Aid

Aid received, per capita, in 2007, in $ of Official Development Assistance per person. Note that grey countries can either be non-recipients or ones for which data is unavailable. The data were converted into dollars using exchange rates, hence may not accurately reflect the purchasing power of the foreign aid received.[1]

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.[2] 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.[3] Humanitarianism and altruism are, nevertheless, significant motivations for the giving of aid.[4] 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.[5] 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.[6] 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.

Contents

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 wars) and natural disasters. 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:

  1. The right to live with dignity.
  2. The distinction between combatant and non-combatants.
  3. The principle of non-refoulement.

Development aid

Official Development Assistance (ODA) measured in GNI in 2006. Source: OECD

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:

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 support: 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 aid: 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 Development's Development Assistance Committee puts foreign aid into three categories:

  • Official Development Assistance (ODA): Development aid provided to developing countries (on the "Part I" list) with the clear aim of economic development
  • 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 altruism; 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 European 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.[7]

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.[8] 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:

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.[9]

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.[10][11]

Many individuals[12] 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.[citation needed] 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.[13]

James Shikwati, a Kenyan 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.[14] 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:

"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."[15][16]

Some have argued that the major international aid organizations have formed an aid cartel.[17]

Another criticism is that financial flows from foreign aid can provoke effects that are similar to the resource curse.[18]

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.[19]

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 Institute, 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,[20] 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) 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.[20]

Response to criticisms of aid

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.’”[21] This “pro-rich” trend is not unique to the United States.[21][22] 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.”[23] What this means is that, at the most basic level, aid is not targeting the most extreme poverty.[21][22]

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.”[23]

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.[22]

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.[22]

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.”[23] 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.[23]

The fourth trap is that of bad governance. However, “there are three ways in which aid can potentially help turnarounds: incentives, skills, and reinforcement.”[23] 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.[23] 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.”[23] 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.”[23]

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.”[21] Aid can make progress towards reducing poverty worldwide.

Aid Inefficiencies and Possible Improvements

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.’”[21] This “pro-rich” trend is not unique to the United States.[21][22] 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.”[23] What this means is that, at the most basic level, aid is not targeting the most extreme poverty.[21][22]

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.”[23]

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.[22]

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.[22]

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.”[23] 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.[23]

The fourth trap is that of bad governance. However, “there are three ways in which aid can potentially help turnarounds: incentives, skills, and reinforcement.”[23] 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.[23] 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.”[23] 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.”[23]

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.”[21] 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.[22] 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 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.”[22]

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.[24] Brazil provides most of its aid in the form of technical expertise and knowledge transfers.[24] This has been descried by some observers as a 'global model in waiting'.[25]


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 [26] 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. [27]

“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. [28]

Aspects of “Searcher’s Approach”

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. [29]

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. [30]

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. [31]

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.[32]

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. [33]

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. [34]

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.[35]

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. [36]


Top Down

Sachs advocates using a top down methodology, where broad ranging plans 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. [37]

Use External Framework

Part of Sachs’ philosophy includes strengthening the International Monetary 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. [38]

Aid through existing governments

Sachs believes it is best to utilize country governments, and empower the 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. [39]

Self Evaluation

Sachs does not see the need for independent evaluators, and sees them as a 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.[40]

Optimism

Sachs’ view makes it a point to attack and attempt to disprove many of the 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.[41]

Economic Efficiency

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. [42]

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. [43]

“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. [44]

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. [45]

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. [46]


Societal Efficiency

Need Section Here

Structural Qualifications

Need Section here about different types of government

See also

Notes and references

  1. ^ World Bank, World Development Indicators, 2010
  2. ^ The Development Assistance Committee of the Organisation for Economic Cooperation and Development defines its aid measure, Official Development Assistance (ODA), as follows: "ODA consists of flows to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agencies, each transaction of which meets the following test: a) it is administered with the promotion of the economic development and welfare of developing countries as its main objective, and b) it is concessional in character and contains a grant element of at least 25% (calculated at a rate of discount of 10%)." (OECD, The DAC in Dates, 2006. Section, "1972".)

    Former USAID official Carol Lancaster, in her book Foreign Aid (2007) defines foreign aid as: "a voluntary transfer of public resources, from a government to another independent government, to an NGO, or to an international organization (such as the World Bank or the UN Development Program) with at least a 25 percent grant element, one goal of which is to better the human condition in the country receiving the aid." (p 9.)

    Both definitions employ the concept that benefit to the people of the receiving country must be one but not necessarily the only objective.

