Global Overcapacity: A Major Cause Essay

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S., who is duly aware of their hardships and struggles. Again, there are many reasons why they are not given what they need to succeed (covert imperialism, ideological differences, etc.) but one of the main reasons is global overcapacity. If there are more countries producing goods and services the supply of those goods and services continue to increase. When supply goes up, and demand remains relatively unchanged (or static) one of the only ways to earn a profit is to lower costs (Judis, 2010). Lowering costs means a smaller profit margin. A smaller profit margin means, well, less money for the CEOs and shareholders.

One may think that this theory is a bit of a reach, that there is no conspiracy to retard the efforts of fledgling countries to take a power position in this new "flat" world (Friedman, 2005). And maybe they're right, there is no coordinated effort to do such a thing, it's just the way the system is set up. Either way, whether it's consciously done or unconsciously done, it's the way it is. The facts bear this out.

For starters, and to circle back to that Chinese proverb, why do countries in power continue to delivery fish, instead of curriculum on fishing techniques? Here is an excerpt, from an article regarding the ill effects of food dumping, that underscores this issue, "Food aid (when not for emergency relief) can actually be very destructive on the economy of the recipient nation and contribute to more hunger and poverty in the long-term. Free, subsidized, or cheap food, below market prices undercuts local farmers, who cannot compete and are driven out of jobs and into poverty, further slanting the market share of the larger producers such as those from the U.S. And Europe" (Shah, 2010).

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There's two additional points to make regarding this scenario. The first is obvious and an iteration of what's just been said, the reason countries in power give away food, supplies, and other resources is because it subverts the efforts of foreign competition. The other reason countries in power donate food, food in particular, is because it helps diminish the available supply in the U.S., thus reducing global overcapacity. One has, no doubt, heard of corn farmers burning their cornfields to serve a similar end, reduce supply to keep prices high.

In the face of this evidence, one can posit that the IMF and the World Bank are two institutions that work toward helping impoverished countries make it to the big stage. After all, they provide funding and assistance to many countries in need. Well, the rebuttal to this fact is that all money comes with strings attached. Or, in short, there's no such thing as a free lunch. Here is a rather concise description of the effect the IMF and World Bank have on the countries they assist, "the way it has happened has required poor countries to reduce spending on things like health, education and development, while debt repayment and other economic policies have been made the priority. In effect, the IMF and World Bank have demanded that poor nations lower the standard of living of their people" (Shah, 2010). The IMF and World Bank don't mind loaning money to struggling nations, as long as those nations follow their orders. It's really a form of new age imperialism whereby nations in power seek to exploit cheap labor and extract resources….....

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