discrimination against poorer nations. Richer nations have, in a way, created and reinforced a systemic racial/economic inequality, which has perpetuated from the beginning of colonialism to present day. Rich nations owe poor nations an inclusive environment and equal access to opportunities and services, and should thus strive towards achieving this. This may be reinforced by equality or anti-discrimination laws, overruling of outdated laws and employment of individuals from poorer nations. This particularly applies to when citizens of poor nations live in rich nations.

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In the long term, rich nations also pose the imminent threat to poor nations of accelerated global warming. Rich nations are the world’s main polluters of greenhouse gases, yet the physical consequences of global warming fall especially on poor nations. According to Our World In Data, ‘the richest half (high and upper-middle income countries) emit 86 percent of global CO2 emissions. The bottom half (low and lower-middle income) only 14%. The very poorest countries (home to 9 percent of the global population) are responsible for just 0.5 percent.’ [16] Developing countries, or poor nations, are particularly vulnerable due to their geographical location, reliance on agricultural output and low adaptive capacity. For instance, Bangladesh is a country ‘with a low-lying coastline, high population density, and an economy highly dependent on agriculture’ yet constantly experiences cyclones, flooding - 7 major floods experienced by Bangladesh between 1974 to 1998 having caused a US$3.3bn economic loss, 30 million lives affected and 918 fatalities - and secondary impacts such as saltwater intrusions significantly reduces the productivity of agricultural fields. [17] All in all, poorer nations are more likely to suffer from the negative impacts of climate change and thus ‘the countries with the fewest resources are likely to bear the greatest burden of climate change in terms of loss of life and relative effect on investment and the economy’ [17].

In regards to climate change, rich nations owe poor nations either/both the offsetting of their emissions, or offering assistance to poor nations in adapting to climate change - in other words, as they brought on the impacts of global warming, the responsibility must fall on them to mitigate climate change, i.e. reduce greenhouse gas emissions to thereby help slow down and stop climate change, as well as assist poorer nations in adapting to climate change induced disasters, i.e. reducing their vulnerability.

The responsibility falls on rich nations to mitigate: by investing in renewable energy, green infrastructure, conserving energy and water consumption and geoengineering such as carbon capture and storage technologies. People have devised methods to ensure rich nations act upon their responsibility: cap-and-trade methods [18] ensure that particularly nations who emit excessively have to engage in actions to offset their excess emissions.

Rich nations can also provide assistance to poor nations in strengthening their adaptation strategies towards climate risks, such as by arranging land use zoning with heightened awareness of vulnerable land use such as floodplains, or adopting better farming practices, or strengthening building structures so that they are more resistant to floods and storms caused by rich nations’ heavy emissions.

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There are, however, some instances where rich nations have detrimental effects on poor nations but cannot be explicitly said to fit the definition of ‘owe’ as it is not their obligation. A more controversial argument of our notion is whether or not rich nations should help the poor by offering financial aid as they have the power to improve the living standards for millions living in poor nations, such as by providing funds in health and education, food aid, crisis mitigation etc.

The argument for that rich countries ‘owe’ the poor financial aid for poverty relief is primarily substantiated by the three following factors: 1) that they are the most powerful and sole agent that possesses the power and financial advantage to provide this aid; 2) without a sense of obligation, rich nations will not have the initiative to provide financial aid to poor nations though it is an ideal solution to poverty; 3) by having introduced poor nations into the Western trade system, rich nations have inadvertently imposed the condition of ‘poverty’ on less developed nations thereby making them ‘poor’ or exacerbating their level of poverty.

