Aid
Encyclopedia
In international relations
, aid (also known as international aid, overseas aid, or foreign aid) is a voluntary transfer of resources from one country
to another, given at least partly with the objective of benefiting the recipient country.
It may have other functions as well: it may be given as a signal of diplomatic
approval, or to strengthen a military
ally
, to reward a government
for behaviour desired by the donor
, to extend the donor's cultural influence, to provide infrastructure
needed by the donor for resource extraction from the recipient country, or to gain other kinds of commercial
access.
Humanitarianism
and altruism
are, nevertheless, significant motivation
s for the giving of aid. In line with this train of thought, the capability approach
promotes the development of giving aid with an aim towards improving each individual's freedoms to develop capabilities.
Aid may be given by individuals, private organisations, or governments. Standards delimiting exactly the kinds of transfers that count as aid vary. For example, aid figures may or may not include transfers for military use: to cite one instance, the United States included military assistance in its aid figure until 1957 but no longer does.
Another issue is whether to count remittances by expatriate workers to family members in their home countries as aid. This constitutes a large but difficult to measure international flow of funds. Depending on the definition, loans may or may not be counted as aid.
Even if the principles of a definition are set, it remains difficult to determine the effective flow of aid because aid is fungible: receiving aid may free up funds in the recipient country for use in non-aid projects that could not have been undertaken had the aid not been received. For example, receiving food aid may enable a government to divert funds from its own food-support budget to its military budget. In that case the net effect of the aid is military although the aid money might actually be spent on food.
Official organisations and those scholars who are primarily concerned with government policy issues frequently include only government-sourced aid in their aid figures, omitting aid from private sources. The most widely used measure of aid, "Official Development Assistance
" (ODA) is such a figure. It is compiled by the Development Assistance Committee
of the Organisation for Economic Co-operation and Development
. The United Nations
, the World Bank
, and many scholars use the DAC's ODA figure as their main aid figure because it is easily available and reasonably consistently calculated over time and between countries.
The DAC consists of 22 of the wealthiest Western industrialised countries plus the EU
; it is a forum in which they
coordinate their aid policies.
Aid may be "given" in the form of financial grants or loans, or in the form of materials, labor, or expertise. Aid is often pledged at one point in time, but disbursements (financial transfers) might not arrive until later.
s) and natural disaster
s. The term often carries an international connotation, but this is not always the case. It is often distinguished from development aid
by being focussed on relieving suffering caused by natural disaster or conflict, rather than removing the root causes of poverty or vulnerability.
The provision of humanitarian aid
or humanitarian response consists of the provision of vital services (such as food aid to prevent starvation
) by aid agencies, and the provision of funding or in-kind services (like logistics or transport), usually through aid agencies or the government of the affected country. Humanitarian aid is distinguished from humanitarian intervention
, which involves armed forces protecting civilians from violent oppression or genocide
by state-supported actors.
The Geneva Conventions
give a mandate to the International Committee of the Red Cross
and other impartial humanitarian organizations to provide assistance and protection of civilians during times of war. The ICRC, has been given a special role by the Geneva Conventions
with respect to the visiting and monitoring of prisoners of war.
The United Nations Office for the Coordination of Humanitarian Affairs
(OCHA) is mandated to coordinate the international humanitarian response to a natural disaster or complex emergency acting on the basis of the United Nations General Assembly Resolution 46/182.
The Sphere Project handbook, Humanitarian Charter and Minimum Standards in Disaster Response, which was produced by a coalition of leading non-governmental humanitarian agencies, lists the following principles of humanitarian action:
Development aid is aid given by developed countries to support development in general which can be economic development
or social development in developing countries. It is distinguished from humanitarian aid
as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term.
Official Development Assistance
(ODA), mentioned above, is a commonly used measure of developmental aid. Development aid is given by governments through individual countries' international aid agencies and through multilateral institutions such as the World Bank
, and by individuals through development charities such as ActionAid
, Caritas, Care International or Oxfam
.
The offer to give development aid has to be understood in the context of the Cold War
. The speech in which Harry Truman announced the foundation of NATO is also a fundamental document of development policy:
's Development Assistance Committee
puts foreign aid into three categories:
; for instance it is often given as a means of supporting an ally in international politics. It may also be given with the intention of influencing the political process in the receiving nation. Whether one considers such aid helpful may depend on whether one agrees with the agenda being pursued by the donor nation in a particular case. During the conflict between communism
and capitalism
in the twentieth century, the champions of those ideologies, the Soviet Union
and the United States
, each used aid to influence the internal politics of other nations, and to support their weaker allies. Perhaps the most notable example was the Marshall Plan
by which the United States
, largely successfully, sought to pull Europe
an nations toward capitalism and away from communism. Aid to underdeveloped countries has sometimes been criticized as being more in the interest of the donor than the recipient, or even a form of neocolonialism
.
S.K.B'. Asante lists some specific motives a donor may have for giving aid: defense support, market expansion, foreign investment, missionary enterprise, cultural extension. In recent decades, aid by organizations such as the International Monetary Fund
and the World Bank
has been criticized as being primarily a tool used to open new areas up to global capitalists, and being only secondarily, if at all, concerned with the wellbeing of the people in the recipient countries.
Besides criticism of motive, aid may be criticized simply on the grounds that it is not effective: i.e., it did not do what it was intended to do or help the people it was intended to help. This is essentially an economic criticism of aid. The two types of criticism are not entirely separate: critics of the ideology behind a piece of aid are likely to see it as ineffective; and indeed, ineffectiveness must imply some flaws in the ideology. Statistical studies have produced widely differing assessments of the correlation between aid and economic growth, and no firm consensus has emerged to suggest that foreign aid generally does boost growth. Some studies find a positive correlation, but others find either no correlation or a negative correlation. In the case of Africa, Asante (1985) gives the following assessment:
The economist William Easterly
and others have argued that aid can often distort incentives in poor countries in various harmful ways. Aid can also involve inflows of money to poor countries that have some similarities to inflows of money from natural resources that provoke the resource curse
.
Many individuals and organizations criticize U.S. Aid. Emergency funds from the International Monetary Fund (IMF) and World Bank, for instance, are linked to a wide range of free-market policy prescriptions that some argue interfere in a country's sovereignty. Policy prescriptions from outsiders can do more harm as they might not fit the local environment. The IMF can be good at helping countries over a short problematic financial period, but for poor countries with long lasting issues it can cause harm. In his book The White Man's Burden, Easterly argued that if the IMF only gave adjustment loans to countries that can repay it, instead of forgiving debts or lending repetitively even if conditions are not met, it would maintain its credibility.
In addition to the above criticisms, the logistics in which aid delivery occurs can be problematic. An earthquake in 2003 in Bam, Iran
left tens of thousands of people in need of disaster zone aid. Although aid was flown in rapidly, regional belief systems, cultural backgrounds and even language seemed to have been omitted as a source of concern. Items such as religiously prohibited pork, and non-generic forms of medicine that lacked multilingual instructions came flooding in as relief. An implementation of aid can easily be problematic, causing more problems than it solves.
James Shikwati
, a Kenya
n economist, has argued that foreign aid causes harm to the recipient nations, specifically because aid is distributed by local politicians, finances the creation of corrupt government such as that led by Dr Fredrick Chiluba in Zambia bureaucracies, and hollows out the local economy. In an interview in Germany's Der Spiegel
magazine, Shikwati uses the example of food aid delivered to Kenya in the form of a shipment of corn
from America. Portions of the corn may be diverted by corrupt politicians to their own tribes, or sold on the black market at prices that undercut local food producers. Similarly, Kenyan recipients of donated Western clothing will not buy clothing from local tailors, putting the tailors out of business. In an episode of 20/20, John Stossel
demonstrated the existence of secret government bank accounts which concealed foreign aid money destined for private purposes.
Some believe that aid is offset by other economic programs such as agricultural subsidies. Mark Malloch Brown
, former head of the United Nations Development Program, estimated that farm subsidies cost poor countries about USD$50 billion a year in lost agricultural exports:
Some have argued that the major international aid organizations have formed an aid cartel
.
