Unequal trade is a major cause of poverty. In theory everyone is better off if they specialise in one thing they are good at and have a competitive advantage in and everyone trades with each other so that they can get everything they want. However theory does not work very well when it hits reality and the reality is that some countries have a very big head start. The rich developed world has been able to make sure that they have the advantage in a great many of the areas that create the most money, areas from design to IT, finance and high tech manufacturing. This leaves only those products that add much less value, such as agriculture to the poorer nations. In theory specialising with free trade would still be a good thing for the poorest and they would still end up rich but as many economies, such as Zambia with Copper have found, they are then at the mercy of the market. If demand for your primary product drops then a countries whole economy goes in to reverse.

Unfortunately despite numerous rounds of trade talks we do not have anything like free trade in the world today. The USA and EU subsidise their farmers and put large tariffs on goods coming in from outside their trading area so even those goods where the poorest should have a competitive advantage cannot be sold to the largest markets. At the same time the poorest cannot move on onto the lowest rung of manufacturing because China would simply undercut them. At all levels the poorest countries are given a petty poor deal in a world that is trading more than ever before.

Trade may increase inequality but it is also provides a way for nations to pull themselves out of poverty, particularly among the poorest countries. This is because in many of the areas of trade that are dominated by the middle sized economies were given up upon by the rich countries a long time ago so there are fewer restrictions. It does not matter to the rich countries whether the final assembly of things like computers happens in China or in Ghana.

It is often asked ‘why did the west become wealthy and the rest stay poor’ one explanation for this is based upon the distribution of resources. Britain, Europe and the Eastern US had the necessary quality coal near to ores such as iron so that they could have an industrial revolution. Today this distribution of resources matters less but it still makes some difference. ‘poor’ countries with access to natural resources are potentially able to make use of those resources to lift themselves out of poverty. The obvious example should be the gulf states, although most of them have misused the wealth they gained so only a few are sustainable. However many poor countries do not have the resources to provide the capital that they can use to make themselves in to rich countries and are much worse affected by higher prices for natural resources than those in the rich world who can afford it.

An inequality of resources does not explain anything. Many very well endowed nations are in desperate poverty-- African nations such as Zimbabwe have lots of gold but that hasn't done them much good. And many countries that have joined the developed world from the developing world are nations without much natural resources, such as Japan, Singapore and Taiwan. Thus it is possible to become developed even without any natural resources if there is a good government in place.

Luck. Many of these countries have been beneficiaries of luck. South Korea and Taiwan gained a lot of support from the USA during the cold war. It was in the US interest to build up their economies so they could stand on their own and provide their own advanced militaries to face off against their communist opposite number. They were also countries that would be useful in the ideological battle should they succeed in developing.

Countries are obviously able to pull themselves out of poverty because it has been done. First Japan managed to join the ranks of the industrial nations in the 1890s (and rejoin after being mostly destroyed in world war II). Since then the ‘Asian Tigers’ of South Korea, Taiwan, Hong Kong and Singapore have caught up with the developed world and other countries such as China are rapidly catching up. Even in such a poor country as India there has seen rapid rates of economic growth that has brought millions out of poverty. These countries prove that it is possible for countries to pull themselves out of poverty.

So far microfinance has not succeeded in pulling any countries out of poverty so it is not yet proven that it can be a successful route. It is possible that if there are any problems with the economy those who have been given loans will see whatever business they have used their loan on go bust and be left with debts they cant pay.

The aim of microfinance is "a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of high quality financial services, including not just credit but also savings, insurance, and fund transfers.” This has a potentially major impact in pulling countries out of poverty as it turns the people in to entrepreneurs and ultimately small businesses and consumers. The basis for any capitalist market. Having small amounts of money and a need to pay that money back means that the recipients of the loans need to find some way of paying for their loan. This means that they become small businessmen (or women) and with their small amount of money they can start businesses that provide the money to pay back the loan. This might be very small things such as using the loan to pay for fertiliser to increase the output of their tiny plot of land or it might be more ambitious like setting up a shop. Either way it helps the economy of the country they are in and gives people a way to bring themselves out of poverty.

Despite what many in the west say corruption is not the cause of all of the poor worlds problems. So long as corruption is recognised and consistent it simply works like a tax, business takes it in to account when doing business. This means that it should have no more effect than taxes of a similar level would.

Furthermore, how are governments which are corrupt, supposed to solve the problem from within?

One of the big factors pulling many poor countries back is corruption, often at all levels, from the policeman allowing someone through a checkpoint in return for a little cash to the big multinationals paying big bribes to the these countries leaders to secure contracts or mining rights. Corruption is an area where having natural resources has been a curse rather than a blessing. They are a source of easy money and something that is in sufficient demand that rich western companies are willing to pay large amounts in order to secure the rights to mine such resources. At the same time there was during the cold war competition between the USA and the USSR to get even minor ex-colonies with little strategic value on side. This has meant that government has come to be a way to gain money through power rather than being there to serve the people. This culture quickly affects the rest of the country as those in power bribe people to be on their side and use force to clamp down on their opponents. It becomes easier to become part of a corrupt system than to speak out against it and reform it.

If corruption is eliminated in a country it would not only get more development aid as western donors would be glad to have someone to donate to where they know it will not simply disappear into corrupt officials pockets but the country would also become a much easier place to do legitimate business in. While a country is corrupt often the most inefficient companies can secure contracts simply through bribery whereas if the corruption is cleaned up then the market will be freer.