The ‘business’ of aid: to what extent does aid do more harm than good?

Abstract:
The topic of this paper views the harms of aid and argues that aid does developing countries more harm than it does good. Aid is the economic assistance from one nation to another. There are different reasons for why this topic is so controversial. Aid does not always benefit the poor countries economic stride; aid may also cause political and psychological harm, and also enlarges the power between developed countries and developing countries. With the different types of aid, each aid does harm to poor countries differently. Tied aid, Food aid, Military aid, and Aids that aren’t grants, are the types of aid that put developing countries in harm.
Introduction

Everything that goes on this beautiful place we call Earth always has an affect on someone other than ourselves. Sometimes it’s for the better, and others for the worst mainly because each individual is entitled to their own opinion based on the facts that are gathered and what is portrayed by society. A conclusion is then found and the individual will stick to his claim regardless of what the opposing side has got to say, so why would it be any different in this case. Developing countries usually receive foreign aid and there are a number of reasons to why these countries need aid, such as poverty, medical and health, and environmental problems. Poverty is one of the main reasons for countries receiving aid, and the people are unable to provide the basic needs for their families. With aid, developing countries not jus receive free money; they need to pay back money they received. Aid covers a large number of things, involving a vast variety of organizations; structures and activities, which are involving, aid work (Regan, 2002). Aid is in the form of advanced countries helping and encouraging economic growth in developing countries. There are many forms of aid, from short-term disaster relief, to longer-term development aid, but with all these different forms of aid, it is followed with a problem and criticized, with either inefficiency of delivery, dependency, or political agendas (Shah, 2010). Government aid has been around for centuries doing all they can to help those in need. As time goes on and the help continues, its only normal for us as human beings to rely on what is being provided for us. This is just the beginning of all our problems. Some types of aid that is doing harm and has an effect on the receiving countries is food aid, military aid, tied aid etc. Aid has been helping the world’s poorest people in coming to aid and trying to help improve the situations and conditions of developing countries, but issues of aid still rise and it is to a great extent from being non-controversial, and the arguments and problems with aid is that aid is doing more harm then good (Regan, 2002).
New funds and agencies were set up at a national and international level to help provide and contribute to the rebuilding schemes for many Third world countries who failed to develop or did, but very slow after there formal independence. The ‘business’ of aid is to help the developing countries needs for manufacturing and commercial agriculture and to bring under control of the shortage of investment capital and provide the foreign currency to pay for the necessary technological import (Webster 1990). The foremost international agencies that support and distribute aid to the developing counties consist of the United Nations, the organization for economic Co-operation and Development (OECD), the IMF, the World Band, and the Development Fund of the European Economic Community (EEC) (Webster, 1990).Aid includes humanitarian assistance in times of emergency, debt relief, technical assistance, short-term disaster relief aid (NGO), longer-term development aid, military aid, food aid and grants for every type of project. The Development Assistance Committee (DAC) of the OECD, oversees the international aid, in terms of increasing aid and improving its terms and forms among donors (Regan, 2002). The DAC defines aid as the Official Development Assistance (ODA). ODA is non-commercial and is most often provided in the form of loans, in debt relief or grants for projects, and is divided between multilateral and bilateral aid (Regan, 2002). Multilateral aid are donor countries it is a made up of a variety of contributors involving different developed countries to give help and fund to a developing country, whereas bilateral is one country supporting or helping another country, government to government. Through NGO money is raised through donations and form government grants that go towards helping organize emergency aid after disasters (natural). Short-Term Aid is for immediate relief in emergencies, and Long-Term Aid is to help improve the quality of life for developing countries and its support goes for economic and social development.
With the number of different aids brought by donors and developed countries, there are a number of problems, cases, and failures to the current system of aid prove that, and why it is doing more harm then it is good. Many questions have come up due to the failure of international aid to encourage the emergence of a self-sustained growth in agricultural and industrial sectors. Aid from government to government has little effect on the poor and benefiting only the rich. Only one country is benefiting and aid has been used to strengthen the power of the authoritarian government (Regan, 2002). Aid is used for different reasons, and different aids have different effects, currently aid is being used for economic, political and strategic reasons. The problem with this is that it is intended to sustain the current character of world inequality, instead of trying to fix and challenge it, aid is only supporting the problem. Many times aid money is misspent, or handled wrong. Aid money may be used for a number of different projects that may be helpful in the short run but not much profitable in the long run. ‘Tied’ aid the donor country also benefits economically from the aid. The receiving country buys goods or services from the donor country to get the aid. Aid is given depending on receiving country agreeing to buy. Tied aid is then seen as harmful if it supports governments that suppress their people. It is a hidden endowment to the industry in the industrialized world (Regan, 2002). Tied aid also focuses more on profiting their countries rather than what the developing countries need. It also increases dependency by being loaned to a country (Webster, 1990). Weaker governments/countries become dependent on donor a country, which puts them at a disadvantage in economic or political negotiations (Regan, 2002).