  3. ^ Lancaster, p 13, writes, "For much of the period of this study [World War Two to the present] foreign aid was used for four main purposes: diplomatic [in which she includes a government's international security and political interests abroad], developmental, humanitarian relief and commercial."
  4. ^ Lancaster, pp 4, 5.
  5. ^ Lancaster, p 67: "In 1957 the administration (with congressional support) separated economic from military assistance and created a Development Loan Fund (DLF) to provide concessional credits to developing countries world-wide (i.e. not, as in the past, just those in areas of potential conflict with Moscow) to promote their long-term growth.
  6. ^ Lancaster uses either ODA or ODA plus OA ("Official Assistance" -- another DAC government-aid category) as her main statistic. She considers it better to add the OA but very often just uses the ODA figure alone; eg., for Table 1.1 (p 13), Table 2.2 (p 39) and Table 2.3 (p 43). In any case the difference is now moot since the DAC recently merged the two categories.
  7. ^ S.K.B. Asante, "International Assistance and International Capitalism: Supportive or Counterproductive?", in Gwendolyn Carter and Patrick O'Meara (eds) African Independence: The First Twenty-Five Years, 1985; Bloomington, Indiana, USA; Indiana University Press. p. 249.
  8. ^ Asante, p. 251.
  9. ^ Asante, p. 265.
  10. ^ Collier, Paul (2005). Is Aid Oil? An analysis of whether Africa can absorb more aid. Centre for the study of African Economies, Oxford University.
  11. ^ Djankov, Montalvo, Reynal-Querol (2005). The curse of aid. The World Bank.
  12. ^ [1], An article on Global Issues about the lack of adequate aid that also criticises U.S. Aid for the policy conditionalities that often accompany it
  13. ^ Habibzadeh, Yadollahie, Kucheki (2008). International aid in disaster zones: help or headache? Lancet.
  14. ^ Thilo Thielke (interviewer), translated by Patrick Kessler. "For God's Sake, Please Stop the Aid!"
  15. ^ [2] Address by Mark Malloch Brown, UNDP Administrator, Makerere University, Kampala, Uganda, 12 November 2002
  16. ^ [3] "Farm Subsidies That Kill", July 5, 2002, By NICHOLAS D. KRISTOF, New York Times
  17. ^ [4] The cartel of good intentions, Foreign Policy, Washington, Jul/Aug 2002, Authors: William Easterly, Issue: 131, Pagination: 40-49, ISSN: 00157228
  18. ^ Djankov, S; Montalvo, J G; Reynal-Querol, M (2008), "The curse of aid", Journal of Economic Growth (Springer) 13 (3): 169–94, http://www.econ.upf.edu/docs/papers/downloads/870.pdf 
  19. ^ Loewenberg, Samuel (June 10, 2008) Coalition seeks cabinet-level foreign aid. Politico.com. Retrieved Dec. 4, 2008.
  20. ^ a b Alan Hudson and Linnea Jonsson (2009) ‘Beyond Aid’ for sustainable development London: Overseas Development Institute
  21. ^ a b c d e f g h Singer, Peter. 2009. The Life You Can Save. New York:Random House.
  22. ^ a b c d e f g h i j Sachs, Jeffrey D. 2005. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Books.
  23. ^ a b c d e f g h i j k l m n o p Collier, Paul. 2007. The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It. Oxford and New York: Oxford University Press.
  24. ^ a b Cabral and Weinstock 2010. Brazil: an emerging aid player. London: Overseas Development Institute
  25. ^ Cabral, Lidia 2010. Brazil’s development cooperation with the South: a global model in waiting. London: Overseas Development Institute
  26. ^ http://williameasterly.org
  27. ^ http://www.earth.columbia.edu/articles/view/1770
  28. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  29. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  30. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  31. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  32. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  33. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  34. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  35. ^ Easterly, William (2007). The White Man's Burden. Oxford University Press. ISBN 0199226113. 
  36. ^ Sachs, Jeffrey (2005). The End of Poverty. Penguin Group. 
  37. ^ Sachs, Jeffrey (2005). The End of Poverty. Penguin Group. 
  38. ^ Sachs, Jeffrey (2005). The End of Poverty. Penguin Group. 
  39. ^ Sachs, Jeffrey (2005). The End of Poverty. Penguin Group. 
  40. ^ Sachs, Jeffrey (2005). The End of Poverty. Penguin Group. 
  41. ^ Sachs, Jeffrey (2005). The End of Poverty. Penguin Group. 
  42. ^ http://www.sciencedirect.com/science/article/pii/S0014292101001878
  43. ^ http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2004.00219.x/full
  44. ^ http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2004.00220.x/full
  45. ^ http://www.ineesite.org/uploads/documents/store/doc_1_Aid_Allocation_and_FS.pdf
  46. ^ http://www.odi.org.uk/resources/download/1861.pdf