Another criticism is that financial flows from foreign aid can provoke effects that are similar to the resource curse
.
In response to aid critics, a movement to reform U.S. foreign aid has started to gain momentum. In the United States, leaders of this movement include the Center for Global Development
, Oxfam America, the Brookings Institution
, InterAction
, and Bread for the World
. The various organizations have united to call for a new Foreign Assistance Act
, a national development strategy, and a new cabinet-level department for development.
, argue that current support for the developing world suffers from a policy incoherence and that while some policies are designed to support the third world, other domestic policies undermine its impact, examples include:
One measure of this policy incoherence is the Commitment to Development Index (CDI)
published by the Center for Global Development
. The index measures and evaluates 22 of the world's richest countries on policies that affect developing countries, in addition to simply aid. It shows that development policy is more than just aid; it also takes into account trade, investment, migration, environment, security, and technology.
Thus, some states are beginning to go Beyond Aid and instead seek to ensure there is a policy coherence, for example see Common Agricultural Policy
reform or Doha Development Round. This approach might see the nature of aid change from loans, debt cancellation, budget support etc., to supporting developing countries. This requires a strong political will, however, the results could potentially make aid far more effective and efficient.
The form of aid must also be considered. The World Bank
, until recently, issued only loans, meaning that the country must repay both the loan and the interest rates. In contrast, the European Commission
issues grants, which countries need not worry about paying back. This means that “loans have been going to the poorest countries and the grants to the middle-income countries.”
Furthermore, consider the breakdown, where aid goes and for what purposes. In 2002, total gross foreign aid to all developing countries was $76 billion. Dollars that do not contribute to a country’s ability to support basic needs interventions are subtracted. Subtract $6 billion for debt relief grants. Subtract $11 billion, which is the amount developing countries paid to developed nations in that year in the form of loan repayments. Next, subtract the aid given to middle income countries, $16 billion. The remainder, $43 billion, is the amount that developing countries received in 2002. But only $12 billion went to low-income countries ($15 billion for all developing countries) in a form that could be deemed budget support for basic needs.
When aid is given to the Least Developed Countries
who have good governments and strategic plans for the aid, it is thought that it is more effective.
The fourth trap is that of bad governance. However, “there are three ways in which aid can potentially help turnarounds: incentives, skills, and reinforcement.” Policy conditionalities, or structural adjustments, were reservations put on aid until a government agreed to aid implemented in the 1980s. This did not work. Aid needs to somehow provide incentives for giving the people power. Power needs to be transferred from the governments to the people. Aid should be restructured in order to allow for skills building in country. According to Collier, “technical assistance is not negligible – money spent on countries with the skilled people who constitute technical assistance is a quarter of total aid flows.” The problem is not that too little money is being provided, rather that technical assistance is not country specific. Aid is also given as budget support, reinforcement for failing states. There is an opportune moment for assisting failing states but it must be done at the right time. Aid cannot be continually poured into failing states and be expected to produce a turnaround. However, if aid is given at the opportune political moment, it can support turnarounds. Collier suggests that when that moment occurs “pour in the technical assistance as quickly as possible to help implement reform” and “then, after a few years, start pouring in the money for the government to spend.”
The form of aid must also be considered. The World Bank
, until recently, issued only loans, meaning that the country must repay both the loan and the interest rates. In contrast, the European Commission
issues grants, which countries need not worry about paying back. This means that “loans have been going to the poorest countries and the grants to the middle-income countries.”
Furthermore, consider the breakdown, where aid goes and for what purposes. In 2002, total gross foreign aid to all developing countries was $76 billion. Dollars that do not contribute to a country’s ability to support basic needs interventions are subtracted. Subtract $6 billion for debt relief grants. Subtract $11 billion, which is the amount developing countries paid to developed nations in that year in the form of loan repayments. Next, subtract the aid given to middle income countries, $16 billion. The remainder, $43 billion, is the amount that developing countries received in 2002. But only $12 billion went to low-income countries ($15 billion for all developing countries) in a form that could be deemed budget support for basic needs.
When aid is given to the Least Developed Countries
who have good governments and strategic plans for the aid, it is thought that it is more effective.
The fourth trap is that of bad governance. However, “there are three ways in which aid can potentially help turnarounds: incentives, skills, and reinforcement.” Policy conditionalities, or structural adjustments, were reservations put on aid until a government agreed to aid implemented in the 1980s. This did not work. Aid needs to somehow provide incentives for giving the people power. Power needs to be transferred from the governments to the people. Aid should be restructured in order to allow for skills building in country. According to Collier, “technical assistance is not negligible – money spent on countries with the skilled people who constitute technical assistance is a quarter of total aid flows.” The problem is not that too little money is being provided, rather that technical assistance is not country specific. Aid is also given as budget support, reinforcement for failing states. There is an opportune moment for assisting failing states but it must be done at the right time. Aid cannot be continually poured into failing states and be expected to produce a turnaround. However, if aid is given at the opportune political moment, it can support turnarounds. Collier suggests that when that moment occurs “pour in the technical assistance as quickly as possible to help implement reform” and “then, after a few years, start pouring in the money for the government to spend.”
According to Sachs, we should redefine how we think of aid. The first step should be to learn what developing countries hope to accomplish and how much money they need to accomplish those goals. Goals should be made with the Millennium Development Goals
in mind for these furnish real metrics for providing basic needs. The “actual transfer of funds must be based on rigorous, country-specific plans that are developed through open and consultative processes, backed by good governance in the recipient countries, as well as careful planning and evaluation.”
Possibilities are also emerging as some developing countries are experiencing rapid economic growth, they are able to provide their own expertise gained from their recent transition. This knowledge transfer can be seen in donors, such as Brazil, whose $1 billion in aid outstrips that of many traditional donors. Brazil provides most of its aid in the form of technical expertise and knowledge transfers. This has been descried by some observers as a 'global model in waiting'.
One of the central tenants in Easterly’s approach is a more bottom up philosophy of aid. This applies not only to the identification of problems, but to the actual distribution of capital to the areas in need. In effect, Easterly would have countries go to the area which needed aid, collect information about the problem, find out what the population wanted, and then work from there. In keeping with this, funds would also be distributed from the bottom up, rather than being given to a specific government.
Easterly also advocates working through currently existing
Aid organizations, and letting them compete for funding. Local
Frameworks, and national organizations are also good.
Easterly strongly discourages aid to government as a rule. He believes,
For several reasons, that aid to small “bottom up” organizations and
Individual groups is a better philosophy than to large governments.
Easterly claims that for far too long, aid agencies have been inefficient, while still being funded. The current system of evaluation for most aid
Programs is internal. Since it is in the best interest of an organization or movement to represent its own success in a positive light, Easterly claims there is much bias. What he proposes as an alternative is an independent auditing system for aid organizations. Before receiving funding, the organization should state their goals and how they expect to measure and achieve them. If they do not meet their goals, Easterly claims we should shift our funding to organizations who are successful, thus making the Aid Organizations become inefficient, or obsolete.
Easterly believes that aid goals should be small. In his opinion, one of the main failings of aid lies in the fact that we create large, utopian lists of things we hope to accomplish, without the means to actually see them to fruition. Rather than establish a utopian vision for a particular country, Easterly insists that we shift our focus to the most basic needs and improvements, from the bottom up. In effect, he argues that if we feed, clothe, vaccinate, build infrastructure, and support markets, the macroscopic results will follow.
The “Searching Approach” is intrinsically tied to the market. Easterly
Claims that the only way for poverty to truly end is for the poor to be
Given the capability to lift themselves out of poverty, and then for it to
Happen. Philosophically, this sounds like the traditional “bootstrap”
Theory, but it isn’t. What he says is that the poor should be given the
Fiscal support to create their market, which gives them the ability to
Become self reliant in the future.
