Case Study Analysis – “Aid, Debt Relief, and Trade: an Agenda for Fighting World Poverty”

After rapid growth in the international debt of developing countries in the 1970s – and the increasing incidence of scheduling back debt in the early 1980s, the risk of countries reflecting the ability and willingness of a country to financial services has been a topic of concern for the international world (Cosset and Roy, 1991).

For many years, the U.S. has cut back on its promised obligations and responsibilities to help the cause of development aid. Between 1990 and 1993, U.S. exports to developed countries grew by 6.2%. In contrast, during that same period, U.S. exports to developing countries grew by a remarkable 49.8%, yielding 46 billion dollars more and 920,000 jobs in the United States (Atwood). Assistance cuts hurt America’s

The IMF was established at the Bretton Woods conference in 1944 to provide short term financial assistance to countries experiencing problems with their trade deficit or other Balance of Payments issues, so they could maintain stability in exchange

The World Bank and the IMF are among the two most corrupted financial institutions to exist today. They're also two of the wealthiest institutions in the world. While they were created after WWII supposedly to help countries recover in during harsh conditions or during economic troubles, they have seemingly done the opposite. They manipulate poor countries by giving loans out to countries that are in such harsh conditions that they must accept the loans. Once they do accept the loans, it becomes a never ending maze of debt. Examples of this corrupt dealing exists still today in countries within Africa. The institutions charge huge amounts of interest and place special conditions on the loans that are accepted which creates a great amount debt. Quickly,

Western aid is known to fail to reverse poverty in poor nations for many reasons. The poor nations cannot continue to provide the aid that the western nations were able to give them. There is no real source of income from the poor nations to provide for the aid talked about in our textbook Think Twice such as pesticides for crops or contraceptives. These things were only ever able to be provided through assistance and donations. The aid provided by the westerners ultimately fails because it cannot be sustained. The aid also takes away the control of the poor because they are no longer able to provide for themselves. This causes them to feel helpless which has no positive effect on reversing poverty. Although the Western Aid only has good intentions

Firstly, not all poor countries have been able to benefit debt cancellation. Some were excluded from the original HIPC deal because they had done a relatively good job in managing their debts. Today, these countries still spend a significant portion of their resources servicing their debt. In 2013, for example, Lesotho spent $40 million paying its external creditors. Kenya spent $620 million servicing its external debt, which is equal to 20% of the aid it received the same year. The HIPC scheme is now coming to an end. Except for the few countries still eligible to enter it, there is now no international process in place for dealing with government debt crisis.

However, the post-crisis public debt issue was not just a European trend. The world’s government

create disincentives in the countries they are trying to help. Sending money to countries with misdirected policies and weak rule of law increases the recipients’ debt without visible economic growth. Nevertheless, no significant

This debt crisis was certainly foreseeable, but the difficulty with the debt of the states lies in the history that can be made for each country, notably Greece, Ireland, Spain, Italy and Portugal. In fact, all countries have followed different paths and today they are burdened with debts more or less important that have multiple causes. The common cause that has weighed in all states is the gradual weakening of economic growth. Beginning in the 1970s, with highs and lows, the euro area tends to grow less strongly, resulting in a limit on the resources of states to meet their needs. We also observe the widespread phenomenon in all Western countries and Japan, namely the demographic aging, which gives rise to additional burdens with which European states can not "cheat", cease paying pensions or cease Care for elderly people who are sick and dependent. These are general factors to which are added factors such as the lack of awareness of the new competition of Asian and emerging countries, which affects both the

Decolonization of many countries in Africa, Latin America and Asia in the 1960s was followed by aid flow

Although Western donors may have had good intentions, the cycle of poverty has continued (28). Although the Marshall Plan was a successful aid program for Western Europe, it was short-lived, a package of US $13 billion over the course of 5 years, from 1948-1952 (12). African aid has been given for an indefinite period of time. She quotes Paul Kagame who summarizes, “While more than US $300 billion in aid has apparently been disbursed to our continent since 1970, there is little to show for it in terms of economic growth and human development” (28). Why is this the case?

For centuries wealthy countries have been giving away billions of dollars to help developing countries improve their economic situation. We have found out aid given to these countries in economic need have caused positive and negative affects towards the government. The basic reasons of giving aid are to help developing countries stimulate economic growth or directly give resources to meet people’s basic needs. The question is whether this aid is helping the developing country’s government or hurting it and by how much? Aid given to these countries can include donations, projects and technical assistance. Wealthy countries give aid to developing countries to promote their own governments internationally and fulfill their economical and political agendas. Throughout history many people have not been accountable for the effects of the aid and just made sure that the aid was there. Also countries that have been giving aid to a particular country for a period of time tend to pull out the aid because different interests arising in the donating country. This cripples the aid receiving country’s economy because the aid was holding the economy together is gone and they have to start building all over. This dependence on aid leaves the country in economic ruins when the aid disappears. Now that we have a background on aid we can see why the knowing the effect aid has on governments is so important.

Since many borrowings of those Third World countries are indexed to short-term interest, the rapid speed of rising in the world interest rate in 80s enlarged the interest margin of those countries debt. In an ordinary sense, the loans from governments and international lending organizations were considered priorities when it comes to returning the debt. However, the private banks are the one who keeps pressing on Third World countries to return debts. Meanwhile, Organizations like IMF (International Monetary Fund) acted like the world’s debt enforcers to step in to insist that those developing countries must pay the debts and impose

Describing the effects of this economic treadmill, the British economist Michael Barratt Brown wrote: "There seemed to be and indeed there was no hope. The same remedy was being administered to all the countries in debt in the Third World and in the communist world alike. 'Export more and pay off your debts! ' was the chorus of the World Bank and the IMF; and the more the debtor countries exported of the same, often mainly primary, products the more

In response to public demands to address the debt crisis of poor countries and provide debt relief, the World Bank and the IMF introduced the Highly