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In Praise of Cheap Labor
Bad jobs at bad wages are better than no jobs at all.
By Paul Krugman
For many years a huge Manila garbage dump known as Smokey Mountain was a favorite media
symbol of Third World poverty. Several thousand men, women, and children lived on that dump–enduring
the stench, the flies, and the toxic waste in order to make a living combing the garbage for scrap metal
and other recyclables. And they lived there voluntarily, because the $10 or so a squatter family could
clear in a day was better than the alternatives.
The squatters are gone now, forcibly removed by Philippine police last year as a cosmetic move
in advance of a Pacific Rim summit. But I found myself thinking about Smokey Mountain recently, after
reading my latest batch of hate mail.
The occasion was an op-ed piece I had written for the New York Times, in which I had pointed
out that while wages and working conditions in the new export industries of the Third World are appalling,
they are a big improvement over the “previous, less visible rural poverty.” I guess I should have expected
that this comment would generate letters along the lines of, “Well, if you lose your comfortable position as
an American professor you can always find another job–as long as you are 12 years old and willing to
work for 40 cents an hour.”
Such moral outrage is common among the opponents of globalization–of the transfer of
technology and capital from high-wage to low-wage countries and the resulting growth of labor-intensive
Third World exports. These critics take it as a given that anyone with a good word for this process is naive
or corrupt and, in either case, a de facto agent of global capital in its oppression of workers here and
abroad.
But matters are not that simple, and the moral lines are not that clear. In fact, let me make a
counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they
have chosen not to think their position through. While fat-cat capitalists might benefit from globalization,
the biggest beneficiaries are, yes, Third World workers.
After all, global poverty is not something recently invented for the benefit of multinational
corporations. Let’s turn the clock back to the Third World as it was only two decades ago (and still is, in
many countries). In those days, although the rapid economic growth of a handful of small Asian nations
had started to attract attention, developing countries like Indonesia or Bangladesh were still mainly what
they had always been: exporters of raw materials, importers of manufactures. Inefficient manufacturing
sectors served their domestic markets, sheltered behind import quotas, but generated few jobs.
Meanwhile, population pressure pushed desperate peasants into cultivating ever more marginal land or
seeking a livelihood in any way possible–such as homesteading on a mountain of garbage.
Given this lack of other opportunities, you could hire workers in Jakarta or Manila for a pittance.
But in the mid-’70s, cheap labor was not enough to allow a developing country to compete in world
markets for manufactured goods. The entrenched advantages of advanced nations–their infrastructure
and technical know-how, the vastly larger size of their markets and their proximity to suppliers of key
components, their political stability and the subtle-but-crucial social adaptations that are necessary to
operate an efficient economy–seemed to outweigh even a tenfold or twentyfold disparity in wage rates.
And then something changed. Some combination of factors that we still don’t fully understand-lower tariff barriers, improved telecommunications, cheaper air transport–reduced the disadvantages of
producing in developing countries. (Other things being the same, it is still better to produce in the First
World–stories of companies that moved production to Mexico or East Asia, then moved back after
experiencing the disadvantages of the Third World environment, are common.) In a substantial number of
industries, low wages allowed developing countries to break into world markets. And so countries that
had previously made a living selling jute or coffee started producing shirts and sneakers instead.
Workers in those shirt and sneaker factories are, inevitably, paid very little and expected to
endure terrible working conditions. I say “inevitably” because their employers are not in business for their
(or their workers’) health; they pay as little as possible, and that minimum is determined by the other
opportunities available to workers. And these are still extremely poor countries, where living on a garbage
heap is attractive compared with the alternatives.