In the end of his book, Easterly proposes a voucher system for foreign
aid. The poor would be distributed a certain amount of vouchers,
which would act as currency, redeemable to aid organizations for
services, medicines, and the like. These vouchers would then be
redeemed by the aid organizations for more funding. In this way,
the aid organization would be forced to compete, if by proxy.
proscriptive solution to poverty. In his book, The End of Poverty, he explains
how throughout history, countries have ascended from poverty by following
a relatively simple model. First, you promote agricultural development, then
industrialize, then embrace technology, and then you become modern. This is
the standard “western” model of development that has been followed by
countries such as China and India. Sachs main idea is that there should have a
broad analytical “checklist” of things a country must attain before it can
reach the next step on the ladder to development. Western nations should
donate a percentage of their GDP as determined by the UN, and pump money
into helping impoverished countries climb the ladder. This strategy, he
insists, will eradicate world poverty by 2025.
Developed by external aid organizations like the UN and World Bank. He
Advocates having these plans so that poverty can be effectively eradicated.
Countries should follow the plans, and if they do, they will eventually escape
Poverty.
Fund, World Bank, and the United Nations. If those institutions are given the
Power to enact change, and freed from mitigating influences, then they will
be much more effective. Sachs also comments that it is not the fault of these
international organizations, as they are composed of member nations, which
is where the problem truly lies. The powerful nations of the world must make
a commitment to end poverty, and then stick to it, in Sachs’ opinion.
Governments of the impoverished world. He remarks that while the
Corruption argument is logically valid in that corruption harms the efficiency
Of aid, levels of corruption tend to be much higher on average for countries
With low levels of GDP, and contends that this hurdle in government should
Not disqualify entire populations for much needed aid from the west.
detractor to proper progress. He argues that many facets of aid cannot be
effectively quantified, and thus it is not fair to try to put empirical
benchmarks on the effectiveness of aid.
ideas that the more “pessimistic” Easterly stands on.
First, he points to economic freedom. One of the common threads of logic
In aid is that countries need to develop economically in order to rise from
Poverty. On this, there is not a ton of debate. However, Sachs contends that
Easterly, and many other neo-Liberal economists believe high levels of
Economic freedom in these emerging markets is almost a necessity to
Development. Sachs himself does not believe this. He cites the lack of
Correlation between the average degrees of Economic Freedom in countries
And their yearly GDP growth, which in his data set is completely
Inconclusive.
Also, Sachs contends that democratization is not an integral part of having
Efficient aid distribution. Rather than attach strings to our aid dollars, or only
Working with democracies or “good governments”, Sachs believes we should
Consider the type of government in the needy country as a secondary
Concern.
Sachs’ entire approach stands on the assertion that abject poverty could be
Ended worldwide by 2025.
Dollar/Collier showed that current allocations of aid are allocated inefficiently. They came to the conclusion that aid money is given in many cases as an incentive to change policy, and for economic reasons, which in many cases can be less efficient than is optimal. They agree that bad policy is detrimental to economic growth, which is a key component of poverty reduction, but have found that aid dollars do not significantly incentivize governments to change policy. In fact, they have negligible impact. As an alternative, Dollar proposes that aid be funneled more towards countries with “good” policy and less than optimal amounts of aid for their massive amounts of poverty. With respect to “optimal amounts” Dollar calculated the marginal productivity of each additional dollar of foreign aid for the countries sampled, and saw that some countries had very high rates of marginal productivity (each dollar went further), while others [with particularly high amounts of aid, and lower levels of poverty] had low [and sometimes negative] levels of marginal productivity. In terms of economic efficiency, aid funding would be best allocated towards countries whose marginal productivities per dollar were highest, and away from those countries who had low to negative marginal productivities. The conclusion was that while an estimated 10 million people are lifted from poverty with current aid policies, that number could be increased to 19 million with efficient aid allocation.
In a followup study to Collier, Dalgaard finds that regardless of policies and utility, aid seems to be less efficient per dollar in the tropics. He states that aid dollars are likely to be just as effective anywhere, so there must be a mitigating externality that is not being accounted for or fleshed out.
New Conditionality is the term used in a paper to describe somewhat of a compromise between Dollar and Hansen. Paul Mosely describes how policy is important, and that aid distribution is improper. However, unlike Dollar, “New Conditionality” claims that the most important factors in efficiency of aid are income distributions in the recipient country and corruption.
One of the problems in foreign aid allocation is the marginalization of the fragile state. The fragile state, with its high volatility, and risk of failure scares away donors, and the people of those states feel harm as a result. Additionally, the fate of neighboring states is important, as economies of the directly adjacent states to those impoverished, volatile “fragile states” can be negatively impacted by as much as 1.6% of their GDP per year. This is no small figure. McGillivray advocates for the reduced volatility of aid flows, which can only be attained through analysis and coordination.
Beynon revisits Collier/Dollar’s “efficient aid allocation” and finds much of the same results, although he believes that the model needs to be more robust, with more samplings, and take into account other Millennium Development Goals.
International relations
International relations is the study of relationships between countries, including the roles of states, inter-governmental organizations , international nongovernmental organizations , non-governmental organizations and multinational corporations...
, aid (also known as international aid, overseas aid, or foreign aid) is a voluntary transfer of resources from one country
Country
A country is a region legally identified as a distinct entity in political geography. A country may be an independent sovereign state or one that is occupied by another state, as a non-sovereign or formerly sovereign political division, or a geographic region associated with a previously...
to another, given at least partly with the objective of benefiting the recipient country.
It may have other functions as well: it may be given as a signal of diplomatic
Diplomacy
Diplomacy is the art and practice of conducting negotiations between representatives of groups or states...
approval, or to strengthen a military
Military
A military is an organization authorized by its greater society to use lethal force, usually including use of weapons, in defending its country by combating actual or perceived threats. The military may have additional functions of use to its greater society, such as advancing a political agenda e.g...
ally
Allies
In everyday English usage, allies are people, groups, or nations that have joined together in an association for mutual benefit or to achieve some common purpose, whether or not explicit agreement has been worked out between them...
, to reward a government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
for behaviour desired by the donor
Donation
A donation is a gift given by physical or legal persons, typically for charitable purposes and/or to benefit a cause. A donation may take various forms, including cash, services, new or used goods including clothing, toys, food, and vehicles...
, to extend the donor's cultural influence, to provide infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
needed by the donor for resource extraction from the recipient country, or to gain other kinds of commercial
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
access.
Humanitarianism
Humanitarianism
In its most general form, humanitarianism is an ethic of kindness, benevolence and sympathy extended universally and impartially to all human beings. Humanitarianism has been an evolving concept historically but universality is a common element in its evolution...
and altruism
Altruism
Altruism is a concern for the welfare of others. It is a traditional virtue in many cultures, and a core aspect of various religious traditions, though the concept of 'others' toward whom concern should be directed can vary among cultures and religions. Altruism is the opposite of...
are, nevertheless, significant motivation
Motivation
Motivation is the driving force by which humans achieve their goals. Motivation is said to be intrinsic or extrinsic. The term is generally used for humans but it can also be used to describe the causes for animal behavior as well. This article refers to human motivation...
s for the giving of aid. In line with this train of thought, the capability approach
Capability approach
The capability approach was initially conceived in the 1980s as an approach to welfare economics....
promotes the development of giving aid with an aim towards improving each individual's freedoms to develop capabilities.
Aid may be given by individuals, private organisations, or governments. Standards delimiting exactly the kinds of transfers that count as aid vary. For example, aid figures may or may not include transfers for military use: to cite one instance, the United States included military assistance in its aid figure until 1957 but no longer does.
Another issue is whether to count remittances by expatriate workers to family members in their home countries as aid. This constitutes a large but difficult to measure international flow of funds. Depending on the definition, loans may or may not be counted as aid.
Even if the principles of a definition are set, it remains difficult to determine the effective flow of aid because aid is fungible: receiving aid may free up funds in the recipient country for use in non-aid projects that could not have been undertaken had the aid not been received. For example, receiving food aid may enable a government to divert funds from its own food-support budget to its military budget. In that case the net effect of the aid is military although the aid money might actually be spent on food.