However, it is not necessarily the rich nations’ obligation to bring poor nations out of poverty as they have not explicitly and actively led to poverty or various crises that occur in poor nations, and therefore it does not deem as accurate to say that they ‘owe’ poor nations financial aid or charity. For instance, skilled workers often migrate from poor to rich countries, having received local education and subsequently migrating to richer nations in search for job opportunities and a potential higher standard of living. Due to the nature of the free market, even though rich nations’ business activities may have negative effects on poorer countries, they do not explicitly owe poor nations anything; the responsibility cannot be placed on the nations as it comes down to individuals’ and firms’ choices. In addition, poor countries are not as well-off only according to Western development standards, and that they may not necessarily want rich nations’ aid. Yet, it is still undeniable that rich countries’ support would have indispensable and critical impact on poor nations’ social and economic wellbeing, and thus they should be encouraged to take responsibility nevertheless as it is the most socially optimal way of alleviating global inequality. In these cases, rich countries may often offer financial relief during times of crisis, such as natural disaster relief funds, food aid, charities etc. The establishment of United Nations is an example of how rich nations have taken initiative to help poor nations.

III. How should we clearly redefine what it means for a country to ‘owe’ another?

Upon evaluation and overview of the above cases, rich countries only owe poor countries when they have engaged in action where it reduces the wellbeing of poor countries in one or more aspects, for instance, if rich nations take advantage of poor nations’ low-cost resources; but not if rich nations should provide poverty relief to poorer nations as it is not their obligation.

This does not balance out even if they have brought benefits to these countries in other aspects if it does not cover the damages they have caused - for instance, if colonizers bring economic benefits to their colonies but cause them to lose their sociopolitical freedom and independence, they still owe poor nations the freedom they have cost them.

It is also difficult for rich nations to compensate for what they have owed them in the past, for instance if rich nations of the past generation have caused harm to poor nations for as long as decades or centuries ago, but had lasting effects to this day. It would be unreasonable for the current generation to pay for their previous generations, but this also means poor nations may not receive the compensation they deserve. In such cases, rich nations should only ensure not to perpetuate any laws or norms that continually serve to harm poor nations, such as attempting to halt the acceleration of climate change, or to update laws that perpetuate racial inequality against individuals from poorer nations.

IV. Conclusion

We looked at four different instances where rich nations and poor nations experience a disparity in wellbeing exacerbated by the actions of rich nations: colonialism, exploitation of labour and resources, racial discrimination and global warming - in which these cases have helped shape the enhanced definition of what it means for a rich nation to ‘owe’ a poor nation.

1. They have engaged in action where it reduces the wellbeing of poor countries in one or more aspects.

2. They have not engaged in action where benefits of equivalent or maximum value were brought to these countries in the same aspects they previously owed them - bringing them other unrelated benefits does not count.

3. They have either occurred recently enough for the reimbursement to be still valid and relevant, or their actions made by past generations had caused lasting effects that remain in the present, to which the current generation is responsible in ensuring they do not perpetuate those effects.

We also looked at instances where though nations experience a disparity in wellbeing, rich nations did not exacerbate or contribute to poor nations’ decline in wellbeing and therefore have no obligation to make compensation towards poor nations, for instance rich nations are not obligated to provide financial aid or support towards poorer nations, nor can even be said to be explicitly responsible for the migration of skilled workers from poor to rich nations - however their financial support does act as a primary solution to global inequalities and so should be encouraged nevertheless.

So what do rich nations owe the poor? Upon evaluation, the answer varies with each case:

1. During the age of colonialism, rich nations owed poor nations the freedom and autonomy of them to exist as a nation independent from their colony, a loss and erasure of local cultures, and economic losses such as tax money. They may not be able to repay what they owe as of now, but should ensure to allow poor nations to regain their autonomy.

2. Rich nations, having taken advantage of poor nations’ cheap resources and introduced them into the trade system, owe them a proper chance to engage in fair trade with rich nations without being exploited or undervalued.

3. Rich nations have contributed to the inequality and discrimination against individuals from poor nations on a systemic level, and thus owe them an inclusive environment and equal opportunities as individuals of rich nations.

4. Rich nations are the primary contributors to global warming, yet consequences of global warming mainly fall on poor nations; rich nations owe poor nations the responsibility to mitigate climate change as well as to help poor nations in adapting to climate change.

Although the above scenarios do not cover all the instances in which rich nations owe poor nations, they are representative of and encompass the social, economic and environmental aspects in which rich nations owe poor nations, and should thus provide a more comprehensive glimpse into what rich nations owe poor nations on a wider scope.

