South/North / Developing Countries/Developed Countries – What is it all about?

11 February by CADTM


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 Lexical choices that are not neutral

The terms used to designate the different categories of countries convey the theoretical and political divergences in terms of analysis and strategy. Generally, these divergences are related to the social contents of the economic concepts: the economic categories are often presented as reflecting natural laws in which social relations and power struggles have a limited place. Thus, the conception of underdevelopment as being a simple time lag, sometimes ascribed to natural causes, largely dominates them. Let us have a look at some of these terms:

‘In 1951, in a Brazilian journal, I mentioned three worlds, yet without using the term ‘‘Third World.’. I coined and used the term for the first time in writing in the French weekly L’Observateur on 14 August 1952. This is how the article ended: ‘‘Because at last this ignored, exploited Third World, looked down on as the Third State, also wants to be acknowledged.’’ I was referring to the well-known words of Sieyes on the Third Estate during the French Revolution.’
Alfred Sauvy, demographer and economist
  • Poor countries : a term that focuses on the economic poverty of the majority of the populations in the countries concerned and obscures the blatant inequalities that exist there. Moreover, a number of countries considered poor are actually very rich in natural resources, not to mention their cultural wealth. These countries should be called exploited or impoverished countries.
  • Countries of the South : a convenient term to stigmatise the break with the countries in the northern hemisphere, often developed and dominant, but having the double defect of ignoring the numerous exceptions to this geographic classification and letting people believe in a natural fatalism. This is why in Latin America they speak about the Global South and the Global North, in order to distinguish them from geographical references. We also speak about ‘the Souths’ in the plural, to highlight the het- erogeneity among countries of the South.
  • Peripheral countries : a term belonging to the Structuralist and Marxist vocabulary which stresses the signs of domination at the heart of a global capitalism run by the most industrialized countries and their imperialist policies.
  • Emerging countries : a term designating the economies that have initiated an undeniable development process that which distinguishes them from the body of the formerly more homogenous Third World - China, India and Brazil being the principal examples. This term is often enough replaced by “emerging markets” and this substitution clearly reflects the neo-liberal vision of a development that can only be achieved through insertion in the international division of labour imposed by capitalist globalization. It should be noted that five countries labelled ‘emerging countries’ have developed some sort of mutual collaboration in a context called BRICS after their respective initials: Brazil, Russia, India, China and South Africa.
  • Countries in transition towards a market economy : a euphemism for countries of Eastern Europe, which, after the collapse of the USSR and the explosion of the Soviet bloc, followed a process of capitalist revival.
For the CADTM, the distinction North/South, Developed/Developing Countries also covers the domination by international financial institutions (IFI) such as the World Bank, the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
and other creditors that enforce imperialist and neocolonial policies monitored by the major powers in the North.

In spite of the various shortcomings of these terms, the following terms are used as synonyms: countries of the South, South(s), Periphery, impoverished countries, developing countries, third world.

They are usually contrasted with: countries of the North, North, Centre, also used as synonyms. This group is dominated by the main industrialized countries or imperialist countries.

In spite of our reluctance and because of statistical data, we have had to use categories established by the World Bank. Indeed, we cannot rely on sufficient resources to set up our own database on a global scale, taking into account more relevant standards than those the World Bank uses to establish various categories of countries.

In 2020, according to the World Bank, ‘developing countries’ consists of three categories [3], according to their incomes, namely:

This classification includes among developing countries economies as different from each other as Thailand and Haiti, Brazil and Niger, Russia and Bangladesh. The World Bank includes China among the 60 ‘higher middle income economies. We have decided to treat China on its own considering the country’s economic significance and the size of its population. According to our approach there are 137 countries of the South in 2020 (vs 138 for the World Bank).

Schematically speaking, the South includes Latin America, the Caribbean, the Middle East, North Africa, Sub-Saharan Africa, South Asia, South-East Asia and the Pacific, Central Asia, Turkey, Central and Eastern European countries outside the EU as well as Bulgaria and Romania that are members of the EU.

