Dwindling Altruism in Modern Economic Policies for the Underdeveloped World Undermines the Essential Parameters
One of the key neoclassical assumptions of economics is that rational beings make decisions to maximize their benefits. Nonetheless, when people sacrifice for the well-being of other beings without expecting personal rewards, they are thought to behave altruistically.
Altruism, in terms of economics, is considered as all the measures taken to relieve individuals through economic means without considering self-interests. Volunteering, donating to charities, prioritizing sustainability principles for future generations, lending financial aid on simpler terms, and endorsing developmental plans based on equity principles are some refined instances of economic altruism in different fields.
However, the term altruism is argued incompatible by the economic decision makers in modern economic approaches for settling down the economic issues faced by today’s world due to certain arguable grounds. The dominance of the neoclassical school of thought in modern economic thinking is one of the root causes of undermining all those development possibilities that contradict the principles of rationality. Furthermore, altruism has taken a back seat due to the escalating neoliberal economic policies emphasizing free market operations, deregulation of financial markets and minimization of state interventions in economic affairs. Consequently, these neoliberal economic reforms have led to the rise of health and education inequalities in many parts of the world. In particular, health and education are public services by nature that demand regulations in some forms to assure access to these necessities for all citizens. However, free market operations have led to the misplacement of these resources and associating them with profit motivation. Therefore, these exceptionally significant cases overemphasize adopting a neoliberal economic approach.
Furthermore, the latest global wealth report published by the Credit Suisse Research Institute provides core evidence of tremendous income inequality and vanished altruism in the economic growth patterns of recent times. According to this report, 43.4 percent of the total global wealth is owned by the top 1 percent of the world, and the top 10 percent of the world’s population holds 76.5 percent. In contrast, the bottom half of the world’s total population is left with 1.2 percent of the total global wealth. Owing to this greater inequality in global wealth distribution patterns, the rich are turning richer, and the economic progress of the poor class is slower than the overall economic growth of the world.
The Economic perspective of providing financial assistance to developing nations by international organizations is also deprived of altruistic behaviour. The financial assistance comes with imposing harsh austerity measures such as a significant reduction in the government’s developmental spending, privatization of state-owned enterprises, removal of trade barriers and higher interest rates on returning debts. These measures appear to be associated with the agenda of aid-providing institutions rather than based upon pure intentions to straighten out the economic challenges of the recipient countries. Although lending organizations provide immediate financial support, they lead developing economies towards worse economic scenarios for the coming years. For instance, cutting down developmental budgets to accomplish strict austerity measures by the borrowing governments deprives the poorest segments of the states of fundamental healthcare and educational facilities.
Similarly, privatization leads to wage cuts and job losses, consequently increasing unemployment and poverty in corresponding states. Likewise, liberalization provides foreign markets a favourable environment to sell their products in developing countries due to the lowest import tariffs. This approach reduces the competitiveness of domestically produced goods and advocates more reliance on imports. Hence, the economies start losing their manufacturing bases and are not left with enough products to export quality products. Therefore, the earnings through exports plunge and prove insufficient to finance the mounting expenditures resulting from the utmost reliance on imports. So, developing countries must ask for more debts to meet the piling-up expenditures. This phenomenon pushes them into a continuous debt trap, intensifying with the passage.
Likewise, the term inflation is more challenging for developing countries to cope with than the developed world. The primary reasons include weak infrastructure, corruption and large dependence by the developing nations on imports, which are subjected to more price hikes due to the weakening of national currency and exacerbating inflation. It has been largely witnessed that signing the aid programs offered by international aid organizations brings inflation in developing countries due to the pre-requisite conditions of structural adjustment programs, such as implementing new taxes of various forms on the citizens of respective states. This makes the life of a layman more challenging in terms of maintaining the rising expenses within the same income level. Besides this, significant proportions of governments’ budgets are designated for paying high-interest rates on debt services and are subjected to shorter periods of repayments. So, the total financial aid is not consumed in productive ways due to the strict requirements of aid organizations from the borrowing states. As a result, the desired targets of creating employment opportunities, reducing poverty and fostering economic prosperity are not achieved. Hence, due to the undermining attribute of altruistic behaviours, financial assistance does not work for developing nations in sorting out their economic adversities.
In spite of the above depiction, the altruistic approach can be upheld in modern economic outlooks by yielding interest-free debt servicing, absolving fierce austerity measures, investing in capacity building and sharing expertise in the fields of health and education, and collaborating with regards to the developmental initiatives based upon the principles of equity in low-income economies. All such options have the potential to fix the economic hurdles of today’s world once initiated by international developmental organizations and the developed world.
An interrogative clause can strike the thoughts of the policymakers of the established economies: Why should the developed world adopt a zero-sum approach of encouraging altruism towards the underdeveloped world? This outlook can be responded to in multiple ways. According to the latest report of the International Rescue Committee, the top ten most adversely exposed countries to climate change roughly contribute 0.28 percent of global Carbon emissions in the atmosphere. Despite the lowest shares in net carbon emissions, they face the severe outcomes of climate change resulting from the externalities produced by the developed world. Besides this, the developed world’s development comprises natural resource exploitation of many parts of Asia, Africa, Latin America, the Middle East and the Pacific Islands. Raw materials were imported from these parts of the world at very low costs by the developed nations of today’s world. Customs of resource exploitation brought about water pollution, deforestation, land conflicts, human rights violations, and inequalities in such territories. Hence, these phenomena led to economic instability and social unrest in such localities.
Therefore, irrefutably, to repay the catastrophes faced by the under-developed world in all forms of externalities due to the modernized world’s pursuit efforts of achieving higher standards of living and the resource exploitation of the impoverished world, it is quite a legitimate solicit of altruistically supporting the under-nourished economies.
Author: Muhammad Danish Raza
The author is pursuing a bachelor of Economics at National Defence University Islamabad, Pakistan.
(Views are personal)