need help for paper: does foreign aid lead to economic growth?

[Ms~Opinionated]

Aid is not expected to be repaid and is often abused and misused.


FDI (foreign direct investment) is what happened to China. In almost all cases, the investment was expected to make a return. So investors had skin in the game and wanted it to be successful. So China became successful or people would have lost money.

No one cares about where the money from aid goes, how it is used, and whether it was effective. Aid is often used to gain political favors.

To answer your question, aid does not lead to economic growth. If you want real externally stimulated economic growth is should ideally come from FDI.

It is pretty clear that 30 years of aid to Africa has not worked. Many African nations were in no way dependent on AID prior to about that time, but the more aid Africa gets the more dependent it becomes. It is also clear that 30 years of FDI to China has done wonders.

 

[stealthbomber]

Don't forget that foreign aid IS a business in itself. No aid agency has an interest in seeing countries develop.

its a huge part of the military industrial complex. after the military comes in and clears the path, businesses come in and supply the occupied nation. its so evil yet so perfect :wow2:

 

[sm0ke]

There aren't any yes or no answers to such a question. You might be able to empirically prove that aid tends to not stimulate economic growth, but it all depends on many factors.

What form of aid, the country receiving it, the government running the country, etc.

I'm actually waiting for a class on population & development economics as we speak. I could get back to you with specifics in nine weeks, but I imagine it would be too late by then.

Just google foreign aid and then the GDP of the receiving country, see if there was any effect. That doesn't mean growth or lack thereof wasn't due to some other factor, but it's a starting point.

 

[88m3]

Don't forget that foreign aid IS a business in itself. No aid agency has an interest in seeing countries develop.

that's absurd

 

[mbewane]

that's absurd

It is, but that's in part how it works: if a country develops, aid agencies lose their "clients", hence their importance, and people who work in aid agencies lose their jobs.

I studied to be part of the Belgian federal Aid agency, and people working for it told us themselves that there's a reason it's mostly short-term "emergency" "solutions" that are provided to developing countries: so that they remain dependent on the aid. That's also the reason you will have three different aid agencies working on the same damn project in the same damn village, wasting resources by doing the same damn thing three time...it brings work to each agency's workers. This waste of resources is so big that the EU Commission actually tried to link subsidies it gives to aid agencies from European countries to a whether they were avoiding this "double-work", but to no avail, precisely because each wants to keep that "market", even though it's less efficient.

I know three persons who worked for aid agencies: my Mom, and two friends, one of which was very near the top of the EU aid pyramid. Long story short, at the end of the year they basically give out money on bs projects that are useless or will only benefit people in power because they have to justify their budget: if they don't use the totality of the budget, they will get less the following year, which could eventually lead to having to lay off someone. I'm doing an internship right now in another intergovernmental agency (which has nothing to do with aid) but the logic is the same.

I'm not saying every single aid project is bad, but a large part is totally inefficient. And we haven't even gotten into "tied" aid yet (a large part of the "given" money goes right back to the donor or to people working for the donor -nationals from that country-), "helping" with one hand and taking back from the other (recipients still paying debts contracted after independence, international trade treaties), and aid distorting local markets.

 

[theworldismine13]

It is, but that's in part how it works: if a country develops, aid agencies lose their "clients", hence their importance, and people who work in aid agencies lose their jobs.

I studied to be part of the Belgian federal Aid agency, and people working for it told us themselves that there's a reason it's mostly short-term "emergency" "solutions" that are provided to developing countries: so that they remain dependent on the aid. That's also the reason you will have three different aid agencies working on the same damn project in the same damn village, wasting resources by doing the same damn thing three time...it brings work to each agency's workers. This waste of resources is so big that the EU Commission actually tried to link subsidies it gives to aid agencies from European countries to a whether they were avoiding this "double-work", but to no avail, precisely because each wants to keep that "market", even though it's less efficient.

I know three persons who worked for aid agencies: my Mom, and two friends, one of which was very near the top of the EU aid pyramid. Long story short, at the end of the year they basically give out money on bs projects that are useless or will only benefit people in power because they have to justify their budget: if they don't use the totality of the budget, they will get less the following year, which could eventually lead to having to lay off someone. I'm doing an internship right now in another intergovernmental agency (which has nothing to do with aid) but the logic is the same.

