The need of the developing nations for international assistance from wealthy nations is definitely not reduced. There are thousands of people particularly that die everyday because of starvation, malnutrition and diseases and millions of families live less than a dollar due to extreme poverty. Wealthy nations are helping curb this problem by giving aids and assistance. However there are a number of people that criticises the idea of giving aid to these developing nations.
According to Miskel (1997) there are two perspectives when it comes to foreign aid; these are the infidels and the crusaders. The crusaders are individuals who believes that the wealthy nations such as the United States spends little on foreign aid and helping the poor nations, on the other hand the infidels think that wealthy nations spend too much on foreign aid.
This paper examines international aid and development. It discusses the role of the wealthy nations in alleviating hunger and poverty on poorer nations. It also gives discussion on the advantages and disadvantages of foreign aid.
Foreign Aid is the military, technical, economic and financial assistance given by wealth nations to developing countries, foreign aid programs aims to rehabilitate the economies of nations that are damaged by wars, strengthen the military of its allies, and promotes economic growth (The Columbia Encyclopaedia, 2004). In addition, Pybus (2003) discussed that foreign aid comes in different forms; basically foreign aid is the arrangement of direct or indirect subsidy for products and services at costs which is less than the prices in the market. Another form of aid is through loans which is often time used for infrastructure and technical services, unlike ordinary loans, foreign aid or “soft” loans have lower interest rates and can be paid for a longer period of time. Soft loans are long-term aids given to developing nations in order to sustain their economy. On the other hand, the most popular for of aid is the emergency aid wherein it is given to countries that are hit by disasters such as war, tsunamis or typhoons, usually it is in the form of food, shelter an clothing.
But despite of the benefits developing nations gain from foreign aid a number of studies have pointed out that foreign aid is not an effective form in alleviating poverty amongst poor nations. According to Djankov, Montalvo, and Reynal-Querol (2006) foreign aids could modify the investment share of the gross domestic product, wherein it has an indirect effect on the economic growth of the nation or could also have an impact on the consumption of the government, which has a negative impact on the economic growth of the nation.
The efforts of wealthy nations to help the poor countries have been less successful particularly in promoting economic growth, establishing a democratic and honest government and changing the economic policies of these nations in order to facilitate growth (Easterly, 2006). In addition, Easterly discussed that in Africa wealthy nations have spent approximately 8 billion on aid yet there has been no progress. According to Biz Ed (2007) there are a number of reasons why foreign aid does not help poor nations and will has a number of negative effects and these are:
- Foreign aids are usually handled by corrupt official who manages the projects that are financed by aid.
- The money given by foreign aids is often times misspent even if it is managed honestly.
- The transfer of the grants in order to fill the gaps in foreign exchange will interfere in the determination of the exchange and interest rates.
- Foreign aids creates an image among nations that receives the aid that developed nations are very wealthy which encourages its citizens to migrate to these nations because they believe that those nations are the place to prosper.
- The flow of aid to less developed nations is not always dependable because it is manoeuvred for political reasons.
- Aid is mostly seen as charity.
For a number of developing nations foreign aid is an important source of revenue for their government. However, if there is a large influx of foreign aid from wealthy nations it may generate corruption, civil wars and rent-seeking activities. Djankov et al used the Chad-Cameroon oil pipeline project as an example; the researchers stated that it was one of the biggest and most expensive projects of the World Bank amounting to 0 million wherein they applied a novel scheme in order to prevent corruption in which the revenue must go to an offshore account and the government of Chad must use the money to provide infrastructure, health, and education. But when the revenues have reached the pockets of government officials in 2004 the project began to encounter problems. The first revenues received by the government from the oil companies was utilised to buy weapons, moreover, the government of Chad reduced the regulation that allows its oil revenues to go to poverty alleviation programs. As mentioned earlier, foreign aids could also spark civil wars in some nations that depend on it. Like in the case of Somalia wherein a civil war occurred because different factions of the society want to control and manage the food aid given to the country (Marren, 1997).
Most of the wealthy nations give foreign aids to the developing countries in order to facilitate democratisation. A number of researchers believe that it is one of the keys that will reduce poverty. Ghali (2007) stated that nations that gave foreign aid must help these countries transform some of their mentalities and convince them to venture on a process of structural change and these can be done by the aid of United Nations wherein it could provide these nations the technical assistance that will empower and educate its citizens.
