The Developing World: a Special Case?

Abstract

The argument that developing countries are a special case and warrant special treatment within the international financial system draws on a number of factors related both to equity and efficiency. On the equity side the argument is that people in developing countries have lower living standards than those in the rest of the world and that the international financial system could and should be used as a vehicle for directing a larger volume of aid to them. This immediately raises the whole question of the pros and cons of foreign aid. However, if it is decided that aid is to be encouraged, another question is whether the international financial system offers the best way of securing a desirable flow of aid. This is a matter of efficiency.