Global Development Theme 4 - Aid and Trade

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Types of Aid

1. Official Development Aid

  • Bilateral Aid: governments in the developed world give money directly to governments in the developing world
  • Multilateral Aid: involves countries donating money to international agencies such as the World Bank and the European Commission                                                                                                                                                                            

2. Non-government Organisations

  • Raise money from donations from the public and tend to work on low-scale development projects with poor communities                                                                                                                            

3. Private Aid

  • Aid from organisations set up by wealthy individuals (e.g. the Bill and Melinda Gates Foundation)                                                                                                                                                                         

4. Emergency Aid

  • Humanitarian relief raised in response to specific circumstances, such as natural disasters
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Arguments FOR Official Development Aid

  • Modernisation Theorists argued that it was essential to inject aid into countries to establish infrastructure and change attitudes
  • Jeffrey Sachs (2005) argues that when large scale aid is practical, target based and measurable, it can work
  • Aid aimed at improving health has led to mass immunisation of children against diseases such as smallpox and polio
  • Aid assisted the Green Revolution in Asia
  • Numerous countries, such as Indonesia and Malasia, have gone into Stage 4 of Rostow's Stage to Development (drive to maturity) with the help of aid
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Arguments AGAINST Official Development Aid

  • Dambisa Moyo argues that ODA hasn't actually generated significant economic growth in recipient countries 
  • Aid stifles the development of small businesses - businesses are put out of business due to foreign aid, and when the aid stops there is no one to continue the work. In the long term, aid injection decimates the local economy and makes the country dependent on foreign aid
  • Neoliberalists argue that aid encourages corruption -  at least 25% of World Bank aid is misused. Corruption leads to worse development projects because corrupt government officials employ people who collude in corruption rather than those who are actually best for the job. Foreign companies will not invest in corrupt countries, where the money stays with the government rather than goes to the people who really need it. Also, corruption encourages talented people who could improve the economy to become unprincipled
  • Too much money is spent on the salaries, administration and conferences of the international organisations, not to the people who need it (Lords of Poverty) It is in the interests of charities for poverty and underdevelopment to exist so that they won't be out of a job 
  • Dependency Theory argues that there is a political agenda to aid - the allocation of US and UK aid has depended on the political ideology of the recipient country. The main point of aid is to make the recipients dependent on the donor (tied aid) These are known as structural adjustment progammes
  • People Centred Development argues that top down aid is often irrelevent to the people receiving it
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The Role of NGOs

1. The Development Function

  • Focusing on small-scale aid projects to help promote local development                                                                    

2. The Empowerment Function

  • Aims to empower local communities by giving them a role in aid projects and establishing fair trade rules                                                                                                                                                                              

3. The Education Function

  • Putting money into developing education for schools and advertising to keep the issue within the public domain                                                                                                                                                                                                

4. The Emergency Function 

  • NGOs are often at the frontline in the delivery of emergency aid when natural/social disasters occur
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Arguments FOR NGO Aid

  • More responsive to the needs to of the local community
  • No political agenda - it is freely given
  • Can provide a more continuous supply of aid whereas government aid is affected by elections
  • Helps the poorest of the poor whereas TNCs will only invest in stable countries to ensure profit
  • Have a broader knowledge about life in developing countries 
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Arguments AGAINST NGO Aid

  • They provide a tiny amount of aid compared to governments and the World Bank - Official Development Aid from Britain is around £10 billion a year whereas NGOs only raise into the millions
  • Spend a lot of their money on advertising and administration costs rather than funding projects
  • Campaigns portray people in the developing world as helpless and starving to generate sympathy to gain donations when sometimes this may be exaggerated
  • NGO aid can be misguided - e.g. Oxfam's 'Buy a Goat' campaign or 'Sponser a Child' campaign
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Arguments FOR Trade

  • There is an obvious link between trade and economic growth - the world's top 5 exporting countries export 40% of the world's goods. The bottom 50 countries export less than 1%
  • Modernisation Theory and Neoliberalism argue that developing countries need to increase their share of world trade to be more competitive
  • Developing countries need to maximise their competitive advantage to achieve growth - they have an abundance of natural resources to export and a larger workforce which can be paid relatively low wages
  • What developing countries lack is the capital and the knowledge to turn these resources into profit - they need to encourage foreign investment from TNCs. In order to do this, developing countries need to become more 'business friendly' by deregulating and relaxing health and safety regulations 
  • Export Processing Zones/Free Trade Zones - special areas which offer incentives for TNCs to invest, like the ones above
  • Trade allows for specialisation - allows nations to devote their scarce resources to the production of particular goods and services for which that nation has competitive advantage (e.g. Germany and cars, Japan and technology, the Caribbean and bananas, sugar and coffe etc.)
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Arguments AGAINST Trade

  • Many developing countries are too dependent on low value exports, such as Ethiopia with coffee and the Caribbean with chocolate and bananas. This means that fluctuations in price can have devastating effects on their wages
  • Trade does not help developing countries industrially because they're locked into only providing raw materials and resources which are cheap (Paul Collier, Resource Trap)
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