DEVELOPMENT ASSISTANCE (INTERNATIONAL AID)!

People around the world need help: - earthquakes - famine - war - extreme poverty In 1969 under the suggestion of Canadian Prime Minister Lester B. Pearson – all member countries of the UN were to donate.7% of their GNP to International Aid. Only Norway, Sweden, Denmark and The Netherlands have met this commitment on a regular basis.

What is Aid? “Contribution of one country or development organization to another country in the form of a loan” Like all other credit it must be paid back. The OECD (Organization for Economic Co- operation and Development) is a group of countries that promotes industrial development in developing countries. Represents the richest countries of the world (29 members). The G-8 is a sub group.

Over 40% of all aid from countries belonging to the OECD is in the form of ‘Tied’ Aid, sometimes called ‘Boomerang’ aid. There is always some sort of payback. Payback comes in the form of actually paying back the loan and the interest. Or it is in the form on favours like allowing a country to use some land for military purposes. One example is Canada donating for free our old buses to India and if India needs parts then they have to buy them from Canada.

There are two channels for giving aid: Multilateral Aid: Help using goods, food or medicine through governments or non- government organizations. EG. The UN development program gives money to women’s education in Afghanistan. Bilateral Aid: This is direct help from one country to another. EG. Japan gives a grant to Syria for the construction of a hospital.

Four main reasons why countries or organizations provide aid: 1.Economic Development To help a country develop an aspect of its economy. Often this country is obliged to import goods from the contributing country. 2. Political Influence Aid in order to create political obligations. For example: The U.S. gives millions to Russia to maintain Russia’s new capitalist system.

Political influence can work the other way a country can implement ‘embargoes’ to force a country in changing its political views. The US has done this to Chile, Iran, Libya, Iraq and Panama. 3. Historical Obligation Countries aid former colonies. Britain and India. 4. Humanitarian Obligation A moral responsibility to suffering people. EG. Canada took in Kosovar refugees during the war in Yugoslavia in 1999.

Some concerns about Foreign Aid: “Give someone a fish and you feed them for a day, teach them how to fish and you feed them for a lifetime” “Foreign aid does not save lives, it prolongs death” A.Foreign Aid does not reach the poorest people. - Aid is channeled through governments and bureaucracies (sometimes corrupt) and it doesn’t all reach the poor.

- some aid ends up in urban centres where it is not needed. Aid Rich Poor Rich Poor Aid A B A – Aid today. B – The solution – Grass Roots!

- The success of NGO’s (Non-Government Organizations) depends on the grass roots approach. B. Sometimes aid has trouble getting there. Since the poor are usually found in the interior of a country with no ‘Infrastructure’ (roads, rail and other services). Note: Most poor countries were colonies. The mother country only developed the ‘Port’ areas to transport back it its country. C. Population becomes dependent on the aid. So do governments and they don’t try to improve on their own.

D. Local businesses suffer since they cannot compete with a product that is given for free or discounted. EG. A local baker. A few words about DEBT: Once countries are in debt they must pay it back. Many times countries borrow further money in order to pay back loans, getting themselves into more debt. The World Bank and the IMF (International Monetary Fund) are two such groups that lend money.

The IMF has 183 members and it promotes international co-operation. It tries to develop economies and in 2001 it loaned out US $65 billion. When money is loaned out to a country it is considered multilateral aid. Once a country is in debt its creditor can influence the way that country is run. EG. In 1970 the World Bank told Sudan to start growing cotton rather than grain so that it could make more money and pay back its loan. You can’t eat cotton!

Since the U.S. is a major contributor it is very influential (voting powers) in both organizations. If a country defaults on a payment, it could lose its credit rating and not get any other loans. (Brazil and other South American countries have been in the news for years due to their inability to pay back loans). Based on their own rules the IMF and World Bank cannot forgive loans.

Most poor countries are paying back the interest on the loans not the actual loan (called the Principle). There has been a plan to lower the debts, but the countries had to follow strict guidelines in what they spent – this is not working.

The End!