Inadequate global transfer of funds

Nature

Capital transfer remains a central problem of the economic growth of the developing world. The disparity between the demand and supply flow of capital is at variance with humanity's global needs. Foreign aid in the form of grants to developing countries has been declining, as have been multinational enterprise investments. The foreign debt problems of seven or eight countries has caused the tightening up of bank loans as well.

Background

The issue of inadequate global transfer of funds emerged prominently in the mid-20th century, as postwar reconstruction and decolonization highlighted disparities in capital flows between developed and developing nations. International forums, such as the United Nations and the World Bank, began documenting the persistent shortfall in financial transfers needed for sustainable development. Over subsequent decades, crises in debt, remittances, and aid effectiveness further underscored the systemic challenges in ensuring equitable and timely cross-border fund movement.

Incidence

In the capital-importing developing countries in 1983 as compared to 1981, direct investment was down $5,100 million and long-term credits were down $14,100 million.

Claim

The main block to development is lack of capital. Developing countries are poor because they are unable to save much, and because they cannot invest and produce much. They are therefore in a self-perpetuating cycle of poverty which can only be broken with the infusion of new capital.

Counter-claim

Every country should have the sovereign right to regulate capital flows into that country consistent with its national development priorities. This regulatory control is described by industrialized countries as a trade distortion. The proposals seeking to establish a new set of multilateral rules for private investment severely restrict the freedom of the host country to regulate capital flows. They would however strengthen transnational corporations. If they are accepted, the volume and pattern of foreign investments will be determined by such corporations to suit their objectives and would have no relevance to the national national priorities of host governments.