I'm not saying every single aid project is bad, but a large part is totally inefficient. And we haven't even gotten into "tied" aid yet (a large part of the "given" money goes right back to the donor or to people working for the donor -nationals from that country-), "helping" with one hand and taking back from the other (recipients still paying debts contracted after independence, international trade treaties), and aid distorting local markets.

that sounds about right, another problem with aid is that the people themselves start looking to the NGO's instead of the actual people that are suppose to be doing things which is the government

so it breaks and important link in development which is people working with their own government to develop the country

i was reading about this NGO that built a well and a pipe system but when the system broke down nobody knew how to fix it, in the end if a community gets a well built by an NGO and they don't develop the capacity to fix a pump have they really progressed or developed?

 

[Slaimon Khan Shah]

GOD INCREASES CHARITY AND DESTROYS INTEREST.

 

[the mechanic]

Not true in all cases since it depends on the government structure and corruption. Foreign aid can increase productivity by allocating the resources to developing technological advances, hire workers, access to equipment etc.

Youre speaking in hypotheticals my friend...IF i give $20,000 to a drug addict he may pay for rehab,,but 99.99% of the time he will just buy more drugs and end up even worse

If the government are fair and really want to develop the economy (increase growth rate) then they will treat the aid as a foreign investment and/or bank loan. Similarly to an investment/loan, it will give access to firms to grow thus increase the overall countries output/GDP/Income.

more hypotheticals..Too much of this aid disappears into peoples pockets..look at all the data..even the IMF admit this

Foreign aid, again, does not kill innovation or the entrepreneurial spirit if it helps create policies that, for example, incentives people to start their own company by creating a stronger judicial system, police, and other factors that creates a safe environment to its' citizens. Why focus on the law? Well, it is certainly a big factor since it is the main thing stopping people from creating their own product/starting their own company in third world countries. No property rights, patents, or a slow judicial process are the main concerns that people are scared of since their absence makes it easier for others' to come and steal their shyt.

I dont know where you did economics but African govenments that get the most aid do the least for their people..WHY? because they get money from outside so they have no incentive to create a wealthy taxbase..in fact its better for them to keep people poor so they get more money its a perverse incentive ..the more poverty and starvation the more money comes in

To answer the OP's question; foreign aid is only beneficial to a country if it is treated as an investment in a "fairly" free-market economic structure and not to strengthen a socialistic government-owns-all ideology.

There would be no aid in a free market system..aid is socialist by the very definition

One persons money money is given to another to spend on someone elses well being.....

What rational intelligent person would expect that to work?

 

[Black smoke and cac jokes]

Youre speaking in hypotheticals my friend...IF i give $20,000 to a drug addict he may pay for rehab,,but 99.99% of the time he will just buy more drugs and end up even worse

That's a fukked up analogy. If a country receives aid to benefit the public then they would most likely distribute the money to benefit the economy and increase productivity. What does that have to do with an addiction?

more hypotheticals..Too much of this aid disappears into peoples pockets..look at all the data..even the IMF admit this

Bratha, I stated in my post that the hypothesis does not apply to current situations since there are a billion other factors that impacts the government officials. There's a huge difference between what Sierra Leone, Afghanistan, Greece, Ethiopia, South Africa, and Ghana have done with their aid because of their fukking situation. Economics focus on theories and therefore aren't enacted/reactive in the same way.

Again, the OP question states need help for paper: does foreign aid lead to economic growth?

I dont know where you did economics but African govenments that get the most aid do the least for their people..WHY? because they get money from outside so they have no incentive to create a wealthy taxbase..in fact its better for them to keep people poor so they get more money its a perverse incentive ..the more poverty and starvation the more money comes in

Again, did S.A. and Ethiopia fukk up their aid and loans? Did they put it in their own pocket and not give a fukk about the public? No, the incentives people to start their own companies, caused a massive increase of productivity in their capitals that is slowly spreading to the suburban/neighboring areas. S.A. grew in a more rapid rate but both countries focused on bettering the country.