When we use the term North we mean the group of 80 countries identified by the World Bank as high income economies, namely countries where the GDP/per capita is over $12,375 per year. The North thus includes West European countries, Central and Eastern European countries that are members of the EU (except Bulgaria and Romania), The United States of America, Canada, Japan, South Korea, Australia, New Zealand and some forty countries at various latitudes [see appended list]. Not all of these countries are ‘industrialized’ in the sense of their economies consisting of a significant manufacturing sector. Indeed, some of those countries are hardly industrialized at all, but they are regarded by international bodies as having achieved a high level of income either because they managed to attract foreign capital, notably through their status as tax havens (such as Panama, the Seychelles, Bahamas, the Caiman islands), or because they can rely on income from oil extraction (such as the Arab States of the Persian Gulf or Brunei in South-East Asia).

 World distribution of population, wealth and CO2 emissions

Countries of the South account for about 66%, China for about 18% and countries of the North for about 16% of a world population estimated at about 7.8 billion in 2020 [4].

Distribution of the world population in 2020

Blue: Southern countries; Orange: China; Grey: Northern countries
Source: United nations

Gross domestic product (GDP) is traditionally the index used by many economists to assess the production of wealth in the world. However, it only provides an imperfect, biased and disputable perception, for at least five reasons:

  1. unpaid labour, mainly that of women, which is vital for social reproduction, is not taken into account;
  2. environmental damage is not recorded as negative (see box below);
  3. the account unit used is the price of a good or service, not the amount of work required to produce it;
  4. inequalities within countries are not taken into account;
  5. the way debt impacts on the progression of economic, political, social and cultural indices is excluded.

In spite of these shortcomings, the GDP reveals deep economic imbalances between the North and the South. The GDP as well as other economic indices used in this study are in US dollars ($) – except when otherwise specified – since nowadays about 60%[International Monetary Funds, World Currency Composition of Official Foreign Exchange Reserves, 3rd term 2019. http://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4 (consulté le 21 janvier 2020)]]of foreign exchange reserves, 88 % [5] of international trade and the majority of loans are denominated in this currency.

The accumulation of wealth is largely concentrated in the North, in almost inverse proportion to the distribution of population. While the share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of the North in the accumulation of world wealth has decreased over the past years, it is to be noted that the reason for this is not a larger part share accumulated by countries of the South, but China’s strong economic growth.

RegionsDistribution of world GDP
In 2010 In 2018
World GDP $66,051 billion $85,910 billion
Countries of the North (high income economies) 69 % 63 %
China 9 % 16 %
Countries of the South 22 % 21 %
incl. higher middle income economies (except China) 14,8 % 12,5 %
incl. lower middle income economies 6,8 % 7,8 %
incl. low income economies 0,6 % 0,7 %
Source : World Bank [6] (totals and subtotals may not be consistent due to rounding)

GDP figures per capita highlights the economic gap between the North and the South.

RegionGDP per capita (in $)
In 2010 In 2018
World 9,540.9 11,312.5
North (high income economies) 39,174 44,786.6
China 4,550.5 9,770.8
South 3,590.3 4,971.2
incl. higher middle income economies (China included) 6,344.4 9,205.4
incl. lower middle income economies 1,662.4 2,217.1
incl. low income economies 642 833,9
Source : World Bank [7]
Geographical distribution of CO2e emissions [8]

We know that the main countries currently emitting greenhouse gases are countries of the North, and China, Brazil and India. Frequently many political leaders and CEOs in countries of the North reiterate that China now emits most GHG and should thus make the greatest effort to reduce those emissions and fight climate change. Such discourse is actually a way of avoiding any acknowledgment of the countries of the North’s historical responsibility in GHG emissions since the industrial revolution in the 19th century (GHGs remain present for decades in the atmosphere, and their consequences on climate change can occur 40 years after their emission). It also ignores the part played by China in the international division of labour: a lot of GHG emission in China results from its manufacture of goods that are sold worldwide – and notably in the North where the domestic purchasing power is higher – by multinational corporations based in countries of the North.

