1. Growth and Development
Foreign Aid
Growth and Development

2. What is aid?
FOREIGN AID is used to transfer the voluntary transfer of resources of resources from one country to another or to loans given on concessionary terms (at less than the market rate)

3. The two types of aid
Humanitarian aid-refers to aid that is given in times of desperate need, for example in the case of natural disasters for the support of refugees. This can be seen with the recent Haitian earthquake (12 January)
Development aid-refers to aid that is given to alleviate poverty in the long term, and aims to improve things such as infrastructure and health and education services.

4. What is the target assistance for developing countries?
In 1970, the countries of the UN agreed that the amount of aid given to developing countries by one countries will be 0.7% of it’s respective GDP.
However, few consistently meet this target

5. Surely there has to be a catch…
Development aid is more likely than humanitarian aid to carry direct or indirect economics or political burdens

6. Sorts of Aid Multilateral aid Bilateral aid Tied Aid
When countries pay money to an international agency which then distributes to countries on the basis of certain criteria
Aid given directly to one country by another
Multilateral aid
Bilateral aid
Sorts of Aid
Tied Aid
Aid with conditions attached
Political reforms
Buying goods from donor country
Economic reforms

7. What are the arguments for aid?
Improves human capital
Provides funds for infrastructure
Reduces global absolute poverty
Can increase AD through the multiplier
Can promote sectoral development
Reduces HIV prevalence
Promotion of healthcare, education and training
What are the arguments for aid?
Fills the savings gap
Can contribute to increased globalisation
Reduction in world inequality
This is frequently associated with growth and development

8. Who agrees? Celebrities Governments
Bono often stops his concerts in order to raise awareness of world poverty and asks people to give aid
These are the guys who donate so much of the GDP to development, along with others
Angelina Jolie often visits poor African countries and has already adopted three children herself

9. Arguments against Aid

10. 1-Does it work?
There is no clear evidence that aid helps to reduce absolute poverty or growth and development
In the last 60 years, $60 trillion of aid has been given to Africa, with no obvious signs of improvement

11. 2-It may result in a dependency culture
The recipients of aid become dependent on the aid
They do not pursue sound macroeconomic policies
No economic growth or development

12. 3-It may not benefit those who it was intended to
It could be diverted into military or nuclear expenditure
It could be ‘lost’ as a result of corruption
SOUTH KOREA
Poor African politician
Luxury cars and mansions

13. 4-Interest on concessionary loans has to be paid back
This involves an opportunity cost for the developing countries such as…
Developing infrastructure
Building hospitals
Improving education and training

14. 5-It can distort market forces
Which leads to an inefficient allocation of resources
6-It gives rise to economic imperialism
As donor countries try to secure political influence on the countries to which they give aid

15. Important things to note
Humanitarian aid is not usually contentious so the focus here is on aid given for development purposes
Official development assistance refers to aid specifically given by governments, and not that of voluntary agencies

16. Are you for or against?