Y376 International Political Economy February 8, 2012

North-South Aid Issues: What the Developing Countries Want Increasing the total amount Increasing the total amount Untying “tied” aid Untying “tied” aid Increasing the proportion of aid channeled through multilateral agencies Increasing the proportion of aid channeled through multilateral agencies Making aid more automatic Making aid more automatic Giving LDCs more control over the spending of aid Giving LDCs more control over the spending of aid

What is Aid (Official Development Assistance)? Undertaken by governments Undertaken by governments Main objective to promote economic development and welfare Main objective to promote economic development and welfare Made on concessional terms with a grant element of at least 25 percent Made on concessional terms with a grant element of at least 25 percent

Figure 6-1. Annual Bilateral ODA by the G-5 Countries, , in Billions of Constant 2006 Dollars Source: OECD Statistics online.

Figure 6-3. ODA from DAC Countries, OPEC, CMEA, and non-DAC Countries, , in Billions of Current Dollars Source: OECD Statistics Online.

ODA,

ODA by Major Donors, 2006

Aid as Percentage of GDP

Example of US Aid to Iraq Infrastructure Water Electricity Health system Schools Reconstruction Elections Source:

US Aid to Iraq,

US Aid to Iraq in Comparison with Aid to Germany and Japan

Why Hasn’t US Aid to Iraq Worked? Preference for US over Iraqi contractors (higher costs) Preference for US over Iraqi contractors (higher costs) Huge proportion of spending went to private companies like Bechtel Huge proportion of spending went to private companies like BechtelBechtel US concentration on rebuilding oil fields and other infrastructure projects US concentration on rebuilding oil fields and other infrastructure projects Al Qaeda disruption of aid work, especially in the rebuilding of infrastructure Al Qaeda disruption of aid work, especially in the rebuilding of infrastructure

Table 6-2. U.S. Foreign Aid Programs, 2004 DepartmentName of Program$Millions Department of StateRefugee756 International Organizations and Programs 320 ESF (policy)3,263 NIS (distribution)584 SEED (distribution)442 HIV/AIDS (distribution)488 Andean Counter-Drug727 Treasury DepartmentContributions to Intl. Financial Institutions 1,383 Debt Relief94 Dept. of AgriculturePL-480 II (budget)1,185 USAIDDA, child survival, disaster4,511 MCA994 Iraq Reconstruction18,439 Other1,000-1,500 Source: Carol Lancaster and Ann Van Dusen, Organizing U.S. Foreign Aid (Washington, D.C.: Brookings Institution, 2005), p. 14.

Table 6-1. Bilateral Aid to Former Colonies, Donor Former Colony Share of Total Aid (in percentages) Portugal99.6 United Kingdom 78.0 France57.0 Belgium53.7 Netherlands17.1 Source: Alberto Alesina and David Dollar, “Who Gives Foreign Aid and Why? Journal of Economic Growth, 5 (March 2000), p. 37.

Summary Aid flows are strongly influenced by former colonial relationships and power politics Aid flows are strongly influenced by former colonial relationships and power politics Net aid flows do not always remain positive because some aid takes the form of loans that must be paid back Net aid flows do not always remain positive because some aid takes the form of loans that must be paid back The US share of total aid to LDCs declined markedly over time The US share of total aid to LDCs declined markedly over time Aid is primarily needed to deal with poverty, disasters, and wars and cannot be used in general to promote long-term economic development Aid is primarily needed to deal with poverty, disasters, and wars and cannot be used in general to promote long-term economic development