Official organisations and those scholars who are primarily concerned with government policy issues frequently include only government-sourced aid in their aid figures, omitting aid from private sources. The most widely used measure of aid, "Official Development Assistance
Official development assistance
Official development assistance is a term compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development to measure aid. The DAC first compiled the term in 1969. It is widely used by academics and journalists as a convenient indicator of...
" (ODA) is such a figure. It is compiled by the Development Assistance Committee
Development Assistance Committee
The Organisation for Economic Co-operation and Development's Development Assistance Committee is a forum for selected OECD member states to discuss issues surrounding aid, development and poverty reduction in developing countries...
of the Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
. The United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
, the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, and many scholars use the DAC's ODA figure as their main aid figure because it is easily available and reasonably consistently calculated over time and between countries.
The DAC consists of 22 of the wealthiest Western industrialised countries plus the EU
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
; it is a forum in which they
coordinate their aid policies.
History
Aid existed in ancient times. More recently, in the nineteenth century, some private aid flowed from the Western countries to the rest of the world; missionary schools are an example. In the nineteenth and early twentieth centuries, aid from governments was tiny compared to present levels, consisting mostly of occasional humanitarian crisis relief. Some transfers that would now be counted as aid, however, came under the purview of colonial office budgets. It was at the end of World War Two, in the contexts of European reconstruction, decolonisation, and cold war rivalry for influence in the third world, that aid became the major activity that it is today.Aid may be "given" in the form of financial grants or loans, or in the form of materials, labor, or expertise. Aid is often pledged at one point in time, but disbursements (financial transfers) might not arrive until later.
Humanitarian aid
Humanitarian aid or emergency aid is rapid assistance given to people in immediate distress by individuals, organisations, or governments to relieve suffering, during and after man-made emergencies (like warWar
War is a state of organized, armed, and often prolonged conflict carried on between states, nations, or other parties typified by extreme aggression, social disruption, and usually high mortality. War should be understood as an actual, intentional and widespread armed conflict between political...
s) and natural disaster
Natural disaster
A natural disaster is the effect of a natural hazard . It leads to financial, environmental or human losses...
s. The term often carries an international connotation, but this is not always the case. It is often distinguished from development aid
Development aid
Development aid or development cooperation is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.It is distinguished...
by being focussed on relieving suffering caused by natural disaster or conflict, rather than removing the root causes of poverty or vulnerability.
The provision of humanitarian aid
Humanitarian aid
Humanitarian aid is material or logistical assistance provided for humanitarian purposes, typically in response to humanitarian crises including natural disaster and man-made disaster. The primary objective of humanitarian aid is to save lives, alleviate suffering, and maintain human dignity...
or humanitarian response consists of the provision of vital services (such as food aid to prevent starvation
Starvation
Starvation is a severe deficiency in caloric energy, nutrient and vitamin intake. It is the most extreme form of malnutrition. In humans, prolonged starvation can cause permanent organ damage and eventually, death...
) by aid agencies, and the provision of funding or in-kind services (like logistics or transport), usually through aid agencies or the government of the affected country. Humanitarian aid is distinguished from humanitarian intervention
Humanitarian intervention
Humanitarian intervention "refers to a state using military force against another state when the chief publicly declared aim of that military action is ending human-rights violations being perpetrated by the state against which it is directed."...
, which involves armed forces protecting civilians from violent oppression or genocide
Genocide
Genocide is defined as "the deliberate and systematic destruction, in whole or in part, of an ethnic, racial, religious, or national group", though what constitutes enough of a "part" to qualify as genocide has been subject to much debate by legal scholars...
by state-supported actors.
The Geneva Conventions
Geneva Conventions
The Geneva Conventions comprise four treaties, and three additional protocols, that establish the standards of international law for the humanitarian treatment of the victims of war...
give a mandate to the International Committee of the Red Cross
International Red Cross and Red Crescent Movement
The International Red Cross and Red Crescent Movement is an international humanitarian movement with approximately 97 million volunteers, members and staff worldwide which was founded to protect human life and health, to ensure respect for all human beings, and to prevent and alleviate human...
and other impartial humanitarian organizations to provide assistance and protection of civilians during times of war. The ICRC, has been given a special role by the Geneva Conventions
Geneva Conventions
The Geneva Conventions comprise four treaties, and three additional protocols, that establish the standards of international law for the humanitarian treatment of the victims of war...
with respect to the visiting and monitoring of prisoners of war.
The United Nations Office for the Coordination of Humanitarian Affairs
Office for the Coordination of Humanitarian Affairs
The United Nations Office for the Coordination of Humanitarian Affairs , is a United Nations body formed in December 1991 by General Assembly Resolution 46/182...
(OCHA) is mandated to coordinate the international humanitarian response to a natural disaster or complex emergency acting on the basis of the United Nations General Assembly Resolution 46/182.
The Sphere Project handbook, Humanitarian Charter and Minimum Standards in Disaster Response, which was produced by a coalition of leading non-governmental humanitarian agencies, lists the following principles of humanitarian action:
- The right to live with dignity.
- The distinction between combatant and non-combatants.
- The principle of non-refoulementNon-refoulementNon-refoulement is a principle in international law, specifically refugee law, that concerns the protection of refugees from being returned to places where their lives or freedoms could be threatened...
.
Development aid
Development aid is aid given by developed countries to support development in general which can be economic development
Economic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...
or social development in developing countries. It is distinguished from humanitarian aid
Humanitarian aid
Humanitarian aid is material or logistical assistance provided for humanitarian purposes, typically in response to humanitarian crises including natural disaster and man-made disaster. The primary objective of humanitarian aid is to save lives, alleviate suffering, and maintain human dignity...
as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term.
Official Development Assistance
Official development assistance
Official development assistance is a term compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development to measure aid. The DAC first compiled the term in 1969. It is widely used by academics and journalists as a convenient indicator of...
(ODA), mentioned above, is a commonly used measure of developmental aid. Development aid is given by governments through individual countries' international aid agencies and through multilateral institutions such as the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, and by individuals through development charities such as ActionAid
ActionAid
ActionAid was founded in 1972 as a child sponsorship charity when 88 UK supporters sponsored 88 children in India and Kenya, the focus primarily being to provide children with an education. Global accounts are now reported in Euros and in 2007 and 2008 turnover was close to 180m Euros...
, Caritas, Care International or Oxfam
Oxfam
Oxfam is an international confederation of 15 organizations working in 98 countries worldwide to find lasting solutions to poverty and related injustice around the world. In all Oxfam’s actions, the ultimate goal is to enable people to exercise their rights and manage their own lives...
.
The offer to give development aid has to be understood in the context of the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
. The speech in which Harry Truman announced the foundation of NATO is also a fundamental document of development policy:
In addition, we will provide military advice and equipment to free nations which will cooperate with us in the maintenance of peace and security. Fourth, we must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas. More than half the people of the world are living in conditions approaching misery. Their food is inadequate. They are victims of disease. Their economic life is primitive and stagnant. Their poverty is a handicap and a threat both to them and to more prosperous areas. For the first time in history, humanity possesses the knowledge and skill to relieve the suffering of these people.
Specific types
- Project aid: Aid is given for a specific purpose e.g. building materials for a new school.
- Programme aid: Aid is given for a specific sector e.g. funding of the education sector of a country.
- Budget supportBudget supportBudget support is a particular way of giving international development aid, also known as an aid instrument or aid modality. With budget support, money is given directly to a recipient country government, usually from a donor government...
: A form of Programme Aid that is directly channelled into the financial system of the recipient country. - Sector-wide Approaches (SWAPs): A combination of Project aid and Programme aid/Budget Support e.g. support for the education sector in a country will include both funding of education projects (like school buildings) and provide funds to maintain them (like school books).
- Food aid: Food is given to countries in urgent need of food supplies, especially if they have just experienced a natural disaster. Food aid can be provided by importing food from the donor, buying food locally, or providing cash.
