Foreign Aid and Economic Growth in the Developing Countries - a Cross-Country Empirical Analysis

Ever had that one friend? The one who tries to help, but no matter how hard he tries, he just aggravates the situation. This friend, Steve, insists he is helping, and those around, too, would support that he is indeed helping. But Steve is actually worsening the circumstances. He is like countries who provide foreign aid to less developed countries. Foreign aid, defined as “the international transfer of capital, goods, or services from a country or international organization for the benefit of the recipient country or its population,” can be military, economic, or humanitarian (“Foreign”). It is often granted to less developed countries in order to evoke government reforms or to stimulate economic growth. However, foreign aid neither elicits government reform, nor does it consistently and reliably stimulate economic growth; therefore, the United States should discontinue providing foreign economic aid.

On one side of the issue the supporters of developmental aid believe that the United States is doing more than a great job by offering economic assistance to countries that need help to develop. These individuals are aware of the unfortunate poverty levels in many countries abroad. They believe that it is the duty of the American people to help reduce the poverty levels in countries in which people live with less than a dollar a day. In fact, some supporters believe that the U.S. is not offering enough support to the poorer countries. Many have

Riddell, Roger C. 2007. Does Foreign Aid Really Work? 1st ed. OXFORD: Oxford University Press, USA.

Historically, aid has been viewed as a viable and effective response to natural disasters, post-war reconstruction and economic development. Aid has been successful in providing people with food, water, clothing, and medicines after tsunamis and relocating the newly homeless after hurricanes. After World War II, aid in the form of the Marshall Plan undeniably rescued Europe from the throws of economic fallout. For these reasons, politicians, citizens, famous rock stars and even some businesses have advocated aid as a method to increase economic development. Sadly, the results have been far from what was expected. The Africa Progress Panel reported that a 7 percent growth rate is needed to make any considerable progress in poverty reduction

The main point of Banerjee and Duflo’s Poor Economics (2012) is that aid is neither good nor bad: there are instances where it can help greatly and instances where it can fail those it seeks to help(4). Aid is a powerful tool, therefore it’s imperative that we carefully select the right types of projects (Banerjee & Duflo, 2012, p. 4-5). Banerjee and Duflo (2012) present a few key points of action as a framework for approaching aid, with the broadest issue being the idea that too much responsibility is placed on the poor in making the most basic decisions (268-69). One example that Banerjee and Duflo (2012) offer is the fact that many of the poorest people don’t have sanitary water

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

According the US Census Bureau, the United States spent $44.957 billion on foreign aid in 2009, in terms of total foreign assistance. Of that, just over $11 billion was military assistance. The nations that received the most foreign aid were Afghanistan, Iraq, Israel and Pakistan. Some aid went to financial institutions and to aid agencies, and therefore is difficult to classify by country. By regions, Asia, Sub-Saharan Africa and the Middle East were the biggest recipients of foreign aid. The recipients and types of foreign aid are indicative of priorities that the US government has with respect to foreign relations. As many people applaud high levels of foreign aid from the US to poor countries around the world, foreign aid also has its critics. From a domestic perspective, criticisms include the argument that this money would be better used in the United States, and the libertarian argument against all forms of foreign aid in general. It is worth noting that many critics of foreign aid still support aid to support military objectives, which includes the four largest recipient of aid (Traub, 2011). External critics of foreign aid argue that such aid has generally failed to achieve its objectives, for a variety of reasons ranging from rapidly increasing populations to corruption to the promotion of dependency relationships (Bovard, 1986). This paper will analyze US foreign aid in the context of its success and failures and make the case that the United States

In 1954, United States of America started to help developing countries by operating the new assistant program. America gave farm surpluses to developing countries and succeeded to stabilize farm prices. Later on, United States of America provided the biggest monetary help to developing nations. Especially in 2004, America accounted 54% of the world’s foreign aid. Also, since 2002, America is supporting more than 65 countries with more than two billion dollars in average. However, some people are criticizing about the American way of supporting developing nations. Since America gives developing nations money and food supplies, this can undermine developing nations’ self-reliance and make them wait for other nations to help them. Thus, America is finding ways to help developing nations to become independent economically. Some American organizations are even teaching them proper ways to farm and grow crops to help them become gradually

Prior to doing the readings for this week, I did not know very much at all about foreign developmental aid. I only ever figured that foreign developmental aid was money that we provided to developing nations to help soothe poverty. After reading these articles, however, I now know that the intended goal of developmental aid is to alleviate poverty in the long-term, rather than as a short-term response. I also saw developmental aid as purely humanitarian, and never paused to consider that consequences of such aid, nor the possibility of the aid failing.

When addressing the issue on whether or not foreign aid can reduce poverty, I would say yes, foreign aid can have positive implications on reducing poverty levels. Foreign aid has the potential to bring substantial relief to countries who are impoverished. The yes argument references the World Health Organization and Rotary; the two are impactful organizations provide aid for countries in poverty. I have first-hand experience with Rotary and their efforts to help foreign countries. Currently, I am partnered with them as a leader on an annual conference they hold for high school students. In our meetings, we discuss the different ways to make an impact and how Rotary International is always involved in solving a problem that includes poverty.

The premise behind foreign aid is the desire of acquiring new allies by creating strong nations. By sending money to countries that are attempting to organize their government or infrastructure, the U.S. creates ties. Once these nations, that we helped, get on their feet they can pay us back in this argument. However, for some nations this is proving to not be enough. Much of the reasoning behind the foreign aid that goes to underdeveloped or troubled nations lies in the attempts to facilitate the process of westernization and modernization. By giving other countries the chance to become more like our nation gives us a greater understanding of them and greater power over them. It also provides the US with greater possibilities for allies. It is for these reasons that global peace is a goal that seems semi-reachable through the act of foreign

4.3. Figure D: It is stated in the article that aid has demonstrated to be have a positive impact on development and economical growth specifically when it is targeted towards a specific objective of the country. For example aid being used towards eradicating certain illnesses. Though, when aid is presented objectively and in large substantial amounts, the overall growth of the country appears to decline. Basically, they explain that aid only works to a certain extent, and there are other solutions that also need to be implemented. The scenario presented for this was Sub-Sahara Africa’s declining

This piece of writing will provide evidences and determine whether trade is the key to economic growth in developing countries but not aid. While trade is the key to economic growth in developing countries, good governance also plays a vital role in economic development. Nevertheless, aid and trade are aimed at different goals. This assignment starts with investigating the connection between aid and development with providing an evidence of its negative impact. It also compares the effect of trade and aid. Secondly, it

Harvard Business School’s Case Study “Aid, Debt Relief, and Trade: An agenda for fighting World Poverty” outlines the steps, and missteps, that the world community has taken since World War II to address the efficacy of international assistance. The study focuses on international financial institutions (IFIs) and their ability to help poor nations break out of poverty and the possible obligations of rich, developed countries to assist the heavily indebted poor countries (HIPCs). Additionally, the study seeks to see if this assistance has been and can be parlayed into growth and investment for the HIPCs.

As a developing countries Bangladesh can not meet its all demand by own economic ability so it takes foreign aid for implementing its development purposes. It has got foreign aid for its several development issues like Jamuna and Padma Bridge. Not only structural development is implemented by foreign aid but also several long term policy and projects are done by it. But the effectiveness of foreign aids to the third world developing countries like Bangladesh is a controversial issue. Liberal economists argue that aids both in the form of grants and loans can play vital role to the development of any country, if it is channeled through proper biding and use effectively to the development projects. In contrary of that, aid causes debt entrapment, dependency, domination etc. to the third world country like Bangladesh.