Aside from civil wars, foreign aids can also be a source of rent seeking activities wherein some organisations make money by manipulating the economy than gaining profits via trade and production of additional wealth. In the case of Uganda only 13 percent of the foreign grants have reached schools between the years 1991-1995 due to rent-seeking activities (Reinikka and Svensson, 2004).
Foreign aids do not necessarily help the impoverished nations instead it decreases the check and balance of the legislature, judiciary and executive branches of the government. This view is greatly manifested in a number of nations specifically in Africa wherein despite of the help and grants given by other nations the economic, political and social status remains the same because most of the people in power engages in rent-seeking activities and tries to exclude other groups in the process of decision-making. Because of that the political situation in most countries that receives aid becomes less democratic.
A number of studies have also pointed out the ineffectiveness of foreign aid. In the study of Boone (1996) he found out that aid does not help increase the investments in the nation; however it helps increase the government size which could be more of a disadvantage since most of the nations that receive foreign aid have corrupt governments. But despite of the issues regarding foreign aids, it is still a big help if the nation has good policies on trade, fiscal and monetary which increases the conditionality of the foreign aid in return would enhance the efficiency of the aid (Burnside and Dollar, 2000).
But despite of the negative effects of foreign aid to some nations as identified by a number of studies, still foreign aids have been pouring over the last years. Foreign aid has positive effects on poor nations because it could potentially contribute to democratisation by technical assistance wherein it emphasises on the electoral process of the nation receiving the aid, helps strengthen the legislature and judiciary system and advocating civil society organisations, another is through foreign aid the budget for education for the impoverished nations will be increased wherein it is favourable for democratisation (Knack, 2004). Most advocates of foreign aid state that the capital inflow from foreign aid is necessary for the economic growth of less developed countries because it closes the gap between the domestic savings and investments which could help in overcoming shortages in skills and capitals, as well as, adding earnings on the export of the nation in order to finance the importation of goods (Fayissa and El-Kaissy, 1999.).
In addition, one of the objectives of the foreign aid programs is to promote democracy which could develop motivation for reform which could have the probability to increase the standards of living of the citizens such as having freedom of speech (Meernik, Krueger, and Poe, 1998).
Aside from the political reforms, foreign aids also change the fiscal structure of the less developed nations. According to Payer (1974) the measures such as free trade and promotion of foreign investments encourages responsible and accountable management of finances by the government in order to increase growth and sustain the development.
Contrary to some views that aid enhances corruption Tavares (2003) discussed that foreign aid could decrease the incidence of corruption because foreign aid is connected with condition and rules that limits the free will of the officials of the recipient country in handling the money, and it alleviates the shortages in public revenue and facilitates the increase of salaries for employees in the public office thus decreasing corruption among public employees.
The recipients of foreign aids are not the only ones that could obtain benefits but the donors as well. According to Ehrenfeld (nd) the reason of most donors is the strategic and economic interests like in the case of Japan wherein aids are given mostly in the Asian region since the country will benefit if these nations will prosper. Therefore the interest of the governments of donor nations shapes the form of aids that in return will help them strengthen their ties with the recipient in various reasons (Ram, 2003). In the case of the economic interests tied aid is usually utilised by donor nations in order to develop job opportunities and advance the export industry by obtaining sales from the nations that receives the aid. Aside from economics, politics play a major role in foreign aid wherein assistance to nations are given in order to reform their government to democracy and develop a better governance because these nations believe that it would improve the security in the world if most of the nations are democratic.
Even though foreign aids are given to less developed nations it doesn’t mean that they are responsible for ending hunger and poverty. Most rich nations provide aid and assistance because of humanitarian reasons, as well as, economic and political reasons. The government as well as the citizens of the less developed nations have the responsibility to fight hunger and poverty. Poor individuals in impoverished communities have the need and responsibility to fight poverty and hunger thus they are the primary actors in the fight against poverty and hunger.
However, these poor individuals remain impoverished because of the lack of assets, technologies that will enable them to move away from poverty and efficient institutions that will help them. This is where foreign aids come into place.
Foreign aids do not only mean money but also assistance to these communities. Foreign aids are the ones that have the responsibility to empower the poor people through teaching them to develop their own organisation that will serve their own needs and interests, wherein these organisations have the ability to influence other organisations in the society that would help in sending their messages to the government. Foreign aid also has the responsibility to provide new technologies that would facilitate the growth in the communities. Empowering people and having new resources will decrease the prevalence of hunger and poverty in less developed nations.