- Untied aid: The country receiving the aid, can spend the money as they choose.
- Tied aidTied aidTied aid is foreign aid that must be spent in the country providing the aid or in a group of selected countries. A developed country will provide a bilateral loan or grant to a developing country, but mandate that the money be spent on goods or services produced in the selected country...
: The aid must be used to purchase products from the country that donated it or a specified group of countries. - Technical assistance: Educated personnel, such as doctors are moved into developing countries to assist with a program of development. Can be both programme and project aid.
- Unilateral vs. multilateral: unilateral aid is given by one country directly to another; multilateral aid is given through the intermediacy of an international organization, such as the World Bank, which pools donations from several countries' governments and then distributes them to the recipients.
OECD categories
The Organisation for Economic Co-operation and DevelopmentOrganisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
's Development Assistance Committee
Development Assistance Committee
The Organisation for Economic Co-operation and Development's Development Assistance Committee is a forum for selected OECD member states to discuss issues surrounding aid, development and poverty reduction in developing countries...
puts foreign aid into three categories:
- Official Development AssistanceOfficial development assistanceOfficial development assistance is a term compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development to measure aid. The DAC first compiled the term in 1969. It is widely used by academics and journalists as a convenient indicator of...
(ODA): Development aid provided to developing countries (on the "Part I" list) with the clear aim of economic developmentEconomic developmentEconomic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area... - Official Aid (OD): Development aid provided to developed countries (on the "Part II" list) and international organizations
- Other Official Flows (OOF): Aid which does not fall into the other two categories, either because it is not aimed at development, or it consists of more than 75% loan (rather than grant).
Criticism of aid
Aid is seldom given from motives of pure altruismAltruism
Altruism is a concern for the welfare of others. It is a traditional virtue in many cultures, and a core aspect of various religious traditions, though the concept of 'others' toward whom concern should be directed can vary among cultures and religions. Altruism is the opposite of...
; for instance it is often given as a means of supporting an ally in international politics. It may also be given with the intention of influencing the political process in the receiving nation. Whether one considers such aid helpful may depend on whether one agrees with the agenda being pursued by the donor nation in a particular case. During the conflict between communism
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
and capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
in the twentieth century, the champions of those ideologies, the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, each used aid to influence the internal politics of other nations, and to support their weaker allies. Perhaps the most notable example was the Marshall Plan
Marshall Plan
The Marshall Plan was the large-scale American program to aid Europe where the United States gave monetary support to help rebuild European economies after the end of World War II in order to combat the spread of Soviet communism. The plan was in operation for four years beginning in April 1948...
by which the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, largely successfully, sought to pull Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
an nations toward capitalism and away from communism. Aid to underdeveloped countries has sometimes been criticized as being more in the interest of the donor than the recipient, or even a form of neocolonialism
Neocolonialism
Neocolonialism is the practice of using capitalism, globalization, and cultural forces to control a country in lieu of direct military or political control...
.
S.K.B'. Asante lists some specific motives a donor may have for giving aid: defense support, market expansion, foreign investment, missionary enterprise, cultural extension. In recent decades, aid by organizations such as the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
has been criticized as being primarily a tool used to open new areas up to global capitalists, and being only secondarily, if at all, concerned with the wellbeing of the people in the recipient countries.
Besides criticism of motive, aid may be criticized simply on the grounds that it is not effective: i.e., it did not do what it was intended to do or help the people it was intended to help. This is essentially an economic criticism of aid. The two types of criticism are not entirely separate: critics of the ideology behind a piece of aid are likely to see it as ineffective; and indeed, ineffectiveness must imply some flaws in the ideology. Statistical studies have produced widely differing assessments of the correlation between aid and economic growth, and no firm consensus has emerged to suggest that foreign aid generally does boost growth. Some studies find a positive correlation, but others find either no correlation or a negative correlation. In the case of Africa, Asante (1985) gives the following assessment:
Summing up the experience of African countries both at the national and at the regional levels it is no exaggeration to suggest that, on balance, foreign assistance, especially foreign capitalism, has been somewhat deleterious to African development. It must be admitted, however, that the pattern of development is complex and the effect upon it of foreign assistance is still not clearly determined. But the limited evidence available suggests that the forms in which foreign resources have been extended to Africa over the past twenty-five years, insofar as they are concerned with economic development, are, to a great extent, counterproductive.
The economist William Easterly
William Easterly
William Russell Easterly is an American economist, specializing in economic growth and foreign aid. He is a Professor of Economics at New York University, joint with Africa House, and Co-Director of NYU’s Development Research Institute. He is also a nonresident senior fellow at the Brookings...
and others have argued that aid can often distort incentives in poor countries in various harmful ways. Aid can also involve inflows of money to poor countries that have some similarities to inflows of money from natural resources that provoke the resource curse
Resource curse
The resource curse refers to the paradox that countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources...
.
Many individuals and organizations criticize U.S. Aid. Emergency funds from the International Monetary Fund (IMF) and World Bank, for instance, are linked to a wide range of free-market policy prescriptions that some argue interfere in a country's sovereignty. Policy prescriptions from outsiders can do more harm as they might not fit the local environment. The IMF can be good at helping countries over a short problematic financial period, but for poor countries with long lasting issues it can cause harm. In his book The White Man's Burden, Easterly argued that if the IMF only gave adjustment loans to countries that can repay it, instead of forgiving debts or lending repetitively even if conditions are not met, it would maintain its credibility.
In addition to the above criticisms, the logistics in which aid delivery occurs can be problematic. An earthquake in 2003 in Bam, Iran
Bam, Iran
Bam is a city in and the capital of Bam County, Kerman Province, Iran. At the 2006 census, its population was 73,823, in 19,572 families.The modern Iranian city of Bam surrounds the Bam citadel. Before the 2003 earthquake the official population count of the city was roughly 43,000. There are...
left tens of thousands of people in need of disaster zone aid. Although aid was flown in rapidly, regional belief systems, cultural backgrounds and even language seemed to have been omitted as a source of concern. Items such as religiously prohibited pork, and non-generic forms of medicine that lacked multilingual instructions came flooding in as relief. An implementation of aid can easily be problematic, causing more problems than it solves.
James Shikwati
James Shikwati
James Shikwati is a Kenyan libertarian economist and Director of the Inter Region Economic Network who promotes freedom of trade as the driving solution to poverty in Africa...
, a Kenya
Kenya
Kenya , officially known as the Republic of Kenya, is a country in East Africa that lies on the equator, with the Indian Ocean to its south-east...
n economist, has argued that foreign aid causes harm to the recipient nations, specifically because aid is distributed by local politicians, finances the creation of corrupt government such as that led by Dr Fredrick Chiluba in Zambia bureaucracies, and hollows out the local economy. In an interview in Germany's Der Spiegel
Der Spiegel
Der Spiegel is a German weekly news magazine published in Hamburg. It is one of Europe's largest publications of its kind, with a weekly circulation of more than one million.-Overview:...
magazine, Shikwati uses the example of food aid delivered to Kenya in the form of a shipment of corn
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...
from America. Portions of the corn may be diverted by corrupt politicians to their own tribes, or sold on the black market at prices that undercut local food producers. Similarly, Kenyan recipients of donated Western clothing will not buy clothing from local tailors, putting the tailors out of business. In an episode of 20/20, John Stossel
John Stossel
John F. Stossel is an American consumer reporter, investigative journalist, author and libertarian columnist. In October 2009 Stossel left his long time home on ABC News to join the Fox Business Channel and Fox News Channel, both owned and operated by News Corp...
demonstrated the existence of secret government bank accounts which concealed foreign aid money destined for private purposes.
Some believe that aid is offset by other economic programs such as agricultural subsidies. Mark Malloch Brown
Mark Malloch Brown
George Mark Malloch Brown, Baron Malloch-Brown, KCMG, PC is a former Minister of State in the Foreign and Commonwealth Office of the British government with responsibility for Africa, Asia and the United Nations...