And yet, wherever the new export industries have grown, there has been measurable
improvement in the lives of ordinary people. Partly this is because a growing industry must offer a
somewhat higher wage than workers could get elsewhere in order to get them to move. More importantly,
however, the growth of manufacturing–and of the penumbra of other jobs that the new export sector
creates–has a ripple effect throughout the economy. The pressure on the land becomes less intense, so
rural wages rise; the pool of unemployed urban dwellers always anxious for work shrinks, so factories
start to compete with each other for workers, and urban wages also begin to rise. Where the process has
gone on long enough–say, in South Korea or Taiwan–average wages start to approach what an
American teen-ager can earn at McDonald’s. And eventually people are no longer eager to live on
garbage dumps. (Smokey Mountain persisted because the Philippines, until recently, did not share in the
export-led growth of its neighbors. Jobs that pay better than scavenging are still few and far between.)
The benefits of export-led economic growth to the mass of people in the newly industrializing
economies are not a matter of conjecture. A country like Indonesia is still so poor that progress can be
measured in terms of how much the average person gets to eat; since 1970, per capita intake has risen
from less than 2,100 to more than 2,800 calories a day. A shocking one-third of young children are still
malnourished–but in 1975, the fraction was more than half. Similar improvements can be seen
throughout the Pacific Rim, and even in places like Bangladesh. These improvements have not taken
place because well-meaning people in the West have done anything to help–foreign aid, never large, has
lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which
are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless
multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit
opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives
of those involved, the result has been to move hundreds of millions of people from abject poverty to
something still awful but nonetheless significantly better.
Why, then, the outrage of my correspondents? Why does the image of an Indonesian sewing
sneakers for 60 cents an hour evoke so much more feeling than the image of another Indonesian earning
the equivalent of 30 cents an hour trying to feed his family on a tiny plot of land–or of a Filipino
scavenging on a garbage heap?
The main answer, I think, is a sort of fastidiousness. Unlike the starving subsistence farmer, the
women and children in the sneaker factory are working at slave wages for our benefit–and this makes us
feel unclean. And so there are self-righteous demands for international labor standards: We should not,
the opponents of globalization insist, be willing to buy those sneakers and shirts unless the people who
make them receive decent wages and work under decent conditions. This sounds only fair–but is it?
Let’s think through the consequences.
First of all, even if we could assure the workers in Third World export industries of higher wages
and better working conditions, this would do nothing for the peasants, day laborers, scavengers, and so
on who make up the bulk of these countries’ populations. At best, forcing developing countries to adhere
to our labor standards would create a privileged labor aristocracy, leaving the poor majority no better off.
And it might not even do that. The advantages of established First World industries are still
formidable. The only reason developing countries have been able to compete with those industries is their
ability to offer employers cheap labor. Deny them that ability, and you might well deny them the prospect
of continuing industrial growth, even reverse the growth that has been achieved. And since exportoriented growth, for all its injustice, has been a huge boon for the workers in those nations, anything that
curtails that growth is very much against their interests. A policy of good jobs in principle, but no jobs in
practice, might assuage our consciences, but it is no favor to its alleged beneficiaries.
You may say that the wretched of the earth should not be forced to serve as hewers of wood,
drawers of water, and sewers of sneakers for the affluent. But what is the alternative? Should they be
helped with foreign aid? Maybe–although the historical record of regions like southern Italy suggests that
such aid has a tendency to promote perpetual dependence. Anyway, there isn’t the slightest prospect of
significant aid materializing. Should their own governments provide more social justice? Of course–but
they won’t, or at least not because we tell them to. And as long as you have no realistic alternative to
industrialization based on low wages, to oppose it means that you are willing to deny desperately poor
people the best chance they have of progress for the sake of what amounts to an aesthetic standard–that
is, the fact that you don’t like the idea of workers being paid a pittance to supply rich Westerners with
fashion items.
In short, my correspondents are not entitled to their self-righteousness. They have not thought the
matter through. And when the hopes of hundreds of millions are at stake, thinking things through is not
just good intellectual practice. It is a moral duty.