A more detailed analysis of CO2e emissions, taking into account those ‘imported emissions’, [9] further widens the gap between countries of the North and countries of the South.



Similarly, the Global Footprint network has developed an indicator which combines the Human Development Index (HDI) and countries’ ecological footprints. As it takes those two variants into account, the analysis of ‘development’ is quite different: in 2015, no single country in the world combined a high HDI and a sustainable ecological footprint. On the other hand, countries that were close to this combination were mainly located in South America, with Cuba in the lead [10].

So, countries of the North have been able to develop their economies and achieve relatively high living standards thanks to significant GHG emissions. In the necessary struggle against climate change, countries of the North have to reduce a much higher proportion of their emissions than do countries of the South, for the allowed emissions within the requirements of a drastic reduction at a global level to be used not only to achieve a transition towards an energy system using 100% of renewable resources, but also to improve living standards in countries of the South.

It is also essential to recall the responsibility of large capitalist corporations over the past two centuries. Indeed, very large corporations that appeared during the 19th century or at the beginning of the 20th century have a huge responsibility in GHG emissions; these include Coca-Cola (founded in 1886), Pepsi-Cola (1898), Unilever (1930), Monsanto (1901), Cargill (1865) in the agri-food sector, BP (1909), Shell (1907), ExxonMobil (1870), Chevron (1879), Total (1924) in the oil industry, ThyssenKrupp (1811), ArcelorMittal (resulting from various groups that developed in the first half of the 20th century) in the steel and metal industry, Volkswagen (1937), General Motors (1908), Ford (1903), Renault-Nissan-Mitsubishi (a group of three companies that had been created between 1870 and 1932) in the car industry, Rio Tinto (1873), BHP Billiton (1895) in the extraction of minerals. If we were to calculate the amount of GHG that they have produced since they were founded, we would realize that it covers a very high proportion of the GHG that have accumulated in the atmosphere, a time bomb that eventually exploded. More recently we have to add to that a number of private or public companies in emergent capitalist countries which also have a most damaging effect on the environment such as Gasprom and Rosneft in Russia, Sinopec and Petrochina in China, Petrobras and Vale do Rio Doce in Brazil, Coal India and Tata in India. Basically, whether in the North or in the South, the capitalist mode of production is responsible for the destruction of the earth. Rather than blaming humankind at large for the ecological crisis when we use the word anthropocene, we should speak of ‘capitalocene’, for the capitalist mode of production is the cause of climate change.

 Beyond the North-South divide: class exploitation in all countries

Yet such a survey of the global economic situation is incomplete, since it bypasses the huge inequalities in income and wealth accumulation within nations. Capitalism has spread on a global scale. In this system, the capitalist class, which accounts for a tiny minority of the population, gets richer and richer thanks to the wealth produced by the labour of the majority of the population, but also thanks to the exploitation of nature, without any concern for its physical limits. Without any leverage Leverage This is the ratio between funds borrowed for investment and the personal funds or equity that backs them up. A company may have borrowed much more than its capitalized value, in which case it is said to be ’highly leveraged’. The more highly a company is leveraged, the higher the risk associated with lending to the company; but higher also are the possible profits that it may realise as compared with its own value. on the means of production, most men and women are forced to sell their labour force to capitalists (who own the means of production), who try to pay the workforce as little as possible, thus preventing a majority of the population from escaping the social conditions in which they find themselves. Conversely, wealth accumulated by capitalists makes it possible for them to invest in various sectors so as to diversify their sources of profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. as they exploit both humans and nature.