, former head of the United Nations Development Program, estimated that farm subsidies cost poor countries about USD$50 billion a year in lost agricultural exports:
"It is the extraordinary distortion of global trade, where the West spends $360 billion a year on protecting its agriculture with a network of subsidies and tariffs that costs developing countries about US$50 billion in potential lost agricultural exports. Fifty billion dollars is the equivalent of today's level of development assistance."
Some have argued that the major international aid organizations have formed an aid cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
.
Another criticism is that financial flows from foreign aid can provoke effects that are similar to the resource curse
Resource curse
The resource curse refers to the paradox that countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources...
.
In response to aid critics, a movement to reform U.S. foreign aid has started to gain momentum. In the United States, leaders of this movement include the Center for Global Development
Center for Global Development
The Center for Global Development is a non-profit think tank based in Washington, D.C. that focuses on international development. It was founded in November 2001 by former senior U.S. official Edward W. Scott, director of the Peterson Institute for International Economics, C. Fred Bergsten, and...
, Oxfam America, the Brookings Institution
Brookings Institution
The Brookings Institution is a nonprofit public policy organization based in Washington, D.C., in the United States. One of Washington's oldest think tanks, Brookings conducts research and education in the social sciences, primarily in economics, metropolitan policy, governance, foreign policy, and...
, InterAction
Interaction
Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea of a two-way effect is essential in the concept of interaction, as opposed to a one-way causal effect...
, and Bread for the World
Bread for the World
Bread for the World is a non-partisan, Christian citizens' movement in the United States to end hunger. The organization describes itself as a collective Christian voice urging nation's decision makers to end hunger at home and abroad...
. The various organizations have united to call for a new Foreign Assistance Act
Foreign Assistance Act
The Foreign Assistance Act is a United States Act of Congress. The Act reorganized the structure of existing U.S. foreign assistance programs, separated military from non-military aid, and created a new agency, the United States Agency for International Development to administer those...
, a national development strategy, and a new cabinet-level department for development.
Beyond aid
As a result of these numerous criticisms, other proposals for supporting developing economies and poverty stricken societies. Some analysts, such as researchers at the Overseas Development InstituteOverseas Development Institute
The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...
, argue that current support for the developing world suffers from a policy incoherence and that while some policies are designed to support the third world, other domestic policies undermine its impact, examples include:
- encouraging developing economies to develop their agriculture with a focus on exports is not effective on a global market where key players, such as the US and EU, heavily subsidise their products
- providing aid to developing economies' health sectors and the training of personnel is undermined by migration policies in developed countries that encourage the migration of skilled health professionals
One measure of this policy incoherence is the Commitment to Development Index (CDI)
Commitment to Development Index
The Commitment to Development Index , published annually by the Center for Global Development, ranks the world’s richest countries on their dedication to policies that benefit the five billion people living in poorer nations. Rich and poor countries are linked in many ways; thus the Index looks...
published by the Center for Global Development
Center for Global Development
The Center for Global Development is a non-profit think tank based in Washington, D.C. that focuses on international development. It was founded in November 2001 by former senior U.S. official Edward W. Scott, director of the Peterson Institute for International Economics, C. Fred Bergsten, and...
. The index measures and evaluates 22 of the world's richest countries on policies that affect developing countries, in addition to simply aid. It shows that development policy is more than just aid; it also takes into account trade, investment, migration, environment, security, and technology.
Thus, some states are beginning to go Beyond Aid and instead seek to ensure there is a policy coherence, for example see Common Agricultural Policy
Common Agricultural Policy
The Common Agricultural Policy is a system of European Union agricultural subsidies and programmes. It represents 48% of the EU's budget, €49.8 billion in 2006 ....
reform or Doha Development Round. This approach might see the nature of aid change from loans, debt cancellation, budget support etc., to supporting developing countries. This requires a strong political will, however, the results could potentially make aid far more effective and efficient.
Where aid actually goes
It is true that aid is rarely given for motives of pure altruism. However, it is important to look at where aid goes. For example, “only about one fifth of U.S. aid goes to countries classified by the OECD as ‘least developed.’” This “pro-rich” trend is not unique to the United States. According to Collier, “the middle income countries get aid because they are of much more commercial and political interest than the tiny markets and powerlessness of the bottom billion.” What this means is that, at the most basic level, aid is not targeting the most extreme poverty.The form of aid must also be considered. The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, until recently, issued only loans, meaning that the country must repay both the loan and the interest rates. In contrast, the European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
issues grants, which countries need not worry about paying back. This means that “loans have been going to the poorest countries and the grants to the middle-income countries.”
Furthermore, consider the breakdown, where aid goes and for what purposes. In 2002, total gross foreign aid to all developing countries was $76 billion. Dollars that do not contribute to a country’s ability to support basic needs interventions are subtracted. Subtract $6 billion for debt relief grants. Subtract $11 billion, which is the amount developing countries paid to developed nations in that year in the form of loan repayments. Next, subtract the aid given to middle income countries, $16 billion. The remainder, $43 billion, is the amount that developing countries received in 2002. But only $12 billion went to low-income countries ($15 billion for all developing countries) in a form that could be deemed budget support for basic needs.
When aid is given to the Least Developed Countries
Least Developed Countries
Least developed country is the name given to a country which, according to the United Nations, exhibits the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world...
who have good governments and strategic plans for the aid, it is thought that it is more effective.
Implications
The basic criticism of aid is that it neither goes where it was intended nor helps those intended. According to Collier, there are four known traps that contribute this problem. The first such trap is known as the conflict trap. Aid should not be used to finance military endeavors. It is difficult to “design aid in such a way that it works even in the environments of poor governance and poor policy that are most at risk of conflict.” The second trap is called the natural resource trap. Countries that are resource rich already have a large volume of capital flowing into their economies. However, it is not being used to its potential. The third trap occurs when a country is entirely landlocked. This one is not too hard to figure out – it is difficult for these countries to engage in global trade.The fourth trap is that of bad governance. However, “there are three ways in which aid can potentially help turnarounds: incentives, skills, and reinforcement.” Policy conditionalities, or structural adjustments, were reservations put on aid until a government agreed to aid implemented in the 1980s. This did not work. Aid needs to somehow provide incentives for giving the people power. Power needs to be transferred from the governments to the people. Aid should be restructured in order to allow for skills building in country. According to Collier, “technical assistance is not negligible – money spent on countries with the skilled people who constitute technical assistance is a quarter of total aid flows.” The problem is not that too little money is being provided, rather that technical assistance is not country specific. Aid is also given as budget support, reinforcement for failing states. There is an opportune moment for assisting failing states but it must be done at the right time. Aid cannot be continually poured into failing states and be expected to produce a turnaround. However, if aid is given at the opportune political moment, it can support turnarounds. Collier suggests that when that moment occurs “pour in the technical assistance as quickly as possible to help implement reform” and “then, after a few years, start pouring in the money for the government to spend.”
Impact
Peter Singer argues that over the last three decades, “aid has added around one percentage point to the annual growth rate of the bottom billion.” He argues that this has made the difference between “stagnation and severe cumulative decline.” Aid can make progress towards reducing poverty worldwide.Aid Destinations
It is true that aid is rarely given for motives of pure altruism. However, it is important to look at where aid goes. For example, “only about one fifth of U.S. aid goes to countries classified by the OECD as ‘least developed.’” This “pro-rich” trend is not unique to the United States. According to Collier, “the middle income countries get aid because they are of much more commercial and political interest than the tiny markets and powerlessness of the bottom billion.” What this means is that, at the most basic level, aid is not targeting the most extreme poverty.The form of aid must also be considered. The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, until recently, issued only loans, meaning that the country must repay both the loan and the interest rates. In contrast, the European Commission
European Commission
The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
issues grants, which countries need not worry about paying back. This means that “loans have been going to the poorest countries and the grants to the middle-income countries.”