Further reading

  • Moyo, Dambisa (2010). Dead Aid: Why Aid is Not Working and How There is Another Way for Africa. Penguin. ISBN 978-0-141031-187. 
  • Riddell, Roger C. (2008). Does Foreign Aid Work?. Oxford University Press. ISBN 978-0-199-544446-2. 
  • Banerjee, Abhijit Vinayak (2007). Making Aid Work. The MIT Press. ISBN 978-0-262-02615-4. 
  • Calderisi, Robert (2006). The Trouble with Africa: Why Foreign Aid Isn't Working. Macmillan. ISBN 1403971250. 
  • Easterly, William (2006). The White Man's Burden: Why the West's Effort to Aid the Rest Have Done So Much Ill and So Little Good. Penguin. ISBN 1594200378. 
  • Lancaster, Carol; Ann Van Dusen (2005). Organizing Foreign Aid: Confronting the Challenges of the 21st Century. Brookings Institution Press. ISBN 0815751133. 
  • Oxfam America (2008). Smart Development: Why US foreign aid demands major reform. Oxfam America, Inc.. http://www.oxfamamerica.org/newsandpublications/publications/briefing_papers/smart-development. 
  • Sogge, David (2002). Give and Take: What's the Matter with Foreign Aid?. Zed Books. ISBN 1842770691. 
  • [5] The cartel of good intentions, Foreign Policy, Washington, Jul/Aug 2002, Authors: William Easterly, Issue: 131, Pagination: 40-49, ISSN: 00157228

External links


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  • aid — [eɪd] noun [uncountable] help, such as food, medicines, or money, given by a government or private organization to help people who are suffering from war, hunger etc: • UN workers have been trying to move food aid to an estimated 2 million… …   Financial and business terms

  • AiD — bezeichnet: Aid (Fluss), ein Nebenfluss der Würm in Baden Württemberg Aid ist das englische Wort für Hilfe, siehe zum Beispiel in: Band Aid Farm Aid Ferry Aid First Aid Irish Northern Aid Live Aid Simplified Aid for EVA Rescue Aids to Scouting… …   Deutsch Wikipedia

  • Aid — Datos generales Nombre real Aída Alonso Iglesias Nacimiento 28 de marzo de 1990 (21 años) Origen …   Wikipedia Español

  • AID — bezeichnet: Aid (Würm), ein Nebenfluss der Würm in Baden Württemberg Aid (Missouri), ein Ort in den USA Aid (Ohio), ein Ort in den USA Chalid al Aid (* 1969), saudi arabischer Springreiter Aid ist das englische Wort für Hilfe, siehe zum Beispiel… …   Deutsch Wikipedia

  • AID — 1 vt: to provide with what is useful in achieving an end conspiracy to counsel or aid draft resisters K. A. Cohen often used in the phrase aid and abet; see also abet vi: to be of use aided in the commission of the crime aid·er …   Law dictionary

  • Aîd — Aïd Religion religions abrahamiques : judaïsme · christianisme · islam Cet …   Wikipédia en Français

  • ʿAid — Aïd Religion religions abrahamiques : judaïsme · christianisme · islam Cet …   Wikipédia en Français

  • aid — aid, aide An aid is someone who helps (in various ways), whereas an aide denotes either of two more specific functions: (1) short for aide de camp, a high ranking officer in the armed services • (Brigadier Monson summoned his five closest aides… …   Modern English usage

  • aid — aid·ance; aid·ant; aid·er; aid·ful; aid·less; aid·man; aid; AID; med·ic·aid; un·aid·ed·ly; …   English syllables

  • Aid — Aid, n. [F. aide, OF. a[ i]de, a[ i]e, fr. the verb. See {Aid}, v. t.] 1. Help; succor; assistance; relief. [1913 Webster] An unconstitutional mode of obtaining aid. Hallam. [1913 Webster] 2. The person or thing that promotes or helps in… …   The Collaborative International Dictionary of English

  • Aïd — Aïd[1] (ce qui donne différentes transcriptions : eid, aid, id) signifie « fête » en arabe. Dans l islam, seules deux fêtes sont authentiquement sacrées : l Aïd el Kebir et l Aïd el Fitr. Les autres célébrations, Mawlid,… …   Wikipédia en Français


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