In order to keep profits at their highest level and to make sure that this mode of production endures, the capitalist class tries not only to pay as low wages as possible, but also to prevent redistribution of wealth by paying as little tax as possible and by under-valuing social policies such as public services (whether housing, transport, health care or education). Capitalists also try to prevent workers from organizing, notably when they stand up against labour rights: the right to form trade unions, right to go on strike, right to collective bargaining, etc. Conversely, workers must organize if they want to acquire social rights and fight those inequalities. So there is a class struggle at an international level, the intensity of which depends on the level of collective organization of workers in a given place and at a given time, in the face of blatant injustices.

In 2019, 2,153 billionaires owned more wealth than 4.6 billion people, i.e. 60% pf the world’s population [11]

Economic inequalities between various groups can be measured through the wealth people can claim and through people’s income (income from labour - wages, pensions, various social benefits - and income from capital such as corporate profits, dividends received by shareholders, etc.).

The poorest among the world population own literally less than nothing: they are indebted and owe money to their creditors – generally banks – namely to the richest portion of the population. In the United States, about 12% of the population, over 38 million inhabitants, are indebted beyond what they can ever hope to repay [12]. Their debts (mostly student loans and mortgages) are so high that the cumulated assets of the poorer 50% are negative (-0.1%) [13].

 Inequality in the distribution of wealth

Respective shares of various groups in total wealthUSA (2014)France (2014)China (2014)India (2012)
Top 10% 73 % 55,3 % 66,7 % 62,8 %
Top1% 38,6 % 23,4 % 27,8 % 30,7 %
Next 9% 34,4 % 31,9 % 38,9 % 32,1 %
Middle 40% 27,1 % 38,4 % 26,7 % 30,8 %
Bottom 50% -0,1 % 6,3 % 6,6 % 6,4 %
Source : World Inequality Database (the total in some columns may not equal 100% because of rounding)

 Inequality in total income

Respective shares of various groups in total incomeWorld (2016)EU28 (2016)USA (2014)China (2015)India (2015)
Top 10% 52,1 % 33,4 % 47 % 41,4 % 56,1 %
Top 1% 20,4 % 10,3 % 20,2 % 13,9 % 21,3 %
Next 9% 31,7 % 23,1 % 26,8 % 27,5 % 34,8 %
Middle 40% 38,2 % 44,6 % 40,4 % 43,7 % 29,2 %
Bottom 50% 9,7 % 22 % 12,6 % 14,8 % 14,7 %
Source : World Inequality Database (the total in some columns may not equal 100% because of rounding)

The 22 wealthiest men in the world own more than all the women in Africa together [14]

As a consequence, we should never oppose North and South as though they were homogeneous entities but rather create a geographical momentum: most decisions are made by a tiny minority in the North and in the South (the 1%) and have heavy negative consequences on the overwhelming majority of the population in the South as in the North (the 99%). The system of domination and exploitation is being reproduced within each country and each region.

In India, for instance, a tiny minority is becoming phenomenally rich thanks to labour performed by hundreds of thousands of poor Indians. In January 2020 and in another region of the world, the International Consortium of Investigative Journalists (ICIJ) exposed the mechanisms of predation and spoliation used by Isabel dos Santos to become the richest woman in Africa, at the expense of the people in her country, Angola. [15].

In the United States, the first economy in the world, over 14 million households were unable to repay their mortgages and were evicted during the sub-prime crisis in 2006 (but massive foreclosures occurred before and still occur today).

Beyond the distinction between geographical blocks, what is at stake is the exploitation of the overwhelming majority of the population, in the South as in the North, by the tiny minority of the capitalist class, also called the 1%. This ruling class is motivated by a quest for maximum short-term profit. We have to understand and fight this division, otherwise we run the risk of not perceiving relevant alternatives in our struggle for the emancipation of the majority who are victims of exploitation and oppression.