Food aid can be related to many issues, but it is mainly about providing food and related assistance to challenge the problem of hunger, that many poor countries face, either due to emergency situations (natural disasters), or to help people who are living in hunger and fear of starvation. Food aid does help developing countries under some circumstances, but also doing much harm, and causing social and economic consequences. One of the reasons food aid has not been a success is due to the tying of food aid with constraints that benefit the donor country more than its recipients (Shah, 2007). Economically food aid can hurt the Third World agricultural sector, by depressing and discouraging local markets and production and may cause local prices to fall, eventually leading farmers going out of business and it just adds on to more unemployment (Webster, 1990). Other problems that contribute to the problem with food aid is that it is a donor-driven system and politically puts an effect on Third World governments, feeling obligated to buy donor goods unquestioningly. Food aid promotes domestic interests in donor countries, it is a foreign policy tool, and exporters drive international institutions and development is not necessarily the objective (Shah, 2007).
Another aid that is harming receiving recipients is military aid. Military aid is to help allies or poor countries fight terrorism and maintain control over their territory, or help the fight against drug wars.Military aid may be given in the form of credits for foreign militaries to buy weapons and equipment from donor countries of even in the form of training (shah, 2010). Military aid can start to feed violence and not fix the real problem that is going on in countries. It is argued that with military aid, the relationship between military and nations can be strengthened.
Due to the fact that some of the aid is loans instead of direct grants, poorer countries may be getting more in to debt (Webster 1990). The debt is ruining developing countries, and their living standards are only getting worse due to resources going towards paying back their debt. It is very hard for countries to rely on one of two items to produce enough income from exports to repay loans (Webster, 1990). Many of these third world countries try to use their aid to boost their export rates, but when aid stops, export rates drop and it may cause social distress and poorer countries become dependent on the aid so they can increase their productions, not realizing they still need to payback their aid loan. As debt continues to increase, aid is dropping. Even with disaster relief and aid, poor countries are still paying debt repayment (Shah, 2007). In 2000, at the UN Millennium Summit, rich countries agreed to use aid only for poverty reduction. However international institutes like the World Bank and IMF continued to attach conditions to the loans, which struck the poor hard (ActionAid, 2006). Due to all the poor countries owing outrageous debts to rich countries, it forces these poor countries to focus on debt repayment, rather than meeting needs of their country and the people.
Aid does not always benefit the poor and many developing countries are unable to control majority of their economic life, and become dependent on their donor country. Poor countries are profiting and it making richer countries richer. Dependency theory was developed to disapprove the view of what is currently going on in developing countries and see if they could achieve modernization and industrialization by colonizing the majority world. Dependency explains the underdeveloped circumstances of many nations and assesses the different structures of interactions among nations. Supporters of dependency theory see economic aid and technical assistance being in command of, which causes cultures to be vulnerable, because they need the help and they begin to rely on donors. Developing countries become so dependent on aid that they don’t improve what needs to be done for the people and the country. When dealing with Third World Countries they lack the control of their economic life, due to power and dominance of minority world or developed countries, dependency theory comes into play. Many poor countries are dependent on the aid and on the national government due to the fact that they lack the acceptable skills, knowledge and attitude they need to take in control of their own, and have poor work ethics (Webster, 1990).
There are many different forms of aid, and aid can be very beneficial to MEDCs and LEDs, it can save lives, help improve living standards of people living in developing countries, improve exports and secure jobs and also open markets for goods. With all the help that Aid provides countries and people in need it does more harm than good and the flow of aid may not always be dependent on. The continuation of poverty in the developing countries is an image of its dependency they have on the minority world.Foreign aid causes corruption and mistrust in developing countries or countries receiving aid. Tied aid focuses on profiting donor countries and not on the developing countries when they are the ones most in need, food aid causes social and economic consequences, and aids that is in the form of a loan only puts developing countries in a more deeper debt. We ask ourselves is aid really doing developing countries of the Third World good But to this extent as we have discussed aid is doing more harm than good, and not helping the developing countries improve aspects of there life as aid should be. Donors and developed countries have to stop the dependency between the developing countries and actually start helping developing countries improve their way of life and get out of poverty.
Bibliography:
Andre Gunder Frank, (1972) “The Development of Underdevelopment,” in James D. Cockcroft, Andre Gunder Frank, and Dale Johnson, eds., Dependence and Underdevelopment. Garden City, New York: Anchor Books
The role of foreign aid in development. (1997, May, 23). The Flow of Foreign Aid and Private Capital to Developing Countries. Retrieved March 12, 2011 from www.cbo.gov/ftpdoc.cfm?index=8&type=0&sequence=3
Shah, Anup. “Military Aid.” Global Issues, Created: 03 May. 2010. Accessed: 09 Mar. 2011.