Follow the format to avoid penalty
Name:
Course Number and Name:
Instructor:
Date:
Short Writing Assignment 4: Global Development
Suggested Length: 300- 750 words (“quality over quantity”, but please remember this is a
“short” writing assignment). Times New Roman 12, double space
Part 1. How does Paul Krugman defend his views that the “Third World and its people” have
benefited from globalization? Also, how does he defend the necessity (for the time being at least)
of low wage jobs in the third world?
Part 2. What are the key points of criticisms William Easterly raises against Sustainable
Development Goals(SDGs)? Despite his criticisms, what does he concede may be the positive
aspect of SDGs?
Part 3. Choose an article from either Krugman or Easterly to respond (choose only one).
If you are responding to Paul Krugman, to what extent do you agree/disagree with his views that
the developing countries (and its people) benefit from having low wage jobs?
If you are responding to William Easterly, to what extent do you agree/disagree with his views
that SDGs (or other UN/Western aid initiatives) are idealistic and ineffective in promoting
development? Should we still establish international development goals then?
The SDGs Should Stand for Senseless,
Dreamy, Garbled
Play sports! Be in harmony with nature! And end all preventable deaths! Only the U.N. could
have come up with a document so worthless.
BY WILLIAM EASTERLY
SEPTEMBER 28, 2015
Nothing better reflects the decline and fall of hopes for Western foreign aid than the United Nations
Sustainable Development Goals (SDGs) for 2030, just launched at a summit this past weekend. The SDG
manifesto is called the “[draft] outcome document of the United Nations summit for the adoption of the
post-2015 development agenda.” This not-quite-soaring rhetoric continues for 35 pages of 17 SDGs buried
among phrases like: “Thematic reviews of progress,” “Implement the 10-Year Framework of Programmes,”
and “Accelerated Modalities of Action.” The 17 goals in turn have 169 targets, a list that has both too many
items and too little content for each one, such as target 12.8: “By 2030, ensure that people everywhere have
the relevant information and awareness for sustainable development and lifestyles in harmony with nature.”
As for foreign aid, it is barely mentioned. Has anybody else noticed the SDG emperor has a shortage of
clothes? Well, the Economist called the SDGs “worse than useless.” Another commentator described them as
“a high-school wish list on how to save the world,” which seems unfair to high schoolers. Even Pope Francis
warned in his address to the SDG summit this past Friday against the risk to just “rest content” with a
“bureaucratic exercise of drawing up long lists of good proposals.” It is a sad result for the much-hyped SDGs.
Yet hope remains: The “rise of the rest” — the economic growth of low- and middle-income countries — is
causing increased respect for the poor, who are mostly achieving their own homegrown development, a
welcome move away from the condescension of the old aid effort.
To be fair, the SDGs sometimes do break through with welcome idealism that is ahead of the curve: “We will
cooperate internationally to ensure safe … migration involving full respect for human rights and the humane
treatment of migrants … of refugees and of displaced persons.” Other inspirational rhetoric is available: “We
envisage a world of universal respect for human rights and human dignity…. We resolve to build a better
future for … the millions who have been denied the chance to lead decent, dignified and rewarding lives.”
The SDGs might have worked, and I hope could possibly still work, as just idealistic rhetoric that will
motivate more people in the rich and free countries to care about the world’s poor and shackled.
But the Sustainable Development Goals are not presented that way — they really are goals and targets. They
want to be like their predecessor, the Millennium Development Goals (MDGs), announced in 2000 with
targets for 2015 — but they are not. The MDGs were so appealing because they were so precise and
measurable. In just one paragraph in the 2000 U.N. Millennium Declaration, the U.N. announced goals to cut
in half the proportion of the world’s population that was in extreme poverty, to cut in half the proportion
who suffer from hunger, to cut in half the proportion without access to safe drinking water, to achieve
universal primary schooling, to reduce the maternal mortality rate by three-quarters, and to reduce underfive child mortality by two-thirds — all by the year 2015. As a later U.N. document in 2005 made clear, the
MDGs held everyone accountable for actually meeting these “quantified and time-bound” targets.
