Can Foreign Aid Help Countries Develop and Get out of Debt?

Can foreign aid help countries

Foreign aid is the voluntary giving or loaning of resources from one country to another. It generally consists of money, labour, or materials, but can also involve food, water, or other basic commodities. While there are advantages to this, there are definitely disadvantages as well. When foreign aid comes in, there is usually a sign of progress. But only when the aid is used judiciously and thoughtfully, can aided countries address their economic and financial crisis and accelerate industrialisation.

International aid has become an accepted policy of industrialised countries to assist in developing the less privileged nations or communities. The UN has encouraged donor countries to contribute 0.7% of their gross domestic product on foreign aid for decades. Britain was the only member of the G7 to meet the contribution target in 2017, according to figures published in April 2018 by the Organisation for Economic Co-operation and Development.

In the run-up to 2017’s general election, Prime Minister Theresa May said: “I’m very proud of the record we have, of the children around the world who are being educated as a result of what the British taxpayer is doing in terms of international aid”.

Questions which arise from this:

According to Luescher in 2009, we are still living in a world where every seventh person is hungry. Then, is foreign aid really helping?
Foreign assistance alleviates hunger in populations hit by natural disasters and other crises. If foreign aid is cut, how will these communities be able to survive?
A large amount of foreign aid does not reach the people, and humanitarian help is requested again. So, does foreign aid perpetuate conflict in aided nations?
Foreign aid is often given with a hidden political agenda. So, does this assistance facilitate donors to get involved with governing in foreign countries?

Useful vocab when talking about foreign aid

Foreign aid – assistance (such as economic aid) provided by one nation to another.
Deal – an agreement entered into by two or more parties for their mutual benefit, especially in a business or political context.
Miss the forest for the trees – an expression used of someone who is too involved in the details of a problem to look at the situation as a whole.
Revolution – a forcible overthrow of a government or social order in favour of a new system.
Enact – make (a bill or other proposal) law.
Democracy – a system of government by the whole population or all the eligible members of a state, typically through elected representatives.
Dictatorship – a country governed by a dictator. Absolute authority in any sphere.
Taxes – a charge usually of money imposed by authority on persons or property for public purposes.
Leverage – the power to influence a person or situation to achieve a particular outcome.
Milk the cow – usually a reference to treating a person or entity as a cash cow. This implies taking advantage of a situation and has a strongly negative tone (except to those happily taking the money).
Catastrophe – an event causing great and often sudden damage or suffering; a disaster.
Counterproductive – having the opposite of the desired effect.
Entice – attract or tempt by offering pleasure or advantage.
Strategy – a plan of action or policy designed to achieve a major or overall aim.

Video for discussion and comprehension

The video below discusses issues surrounding the giving of aid to other countries and why they should (or shouldn’t) give financial help to other countries. While the topic is directly related to finance, much of the debate lies in the politics and favours that would need to be returned for the help received.

Watch the video and then answer the questions below.

  1. What could governments do instead of giving away billions of dollars in foreign aid?
  2. Is foreign aid effective?
  3. Who makes the deals?
  4. When does a leader want to make a deal?
  5. What would happen if a policy were popular?
  6. Does a rich leader need to negotiate with the people?
  7. What happens when a struggling country’s leader gets billions of dollars in aid?
  8. What is the aim of foreign aid?
  9. Does foreign aid reach the citizens?
  10. Is foreign help effective?
  11. What is the solution?

Show Answers

  1. They could grow their economies or strengthen their military.
  2. No, it is not. Foreign aid is very ineffective even in the largest amounts and with the best intentions.
  3. Politicians make the deals, not citizens.
  4. A leader wants to make a deal when he wants to please his population, gain votes or, most likely, avoid revolution.
  5. If policies were popular, the leader would not need to convince the people. He would just enact them.
  6. No. A rich leader does not need the people’s taxes. He is free from the demands of his citizens.
  7. He is less likely to care about the people’s demands. The more aid is given, the freer a leader is to do what he wishes.
  8. The goal of the aid should be developing the economy or solving a humanitarian crisis.
  9. A lot of aid reaches the citizens. It often comes in the form of contract or economic development, which dictators cannot steal.
  10. No, it is not. It is actually counterproductive to fixing problems.
  11. One solution is still giving aid, but more strategically: instead of giving money up front, it can be given conditionally over time.

 

Why foreign aid is needed

Foreign assistance saves lives particularly during calamities and natural disasters. It helps provide livelihoods and housing so that victims can start over.
Industrial development projects supported by foreign help create more jobs, improve infrastructure and contribute to the overall development of the local community.
Foreign help improves relations between donors and aided nations considerably. The humanitarian response of the international community gives a clear indication that donor countries take into account closer ties with aided nations.
Less privileged communities benefit from foreign aid when provided clean water and sanitation facilities, which leads to reducing risk of contracting infections and diseases.

Reasons to cut foreign aid

Foreign aid becomes a tool of oppression rather than empowerment. The constant stream of ‘free’ money is a very convenient way to keep an inefficient government in power.
There is the likelihood that foreign financial support does not reach the people, but goes to the pockets of corrupt tyrants and dictators.
It can create a dependency. Less economically developed countries (LDCs) may become increasingly dependent on donor countries, and become heavily indebted.
It can increase local costs for basic supplies. Development projects can lead to higher local costs for basic needs once the situation stabilizes. In this sense, people may be forced to pay more for their basic needs than they did before the emergency occurred.

Potential debating topics on foreign aid

Donors use foreign aid to clean up their international image.
Donors use foreign aid as an instrument to rapidly engage international partners.
Less economically developed countries use foreign aid to have donors invest in their countries.In 2009, China, a non-democratic country (not involved in Development Assistance Committee, DAC) reached $69.9 billion in foreign aid, two times that of the U.S. foreign aid in the same year. Then, do only democratic governments contribute to meeting world’s increasing humanitarian needs?
Given the case of US aid to Israel, could high levels of foreign assistance be interpreted as favouritism? Isn’t favouritism a kind of veiled totalitarianism?

Conclusion

There are advantages and disadvantages inherent in foreign aid. While the progress of the less economically developed countries is not proven to be achieved through foreign aid alone, international support is necessary. A key challenge is to promote investment in the LDCs so that their development efforts are assisted by foreign assistance.

Further reading

Does Foreign Aid Really Work? by Oxford University Press, USA

Dead Aid: Why aid is not working and how there is another way for Africa by Penguin

https://www.theguardian.com/global-development/2018/feb/12/foreign-aid-less-effective-than-expected-at-curbing-migration-study-says

https://www.tandfonline.com/doi/abs/10.1080/13510349708403526

http://www.lse.ac.uk/News/Latest-news-from-LSE/2018/07-July-2018/Do-we-need-to-rethink-foreign-aid

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