Foreign aid

From Wikipedia, the free encyclopedia

It has been suggested that this article or section be merged into Aid. (Discuss)

Foreign aid (also international aid or overseas aid) is a situation in which one country helps another country through some form of donation. The main recipients of foreign aid are developing countries (ie. "the Third World"), and the main contributors are developed countries (ie. "the First World").

One major type of foreign aid, development aid, is aid given by developed countries to support economic development in developing countries. Humanitarian aid, on the other hand, is short-term foreign aid used to alleviate suffering caused by a humanitarian crisis such as genocide, famine, or a natural disaster. Finally, military aid is used to assist an ally in its defense efforts, or to assist a poor country in maintaining control over its own territory.

Other types of foreign aid exist as well, although many could be considered to fall under one of the three categories listed above. Latin American countries, as well as countries in other parts of the world, receive a great deal of aid designed to help them fight drug trafficking and cultivation. Many countries receive military aid to help with counter-insurgency efforts, or to help them fight terrorism. Much of the aid to Africa is used to help combat diseases such as AIDS and malaria. The World Health Organization assists countries in keeping under control possible pandemics such as Avian Flu and (in the recent past) SARS. Other problems poor countries are assisted with include landmines, corruption, democratization, adjustment to trade liberalization, money laundering, and peace building.

There has been significant criticism of foreign aid. Statistical studies have produced widely differing assessments of the correlation between aid and economic growth, and no firm consensus has emerged to suggest that foreign aid generally does booost growth. Some studies find a positive correlation, but others find either no correlation or a negative correlation. The economist William Easterly and others argue that aid can often distort incentives in poor countries in various harmful ways. Aid can also involve inflows of money to poor countries that have have some similarities to inflows of money from natural resources that provoke the Resource Curse. ^[1] Others note that funds derived from Corruption in many third world nations leads to a portion of the aid money being siphoned off into private bank accounts in offshore tax havens. These flows of dirty money significantly exceed volumes of foreign aid flowing in, and many people now argue that a central focus of those fighting poverty should be to tackle bank secrecy and to close tax havens (which, contrary to widespread perceptions, are not limited to island economies such as the Cayman Islands, but also include financial centers such as New York and the City of London.) Aid is also often routed to reward multinational companies rather than the citizens of the country that it is supposed to help. In addition, it can be a method of corruption at home. The money, once in the hands of corrupt dictators and off the stringent accounting books of most Western nations can then be kicked back to corrupt domestic politicians in a number of ways. And as an apparent act of charity it is also less politic to scrutinize such a transaction.

Advocates of foreign aid recognize these difficulties but believe they are not insurmountable. One way to prevent the first type of problem is reduce the amount of aid that is tied. Tied aid is aid which the donor requires the recipient to spend on goods made in the donor country. This often means aid subsidizes corporations based on the donor country instead of helping those who it is directed at. However, many countries are reducing the percentage of their aid that is tied, and continued reductions will reduce this problem.

There are also a number of ways to distribute aid without giving money to corrupt governments. The World Bank released a study in which it found that while aid to countries with poor governance has often proved to have little positive impact, many developing countries have governments which have proved themselves able to use aid effectively. Secondly, many countries distribute their foreign aid through private organizations which have few connections with the governments in the recipient countries. United Nations agencies also have a presence in the developing world.