Foreign aid comes in various forms, as mentioned earlier but usually it is in the form of soft loans but there are non-government organisations that contributes to foreign aid such as humanitarian missions by organisations like Red Cross. It is a known fact that most of the impoverished nations in this world do not have the capability to provide the basic necessities needed by its citizens therefore foreign aid is essential because somehow it alleviates poverty and hunger. Without foreign and humanitarian aids given to these countries more people would have died.
No country in this world wants to depend on another nation to provide the basic needs of the people thus foreign aids do not institutionalise dependence, aids such as food and clothing are only temporary. On the other hand, the money given to the government could either help or worsen the condition of the nation. If the foreign aids lie in the hands of a corrupt government there is a huge probability that its people will depend on foreign aids in order to live, but if the government have allocated the funds in sustainable projects then the needs such as health care and education could be provided to the citizens.
The governments of these nations must have the political will and power to alleviate the conditions of its people. According to van de Sand (2001) the power to enable poor families and communities to escape from hunger and poverty lies in the hand of their government. In most developing nations the national government has the power but doesn’t have the will to implement the policies that would help poor people and communities.
Poor individuals in less developed nations constitute the majority of the population and if these people would come together and pressure their governments to create programs and policies that would be beneficial to them then the government will most likely participate in the fight against hunger and poverty. If the foreign aid could also be allocated in organisations of the poor then they will have the voice and the power to address their needs in the government. Foreign aid does not necessarily come in the form money. Imparting the knowledge and skills that will enable them to voice out their concerns and make direct changes in their communities could be a more powerful form of foreign aid.
The government of less developed nations do not have the knowledge and ability to handle, manage and allocate the funds properly. The main responsibility of the donors is to help and assist the government in addressing and responding appropriately to the interests of the poor people whether it is material, social, economical or political. The donor or donors has the ability to influence the government regarding its will and commitment to the people and the capacity and resources of the nation. Assistance on actions such as building infrastructure and investing on the human capital are some of the ways in which the donors could help.
Van de Sand enumerated various approaches that could be useful in fighting poverty and hunger in less developed nations and these are:
Organisations of the poor
Developing organisations for the poor could be a useful way in determining whether the foreign aid given to poor nations goes to the basic services needed like employment, shelter, education and healthcare. By strengthening the organisations of the poor the people will be more empowered and could demand for accountabilities from the government.
Poverty Reduction Strategies
Developing poverty reduction strategies to aid the governments would make a difference on the lives of the poor people. Creating policies to benefit the poor would be one strategy the government can do.
Moreover, Pielemeier (2006) enumerated the ways in which wealthy nations could address poverty alleviation and these are:
Integrating Population and Environment
The projects that are usually included are natural resource management and family planning. By integrating population and environment the roles of the female in the community are expanded and it initiates positive changes in the community. In addition the projects are cost-effective therefore beneficiaries and organisations are starting to utilise it.
Coastal Resource Management
The projects in this area focus on the sustainable utilisation of coastal fishing areas and forested areas owned by the government and communities. It gives opportunities for generating income and gives a safety net for fishermen because the dependence on over fished waters is reduced and there is enough time for regeneration of marine resources.
Deforestation-
Providing alternative livelihoods to farmers that uses the slash and burn technique, as well as, availability of credit is seen as important ways to conserve the forests and waters. By providing direct assistance to these people it benefits both parties because farmers now have new ways for generating income at the same time they conserve the forest.
Population
According to the United Nations poverty causes poor health, rapid population and gender inequality. And most of the less developed nations have huge population. Through teaching these people about family planning and reproductive health poverty will be alleviate because as more women use family planning female workers increase and households become smaller, therefore the basic necessities of the family could be provided.
One of the reasons why foreign aid is viewed as an ineffective form of help less developed nations is because most of the people in the government that handles the aid are corrupt or does not have the proper knowledge. Osborne (2002) stated that the best thing to do to help poor nations is to keep the markets of wealthy nations open. Assistance through cash and projects could be harmful than helpful because it could be a source of corruption. The best way in which governments of less developed nations is to participate in the global economy through removing the hindrances to trade and removing the distortions in the economy.
Making foreign aid effective in less developed nations is hard. The principle of conditionality in aid does not work in most nations because most of the government lack the accountability and credibility to handle the funds. Loans in the form of “soft” loans is the best way for foreign aid to be effective because the government has to return it, thus instilling discipline on the fiscal management of the government. Therefore, increasing the accountability and responsibility of the government that receives foreign aid is one of the best ways to improve the efficiency of foreign aid.
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