 Patriarchal dominance

According to Oxfam, every day, women and girls perform the equivalent of 12.5 billion working hours in unpaid care. Women perform over three quarters of unpaid work in the world [16]

Similarly, we have to take into account the oppression and exploitation of women everywhere in the world. The oppression of women goes back a long way and existed before capitalism. The oppression of women as women, by men, is called “patriarchy”. In the context of capitalism, patriarchy means that women and gender minorities are assigned most tasks related to social reproduction which produce and regenerate the living conditions of the labour force (such as education, care, food), and thus perpetuate capitalism. Those tasks are usually performed within the family, and are unpaid and made invisible. That oppression is reproduced in several ways and beyond the strictly economic aspect: through language, filiation, stereotypes, religions, culture, etc. The oppression of women and the patriarchal system are part and parcel of capitalist exploitation, whether in the South or in the North. The consequences of illegitimate public and private debts reinforce the oppression of women.

 Centre-Periphery relations in the North and in the South

Brazil’s large private corporations exert imperialist relationships of dominance on neighbouring countries in Latin America; China’s big corporations similarly dominate other countries in Africa, and in South and South-East Asia. Those relationships are sometimes called sub-imperialism, peripheral imperialism or regional imperialism.

Within the EU, whose member-states are almost all part of the North (except for Romania and Bulgaria), peripheral countries are dominated by countries with stronger economies and their large private corporations – this applies to countries in the so-called South Periphery such as Greece, Cyprus, Spain, Portugal, and to countries in the so-called East Periphery in central and East Europe. Within the United States, people in Puerto Rico are subjected to a neo-colonial relationship.

We must therefore add the concept of economic centres and peripheries at a regional and continental level to enable a better understanding of international relationships. [17]. That centre-periphery model makes it possible to account for the system of oppression by a centre consisting of dominant economies that enforce their conditions on the peripheral economies that are subjected to this system based on unequal relationships and dependency mechanisms, all in the service of capital accumulation.


Contributors to this article included : Maud Bailly, Nathan Legrand, Milan Rivié, Eric Toussaint and the national coordination group of CADTM Belgium.


List of Southern and Northen countries (according to World Bank classification)

LOW-INCOME ECONOMIES (GDP PER CAPITA : $1,025 OR LESS) :

Afghanistan, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Democratic Republic of Congo (Congo-Kinshasa), Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, North Korea, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, Sierra Leone, Somalia, South Sudan, Syria, Tajikistan, Tanzania, Togo, Uganda, Yémen


LOWER MIDDLE INCOME ECONOMIES (GDP PER CAPITA : $1,026 TO $3,995)

Angola, Bangladesh, Bhutan, Bolivia, Cape Verde, Cambodia, Cameroon, Comoros, Republic of Congo (Congo-Brazzaville), Côte d’Ivoire, Djibouti, Arab Republic of Egypt, El Salvador, Eswatini, Ghana, Honduras, India, Indonesia, Kenya, Kiribati, Kyrgyzstan, Laos, Lesotho, Mauritania, Federated States of Micronesia, Moldova, Mongolia, Morroco, Myanmar, Nicaragua, Nigeria, Pakistan, Papua New Guinea, Philippines, São Tome-and-Principe, Senegal, Solomon Islands, Sudan, East Timor, Tunisia, Ukraine, Uzbekistan, Vanuatu, Vietnam, West Bank and Gaza, Zambia, Zimbabwe


HIGHER MIDDLE INCOME ECONOMIES (GDP PER CAPITA : $3,996 TO $12,375)

Albania, Algeria, American Samoa, Argentina, Armenia, Azerbaijan, Belarus, Belize, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, China, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Equatorial Guinea, Ecuador, Fiji, Gabon, Georgia, Grenada, Guatemala, Guyana, Iran, Iraq, Jamaica, Jordan, Kazakhstan, Kosovo, Lebanon, Libya, Malaysia, Maldives, Marshall Island, Mauritius, Mexico, Montenegro, Namibia, Nauru, Northern Macedonia, Paraguay, Peru, Romania, Russian Federation, Samoa, Serbia, South Africa, Sri Lanka, St. Lucia, Saint-Vincent and the Grenadines, Suriname, Thailand, Tonga, Turkey, Turkmenistan, Tuvalu, Venezuela