Furthermore, consider the breakdown, where aid goes and for what purposes. In 2002, total gross foreign aid to all developing countries was $76 billion. Dollars that do not contribute to a country’s ability to support basic needs interventions are subtracted. Subtract $6 billion for debt relief grants. Subtract $11 billion, which is the amount developing countries paid to developed nations in that year in the form of loan repayments. Next, subtract the aid given to middle income countries, $16 billion. The remainder, $43 billion, is the amount that developing countries received in 2002. But only $12 billion went to low-income countries ($15 billion for all developing countries) in a form that could be deemed budget support for basic needs.
When aid is given to the Least Developed Countries
Least Developed Countries
Least developed country is the name given to a country which, according to the United Nations, exhibits the lowest indicators of socioeconomic development, with the lowest Human Development Index ratings of all countries in the world...
who have good governments and strategic plans for the aid, it is thought that it is more effective.
Aid outcomes and implications
The basic criticism of aid is that it neither goes where it was intended nor helps those intended. According to Collier, there are four known traps that contribute this problem. The first such trap is known as the conflict trap. Aid should not be used to finance military endeavors. It is difficult to “design aid in such a way that it works even in the environments of poor governance and poor policy that are most at risk of conflict.” The second trap is called the natural resource trap. Countries that are resource rich already have a large volume of capital flowing into their economies. However, it is not being used to its potential. The third trap occurs when a country is entirely landlocked. This one is not too hard to figure out – it is difficult for these countries to engage in global trade.The fourth trap is that of bad governance. However, “there are three ways in which aid can potentially help turnarounds: incentives, skills, and reinforcement.” Policy conditionalities, or structural adjustments, were reservations put on aid until a government agreed to aid implemented in the 1980s. This did not work. Aid needs to somehow provide incentives for giving the people power. Power needs to be transferred from the governments to the people. Aid should be restructured in order to allow for skills building in country. According to Collier, “technical assistance is not negligible – money spent on countries with the skilled people who constitute technical assistance is a quarter of total aid flows.” The problem is not that too little money is being provided, rather that technical assistance is not country specific. Aid is also given as budget support, reinforcement for failing states. There is an opportune moment for assisting failing states but it must be done at the right time. Aid cannot be continually poured into failing states and be expected to produce a turnaround. However, if aid is given at the opportune political moment, it can support turnarounds. Collier suggests that when that moment occurs “pour in the technical assistance as quickly as possible to help implement reform” and “then, after a few years, start pouring in the money for the government to spend.”
Actual Impact
Peter Singer argues that over the last three decades, “aid has added around one percentage point to the annual growth rate of the bottom billion.” He argues that this has made the difference between “stagnation and severe cumulative decline.” Aid can make progress towards reducing poverty worldwide.Improving the economic efficiency of aid
Currently, donor institutions make proposals for aid packages to recipient countries. The recipient countries then make a plan for how to use the aid based on how much money has been given to them. Alternatively, NGO's receive funding from private sources or the government, and then implement plans to end their specific issues. In the views of many scholars, this system is inherently ineffective. If we hope to eliminate poverty, we must reexamine how we distribute funding, and how we attack problems.According to Sachs, we should redefine how we think of aid. The first step should be to learn what developing countries hope to accomplish and how much money they need to accomplish those goals. Goals should be made with the Millennium Development Goals
Millennium Development Goals
The Millennium Development Goals are eight international development goals that all 193 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015...
in mind for these furnish real metrics for providing basic needs. The “actual transfer of funds must be based on rigorous, country-specific plans that are developed through open and consultative processes, backed by good governance in the recipient countries, as well as careful planning and evaluation.”
Possibilities are also emerging as some developing countries are experiencing rapid economic growth, they are able to provide their own expertise gained from their recent transition. This knowledge transfer can be seen in donors, such as Brazil, whose $1 billion in aid outstrips that of many traditional donors. Brazil provides most of its aid in the form of technical expertise and knowledge transfers. This has been descried by some observers as a 'global model in waiting'.
Various Academic Theories
Since the 1960's, improving the efficiency of foreign aid has been a common topic of academic research. There is debate on whether foreign aid is efficacious, but for the purposes of this article we will ignore that. Given that schema, a common debate is over which factors influence the overall economic efficiency of foreign aid. Indeed, there is debate about whether aid impact should be measured empirically at all, but again, we will limit our scope to increasing the economic efficiency.Philosophy
At the forefront of the aid debate has been the conflict between professor William Easterly of New York University and his ideological opposite, Jeffrey Sachs, from Columbia University. Easterly advocates the "searcher's" approach, while Sachs advocates a more top down, broad planned approach. We will discuss both of these at length.“Searchers Approach”
Bill Easterly offers a nontraditional, and somewhat controversial “searching” approach to solving poverty, as opposed to the “planned” approach in his famous critique of the more traditional Owen/Sachs, The White Man’s Burden. Traditional poverty reduction, Easterly claims is based on the idea that we know what is best for those countries, which are impoverished. He claims that they know what’s best. Having a top down “master plan”, he claims is inefficient. His alternative, called the “Searchers” approach uses a bottom up strategy, which surveys the poor in the countries in question, and then tries to directly aid individuals, rather than governments. Local markets are a key incentive structure. The primary example is of Mosquito nets in Malawi. In this example, an NGO sells Mosquito nets to rich Malawians, and uses the profits to subsidize cheap sales to the impoverished. Hospital nurses are used as middle-women, profiting a few cents on every net sold to a patient. This incentive structure has seen the usage of nets in Malawi spike over 40% in less than 7 years.Bottom Up Philosophy
One of the central tenants in Easterly’s approach is a more bottom up philosophy of aid. This applies not only to the identification of problems, but to the actual distribution of capital to the areas in need. In effect, Easterly would have countries go to the area which needed aid, collect information about the problem, find out what the population wanted, and then work from there. In keeping with this, funds would also be distributed from the bottom up, rather than being given to a specific government.
Utilize Aid Organizations, and Local Frameworks
Easterly also advocates working through currently existing
Aid organizations, and letting them compete for funding. Local
Frameworks, and national organizations are also good.
Aid Individuals, not governments
Easterly strongly discourages aid to government as a rule. He believes,
For several reasons, that aid to small “bottom up” organizations and
Individual groups is a better philosophy than to large governments.
Independent Evaluation
Easterly claims that for far too long, aid agencies have been inefficient, while still being funded. The current system of evaluation for most aid
Programs is internal. Since it is in the best interest of an organization or movement to represent its own success in a positive light, Easterly claims there is much bias. What he proposes as an alternative is an independent auditing system for aid organizations. Before receiving funding, the organization should state their goals and how they expect to measure and achieve them. If they do not meet their goals, Easterly claims we should shift our funding to organizations who are successful, thus making the Aid Organizations become inefficient, or obsolete.
Compartmentalized Goals
Easterly believes that aid goals should be small. In his opinion, one of the main failings of aid lies in the fact that we create large, utopian lists of things we hope to accomplish, without the means to actually see them to fruition. Rather than establish a utopian vision for a particular country, Easterly insists that we shift our focus to the most basic needs and improvements, from the bottom up. In effect, he argues that if we feed, clothe, vaccinate, build infrastructure, and support markets, the macroscopic results will follow.
Use The Market
The “Searching Approach” is intrinsically tied to the market. Easterly
Claims that the only way for poverty to truly end is for the poor to be
Given the capability to lift themselves out of poverty, and then for it to
Happen. Philosophically, this sounds like the traditional “bootstrap”
Theory, but it isn’t. What he says is that the poor should be given the
Fiscal support to create their market, which gives them the ability to
Become self reliant in the future.
Ideas
In the end of his book, Easterly proposes a voucher system for foreign
aid. The poor would be distributed a certain amount of vouchers,
which would act as currency, redeemable to aid organizations for
services, medicines, and the like. These vouchers would then be
redeemed by the aid organizations for more funding. In this way,
the aid organization would be forced to compete, if by proxy.