So you think the incentives for governments is to keep people poor to benefit them? I rather say that it is to make themselves wealthy so they are able to move to another developed country later on. It has nothing to do with keeping their own people poor, but instead to benefit themselves. The more money analyzes is a continuation of the previous benefits so of course. Still, you are still not answering the question the OP stated.

There would be no aid in a free market system..aid is socialist by the very definition

I said fairly free, to highlight Hong Kong, U.S.A. and other nations that rely on an open-market security exchange, relatively free movement of goods and services, and an overall system that promotes entrepreneurship and a person's/firms's well being that is heavily reliant on their willingness to comply with the market.

Socialistic approaches such as foreign aid serve as the fundamental tool for countries to build on.

I don't know if you ever studied economics but...ah fukk it, let me see your response and see if you have

 

[The Frozen One]

daps for all in this thread...major help..

 

[mbewane]

Eh brehs, what about the Marshall Plan? It never comes up in the aid discussion (maybe because speaking about "aid" towards European countries is taboo) but if it wasn't aid, what exactly was it? Foreign investments? It came up during my studies but I admit that I don't remember much of how it was organized...but it does sound like foreign aid to me?

 

[theworldismine13]

Eh brehs, what about the Marshall Plan? It never comes up in the aid discussion (maybe because speaking about "aid" towards European countries is taboo) but if it wasn't aid, what exactly was it? Foreign investments? It came up during my studies but I admit that I don't remember much of how it was organized...but it does sound like foreign aid to me?

dambisa touches on that, it worked because Europe already had strong institutions and it was a temporary one shot thing

and also you can say military aid worked, through NATO and such the US has been subsidizing euroeapan countries for 50 years and allowed them to spend more money on social programs, but the cost of that is that they are an american puppet when it comes to military matters, so nothing is free

 

[TTT]

You first need to establish the definition of foreign aid, the OECD definition of what ODA is seen to be the basis of foreign aid as it is defined by donors particularly from the West, they have recently brought China into the fold on the basis of collecting stats.

As for the question itself, the answer largely depends on what aid you are talking about. Initially the big donors concentrated on big infrastructure projects but these ended up being scaled back because dam building for example was associated with deteriorating environmental issues.

ODA in the form of budgetary support, some concessional loans , and direct donations of goods has not spurred growth because it has not been targeted at economic growth but to simply plug in deficiencies that these Governments faced.In some cases food donations ended up crowding out farmers because of cheap products.

China's role in all this has become a lot more important because they are not only a capital supplier but they have represented a new model. Where traditional banking systems would see an Angola emerging from civil war as a poor creditor the Chinese engage them using resource backed lines of credit and in some cases infrastructure building.

Aid failed because it is not targeted towards investments that help spur economic activity like basic infrastructure but has been targeted at basic country finances and humanitarian issues.

 

[mbewane]

dambisa touches on that, it worked because Europe already had strong institutions and it was a temporary one shot thing

and also you can say military aid worked, through NATO and such the US has been subsidizing euroeapan countries for 50 years and allowed them to spend more money on social programs, but the cost of that is that they are an american puppet when it comes to military matters, so nothing is free

True, I forgot she talked about it, it's just that it hardly ever comes up in discussions about foreign aid, indeed the situation was different.

Hum, I wouldn't go as far as to say that the US "subsidized" Europe, because if I'm not mistaken the sums were actually not that big, and remember that we're talking about countries such as France, GB, or Belgium who still had colonies. And Nazis were leading an war of occupation, so they didn't destroy that much infrastructure in Europe (because they wanted to use it), hell they didn't even need to since they were winning quickly. Paris for example was hardly bombed I think, Belgium was dealt with in three hours GB did suffer more, actually the countries that suffered most during the war were the USSR, Poland and...Germany.

And regarding the "american puppet" in military affairs, I'd say that's mostly true for GB and Eastern european countries since the fall of the wall, but there are enough example of the US and European countries going different ways, the best being the Invasion of Iraq.

 

[The Frozen One]

well i finished it

although it is one of the worst papers i have written IMO.