Explanations of Underdevelopment Essay Example | Topics and Well Written Essays - 1000 words

Explanations of Underdevelopment - Essay Example Multinational corporations or MNC can broadly be defined as the business corporations that operate across the world and have operation units in different countries. They are not only equipped with huge financial resources but they also have significant abilities to transfer knowledge across the international market. Underdeveloped nations, on the other hand are not financially or otherwise equipped to exploit their own resources. Thus, they become highly attractive business propositions for multinational companies as they can exploit the vast market potential of the region. But that is not the whole truth. MNCs bring their knowledge and use their financial expertise to not only exploit host country’s resources but they also contribute extensively to their socio-economic development. Theory of dependency primarily relies on financial aids to the underdeveloped nations from developed countries or international aid agencies that are frequently misused or used in areas other than infrastructural development. These aids are often in the form of soft loans but they still increase the debt liability of the already poor countries. The money is frequently misused or not used on areas infrastructure development, education, health etc which could benefit the society on long term. The inability of the government to appropriately utilize financial resources results in vicious debt trap. Isbister emphatically claims that they are ‘waylaid by the debt crisis’ (2003: 180). ... The money is frequently misused or not used on areas infrastructure development, education, health etc which could benefit the society on long term. The inability of the government to appropriately utilize financial resources results in vicious debt trap. Isbister emphatically claims that they are ‘waylaid by the debt crisis’ (2003: 180). Third world countries like Ghana, Botswana etc are prime examples where vast disparity of income is highly visible. Despite massive international aid, the common man is still reeling under abject poverty. Another important fact is that financial aids are often subject to conditions which are either not practical for poor nations or they fail to instill necessary discipline amongst the policy makers for its effective utilization so that it can filter down to the common man. At the same time, it also provides huge power to the donor which is often exploited by them for their own benefits vis-a-vis low wages to local persons, exploitation of natural resources at low cost etc. MNCs in such scenario may justifiably become the scapegoat for vested interests. Another important aspect of dependency theory is that third world countries get used to the foreign aid because most of them are characterized by unstable socio-political environment. This helps the vested interests in the higher hierarchy of politics and bureaucracy to divert fund for their own interests. Thus, socio-economic growth of the underdeveloped nations remains a dream. Modernization theory, on the other hand, focuses on capitalist principles of market and exhorts underdeveloped economies for more liberal market based policies to facilitate foreign investment. It also makes underdeveloped countries more attractive for MNCs who can