Proscriptive ‘Ladder Approach’
Sachs presents a near dichotomy to Easterly. Sachs presents a broad,proscriptive solution to poverty. In his book, The End of Poverty, he explains
how throughout history, countries have ascended from poverty by following
a relatively simple model. First, you promote agricultural development, then
industrialize, then embrace technology, and then you become modern. This is
the standard “western” model of development that has been followed by
countries such as China and India. Sachs main idea is that there should have a
broad analytical “checklist” of things a country must attain before it can
reach the next step on the ladder to development. Western nations should
donate a percentage of their GDP as determined by the UN, and pump money
into helping impoverished countries climb the ladder. This strategy, he
insists, will eradicate world poverty by 2025.
Top Down
Sachs advocates using a top down methodology, where broad ranging plansDeveloped by external aid organizations like the UN and World Bank. He
Advocates having these plans so that poverty can be effectively eradicated.
Countries should follow the plans, and if they do, they will eventually escape
Poverty.
Use External Framework
Part of Sachs’ philosophy includes strengthening the International MonetaryFund, World Bank, and the United Nations. If those institutions are given the
Power to enact change, and freed from mitigating influences, then they will
be much more effective. Sachs also comments that it is not the fault of these
international organizations, as they are composed of member nations, which
is where the problem truly lies. The powerful nations of the world must make
a commitment to end poverty, and then stick to it, in Sachs’ opinion.
Aid through existing governments
Sachs believes it is best to utilize country governments, and empower theGovernments of the impoverished world. He remarks that while the
Corruption argument is logically valid in that corruption harms the efficiency
Of aid, levels of corruption tend to be much higher on average for countries
With low levels of GDP, and contends that this hurdle in government should
Not disqualify entire populations for much needed aid from the west.
Self Evaluation
Sachs does not see the need for independent evaluators, and sees them as adetractor to proper progress. He argues that many facets of aid cannot be
effectively quantified, and thus it is not fair to try to put empirical
benchmarks on the effectiveness of aid.
Optimism
Sachs’ view makes it a point to attack and attempt to disprove many of theideas that the more “pessimistic” Easterly stands on.
First, he points to economic freedom. One of the common threads of logic
In aid is that countries need to develop economically in order to rise from
Poverty. On this, there is not a ton of debate. However, Sachs contends that
Easterly, and many other neo-Liberal economists believe high levels of
Economic freedom in these emerging markets is almost a necessity to
Development. Sachs himself does not believe this. He cites the lack of
Correlation between the average degrees of Economic Freedom in countries
And their yearly GDP growth, which in his data set is completely
Inconclusive.
Also, Sachs contends that democratization is not an integral part of having
Efficient aid distribution. Rather than attach strings to our aid dollars, or only
Working with democracies or “good governments”, Sachs believes we should
Consider the type of government in the needy country as a secondary
Concern.
Sachs’ entire approach stands on the assertion that abject poverty could be
Ended worldwide by 2025.
David Dollar
Dollar/Collier showed that current allocations of aid are allocated inefficiently. They came to the conclusion that aid money is given in many cases as an incentive to change policy, and for economic reasons, which in many cases can be less efficient than is optimal. They agree that bad policy is detrimental to economic growth, which is a key component of poverty reduction, but have found that aid dollars do not significantly incentivize governments to change policy. In fact, they have negligible impact. As an alternative, Dollar proposes that aid be funneled more towards countries with “good” policy and less than optimal amounts of aid for their massive amounts of poverty. With respect to “optimal amounts” Dollar calculated the marginal productivity of each additional dollar of foreign aid for the countries sampled, and saw that some countries had very high rates of marginal productivity (each dollar went further), while others [with particularly high amounts of aid, and lower levels of poverty] had low [and sometimes negative] levels of marginal productivity. In terms of economic efficiency, aid funding would be best allocated towards countries whose marginal productivities per dollar were highest, and away from those countries who had low to negative marginal productivities. The conclusion was that while an estimated 10 million people are lifted from poverty with current aid policies, that number could be increased to 19 million with efficient aid allocation.
Dalgaard
In a followup study to Collier, Dalgaard finds that regardless of policies and utility, aid seems to be less efficient per dollar in the tropics. He states that aid dollars are likely to be just as effective anywhere, so there must be a mitigating externality that is not being accounted for or fleshed out.
“New Conditionality”
New Conditionality is the term used in a paper to describe somewhat of a compromise between Dollar and Hansen. Paul Mosely describes how policy is important, and that aid distribution is improper. However, unlike Dollar, “New Conditionality” claims that the most important factors in efficiency of aid are income distributions in the recipient country and corruption.
McGillivray
One of the problems in foreign aid allocation is the marginalization of the fragile state. The fragile state, with its high volatility, and risk of failure scares away donors, and the people of those states feel harm as a result. Additionally, the fate of neighboring states is important, as economies of the directly adjacent states to those impoverished, volatile “fragile states” can be negatively impacted by as much as 1.6% of their GDP per year. This is no small figure. McGillivray advocates for the reduced volatility of aid flows, which can only be attained through analysis and coordination.
Beynon
Beynon revisits Collier/Dollar’s “efficient aid allocation” and finds much of the same results, although he believes that the model needs to be more robust, with more samplings, and take into account other Millennium Development Goals.
See also
- Debt reliefDebt reliefDebt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. From antiquity through the 19th century, it refers to domestic debts, in particular agricultural debts and freeing of debt slaves...
- Disability aid abroadDisability aid abroadDisability Aid Abroad is an international not for profit charity formed to help disabled people with disabilities in developing countries.CEO John Coghlan says that "people with disabilities are the forgotten voice of international aid and they need urgent specified help.A recent UNESCO report...
- Global Food Security Act of 2009Global Food Security Act of 2009The Global Food Security Act of 2009, also known as the Lugar-Casey Food Security Bill, is a bill introduced February 5, 2009 in the 111th Congress by Richard Lugar and sponsored by Robert Casey , Mark Begich , Roland Burris , Susan Collins , Richard Durbin , Thomas Harkin , John Kerry ,...
- International Aid Transparency InitiativeInternational Aid Transparency InitiativeThe International Aid Transparency Initiative is a global campaign to create transparency in the records of how aid money is spent. The initiative hopes to thereby ensure that aid money reaches its intended recipients...
- Transparency InternationalTransparency InternationalTransparency International is a non-governmental organization that monitors and publicizes corporate and political corruption in international development. It publishes an annual Corruption Perceptions Index, a comparative listing of corruption worldwide...
- United States foreign aid
Further reading
- http://www.nyu.edu/fas/institute/dri/Easterly/File/Easterly_FP_article_2002.pdf The cartel of good intentions, Foreign Policy, Washington, Jul/Aug 2002, Authors: William Easterly, Issue: 131, Pagination: 40-49, ISSN: 00157228
External links
- Foreign Relations and International Aid resources from University of Colorado–Boulder
- AidData - a web portal for information on development aid, including a database of aid activities financed by donors worldwide
- EuropeAid Cooperation Office
- OECD Development Co-operation Directorate (DAC)
- Overseas Development Institute
- Aid Reform Campaign at Oxfam America
- Foreign Aid at Brookings InstitutionBrookings InstitutionThe Brookings Institution is a nonprofit public policy organization based in Washington, D.C., in the United States. One of Washington's oldest think tanks, Brookings conducts research and education in the social sciences, primarily in economics, metropolitan policy, governance, foreign policy, and...
- Center for Global Development's Modernizing U.S. Foreign Assistance Initiative
- Aid Workers Network
- www.realityofaid.org
- Aid Harmonization: What Will It Take to Meet the Millennium Development Goals?
- Aid at GlobalIssues.org
- Euforic makes information on Europe's development cooperation more accessible
- The Development Executive Group Resource for staffing, tracking, winning, and implementing development projects.
- European Network on Debt and Development reports, news and links on development aid.
- How Food Aid Work.
- Aid Guide at OneWorld.net
- NL-Aid.
- http://www.aid-uk.co.uk
- Foreign Aid Projects 1955-2010