HIGH INCOME ECONOMIES (GDP PER CAPITA : $12 376 OR MORE) :

Germany, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, Bahamas, Bahrain, Barbados, Belgium, Bermuda, Brunei Darussalam, Canada, Cayman Islands, Channel Islands, Chile, Cyprus, Croatia, Curaçao, Denmark, Estonia, Faroe Island, Finland, France, French Polynesia, Gibraltar, Greece, Greenland, Guam, Hong Kong, Hungary, Iceland, Ireland, Czech Republic, Isle of Man, Israel, Italia, Japan, South Korea, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Malta, Monaco, Netherlands, New Caledonia, New Zealand, Northern Mariana Islands, Norway, Oman, Palau, Panama, Poland, Portugal, Porto Rico, Qatar, San Marino, Saudi Arabia, Seychelles, Singapore, Sint-Maarten (Dutch part), Slovakia, Slovenia, Spain, Saint Martin (French part), Sweden, Switzerland, Taiwan, Trinidad and Tobago, Turks and Caicos Islands, United Arab Emirates, United Kingdom, United States, Uruguay, Virgin Island (United States)



Translated by Christine Pagnoulle and Kate Armstrong

Footnotes

[1Tariq Khokar, ‘Should we continue to use the term “developing world”’, November 2015, http://blogs.worldbank.org/opendata/should-we-continue-use-term-developing-world

[2Alfred Sauvy: “We readily speak of two opposing worlds (the capitalist world and the socialist world: my note), of their possible war, of their coexistence, etc., all too often forgetting that there exists a third one, the most important, and in fact the first one in chronological terms. This is the body of those that we call, in United Nations fashion, the underdeveloped countries. (…) The underdeveloped countries, the 3rd world, have entered into a new phase (...). Because at last this ignored, exploited Third World, looked down on as the Third Estate, also wants to be acknowledged”. L ’Observateur, 14 August, 1952, n 118, p. 14

[3World Bank, ‘World Bank Country and Lending Groups’, 2020, https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups (accessed 3 January 2020).

[4United Nations Organisation, Department of economic and social affairs, Population Division, World Population Prospects 2019, Online Edition. Rev. 1.

[5Bank for International Settlements, Triennial Central Bank Survey. Foreign exchange turnover in April 2019, September 2019.

[6World Bank database (accessed on 21 January 2020).

[7World Bank database (accessed 21 January 2020).

[8CO2e, which stands for ‘CO2 equivalent’, makes it possible to account for GHG that are not taken into account if we only refer to CO2.

[9‘Imported emissions’ can be applied to a US textile company producing in China, but whose clothes will be sold in the US.

[10See Global Footprint Network (2015). Sustainable development: Making it Measurable. Human Development Index & Ecological Footprint per person for nations.
http://www.footprintnetwork.org/documents/Global_Footprint_Network_HDI_poster2015_final_lo-res.pdf

[12Chuck Collins, “Negative Wealth Matters”, Inequality.org, 28 January 2016. https://inequality.org/great-divide/negative-wealth-matters/ (accessed 21 January 2020).

[13World Inequality Database. https://wid.world (accessed 21 January 2020)

[15See Joan Tilouine, ‘ “Luanda Leaks” : la mainmise d’Isabel dos Santos, la femme la plus riche d’Afrique, sur les finances de l’Angola », LeMonde.fr, 19 January 2020. https://www.lemonde.fr/afrique/article/2020/01/19/luanda-leaks-la-mainmise-d-isabel-dos-santos-la-femme-la-plus-riche-d-afrique-sur-les-finances-de-l-angola_6026507_3212.html (accessed 21 January 2020)

[17See François Houtart. « Rapports Nord-Sud ou la rigueur des concepts ». Alternatives Sud, 2016, vol. 23, no 2, p. 157-178.

Translation(s)

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