Footnotes / Bibliography

1. “LEDC and MEDC Education Comparison.” Mission 2015: LEDC MEDC Education Comparison, https://web.mit.edu/12.000/www/m2015/2015/ledc_medc_edcomparison.html

2. The Age of Imperialism (1870–1914) - Tamaqua Area School District. https://www.tamaqua.k12.pa.us/cms/lib07/PA01000119/Centricity/Domain/119/TheAgeofImperialism.pdf.

3. Moore, Alison McKnight. “The Age of Imperialism - the Scramble for Africa.” Scribd, 28 Nov. 2012, https://www.slideshare.net/AlisonMcKnightMoore/the-age-of-imperialism-the-scramble-for-africa.

4. Balfour, S. F. “HONG KONG BEFORE THE BRITISH: Being a Local History of the Region of Hong Kong and the New Territories before the British Occupation.” Journal of the Hong Kong Branch of the Royal Asiatic Society, vol. 10, 1970, pp. 134–79. JSTOR, http://www.jstor.org/stable/23881599.

5. “Singapore Colony.” The British Empire, https://www.britishempire.co.uk/maproom/singapore.htm.

6. Tan, Ian. “Isabella Jackson, Shaping Modern Shanghai: Colonialism in China's G...” ABE Journal. Architecture beyond Europe, Laboratoire InVisu CNRS/INHA (UAR 3103), 28 July 2019, https://journals.openedition.org/abe/5724.

7. Oliver, Erna, and Willem H. Oliver. “The Colonisation of South Africa: A Unique Case.” HTS Theological Studies, AOSIS Publishing, http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S0259-94222017000300062.

8. “History of Colonial Hong Kong (1800s–1930s).” Academic Dictionaries and Encyclopedias, https://en-academic.com/dic.nsf/enwiki/546780.

9. “Hong Kong Population (Live).” Worldometer, https://www.worldometers.info/world-population/china-hong-kong-sar-population/.

10. The Investopedia Team. “Who Was David Ricardo?” Investopedia, Investopedia, 16 June 2022, https://www.investopedia.com/terms/d/david-ricardo.asp.

11. Corbat, Mike. “Why the U.S. and the World Need Trade to Prosper”, 25 Apr. 2017, https://www.citigroup.com/citi/news/executive/170425Eb.htm.

12. King, Sam. “Imperialism and the Development Myth: How the Rich Countries Dominate in the Twenty-First Century.” Progress in Political Economy (PPE), 11 Oct. 2021, https://www.ppesydney.net/imperialism-and-the-development-myth-how-the-rich-countries-dominate-in-the-twenty-first-century/.

13. Lynch, Lainey, et al. “Infamous Companies Exploit Child Labor for Their Own Benefit.” The Woodgrove Outlander, 29 Oct. 2020, https://www.thewoodgroveoutlander.com/news/2020/10/29/infamous-companies-exploit-child-labor-for-their-own-benefit/.

14. Powell, Benjamin, and David Skarbek. “Sweatshops and Third World Living Standards ... - Independent Institute.” The Independent Institute, 27 Sept. 2004, https://www.independent.org/pdf/working_papers/53_sweatshop.pdf.

15. Telhami, Shibley. “The Persian Gulf: Understanding the American Oil Strategy.” Brookings, Brookings, 28 July 2016, https://www.brookings.edu/articles/the-persian-gulf-understanding-the-american-oil-strategy/.

16. Ritchie, Hannah. “Global Inequalities in CO2 Emissions.” Our World in Data, 16 Oct. 2018, https://ourworldindata.org/co2-by-income-region.

17. Abeygunawardena, Piya, and Yogesh Vyas. “Poverty and Climate Change - OECD.” Organisation for Economic Co-Operation and Development (OECD), https://www.oecd.org/env/cc/2502872.pdf.

18. World Bank Group. “Climate Explainer: Article 6.” World Bank, World Bank Group, 23 May 2022, https://www.worldbank.org/en/news/feature/2022/05/17/what-you-need-to-know-about-article-6-of-the-paris-agreement.