In the SDGs, it is hard to imagine what the time-bound and quantified target is for harmony with nature.
Unlike the MDGs, the SDGs are so encyclopedic that everything is top priority, which means nothing is a
priority: “Sport is also an important enabler of sustainable development.” “Recognize and value … domestic
work … and the promotion of shared responsibility within the household.” It’s unclear how the U.N. is going
to get more women to play soccer and more men to do the dishes.
Beyond the unactionable, unquantifiable targets for the SDGs, there are also the unattainable ones: “ending
poverty in all its forms and dimensions,” “universal health coverage,” “ending all … preventable deaths
[related to newborn, child, and maternal mortality] before 2030,” “[end] all forms of discrimination against
all women and girls everywhere,” and “achieve full and productive employment and decent work for all
women and men.” Again, these could have been great as ideals — I share such ideals with great enthusiasm.
But the SDGs are not put forth as ideals but as “targets” for the year 2030. The rejoinder to a utopian target
should be: Wow, if something that great is possible, why wait until 2030? Why didn’t it happen already?
It’s a mark of how the SDGs don’t take seriously their own utopian promises that they keep repeating them
over and over again for different sub-groups. After promising full employment of everyone, the SDGs also ask
more modestly for full employment of “young people,” having already mentioned even more modestly they
are “promoting youth employment.” They don’t seem to get how following a big promise with a much
smaller one weakens the big promise’s credibility. You have already won $1 million dollars — plus a free
toaster.
As if the promises were not already weakened enough by being either unmeasurable or unattainable, there
are still a lot of ways to opt out. The commitments “will be voluntary and country-led,” they can be modified
upon demand for “different national realities, capacities and levels of development,” and they will defer to
each nation’s “policy space and priorities.”
Part of the problem is the use of that word “sustainable” — the U.N. never defines it. “Sustainable” might
have something to do with climate change, but the SDGs tell us that climate change will be negotiated in a
different U.N. summit in Paris beginning in late November. “Sustainable” is so overused in so many different
contexts that it means very little — we might as well call them the “Some-such Development Goals.”
The best chance the SDGs have at saying something with real meaning is the promise, by 2030, to “eradicate
extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day.” This
is one of the few endings promised by the SDGs that could actually be possible, mostly because it is such an
extreme definition of extreme poverty and the trend on this poverty has already been sloping downward for
decades.
Unfortunately, the one and only official international custodian of the global poverty line, the World Bank,
chose just this moment to increase the confusion on where the global poverty line should be. World Bank
President Jim Yong Kim announced last week that the poverty line is not really $1.25; instead, it is about
$1.90 — which might add a hundred million or so poor to the global rolls (not yet determined). Princeton
University’s Angus Deaton, one of the world’s leading poverty experts, suggested this confusion is because
“[you’ve] got a line that no one knows where to put it,” all based on “underlying data that is bad,” creating a
“statistical problem from hell.” So the headline goal of the SDGs turns out to be almost as unmeasurable as
the others.
What about foreign aid? President Barack Obama endorsed the SDGs in a speech to the U.N. summit on
Sunday, but if there is to be any new U.S. aid for the SDGs, he forgot to mention it. While a price tag for SDGs
of $3 trillion is mentioned (with no explanation) in U.N. discussions, there is no talks in the document itself
of foreign aid increasing to pay for these targets. The rich countries are “to implement fully their official
development assistance commitments” (see target 17.2) — in other words, to keep previous foreign aid
promises already broken. A surge in foreign aid had been at the heart of the MDGs, but the SDGs just change
the subject as fast as possible — the next target (see target 17.3) is to “mobilize additional financial resources
for developing countries from multiple sources.” Nothing better exemplifies the decline and fall of the
millennium goals’ transformational hopes for foreign aid than this no-show for the SDGs.
So the SDGs …
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