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The effects of development aid
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In order to improve economic growth, most of the developing and less developed countries asked for aid and borrowed a huge amout of money from international organizations e.g. International Monetary Fund (IMF), World Bank (WB), developed countries, and other donors. However, they still did not elevate their economy. Easterly (2002), a former economist at The World Bank and a professor of economics at New York University claims that aid and lending is not effective to promote economic growth in developing countries. He also provides reasons and uses several country examples. His exposition end up with a conclusion that adjustment lending and foreign aid gives only little contribution to developing countries economy due to lack of incentives for both donors and recipients. The aim of this paper to complement and criticise Easterly’s argument that adjustment lending fails to boost developing countries economy.
In the first part of this essay will shortly summarize Easterly’s idea; while the second part will discuss its’ strengths and weaknesses. Several compliment notions to endorse Easterly’s argument are provided in this review.
Easterly (2002) noted that there were some success story for adjustment lending in some countries. However, he identified more countries were not successful. These failures are due to two main reasons. First, it was because there were no policy adjustmens from the recipient countries to decrease inflation. Second, it was because the government could not control inflation during transition period. Furthermore, the other polices which he revealed are high black market premium, budget deficit policies, and negative real interest. Easterly also recognise donors’ characteristics which triggered recipient co...
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...id contest are not comprehensive enough and also not consistent with his pessismist view on aid. Hence, his chapter is still valuable and relevant with current situation where there are still many developing countries are highly depend on foreign aid.
Works Cited
Booth, P 2012, ‘Does foreign aid make the poor poorer?’, Economic Affairs, Wiley Online Library, Vol. 32, no. 1, p.1,
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Easterly, W 2002. ‘The loans that were, the growth that wasn’t’ ,The elusive quest for growth: economists adventures and misadventures in the tropics,’ The MIT Press, Cambridge, Massachusetts, pp.101-120
Moyo, D 2009, ‘Why foreign aid is hurting Africa’, The Wall Street Journal, viewed 07 February 2012,
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The Structural Adjustment Programs (SAPs) are economic policies imposed on countries that borrow loans from the World Bank (referred to as “the Bank”) and the International Monetary Fund (referred to as “the Fund” or IMF). Originating from the right-wing neo-liberalism ideology of the Bank and the Fund (which are the International Financial Institutions or “IFIs”), the SAPs were created to establish a free market economic system in the borrowing (developing) countries, which lead to privatization within those countries. The Bank and the Fund tell the critics that the SAPs help ensure that the money lent will be spent in accordance with the overall goals of the loan and help in re...
Every year, more and more money is donated to Africa to promote democracy in order to get rid of the powerful coups in many countries through out the continent. While the coups are declining and democratic governments are being established, the economic growth and development of Africa is not anywhere it should be considering the abundant natural resources and coastline that the continent possesses. Even though countries, like the United States of America, donate millions of dollars they are a large reason why Africa is underdeveloped economically. The Trans-Atlantic Slave trade is the most devastating event in the history of the world. Nearly 14,000,000 men, women, and children were displaced, sold into slavery, and killed by the trade routes.(
... aid across the world. As we have established that we do have an obligation to redistribute globally in a cosmopolitan perspective, distributing wealth however we may need to rethink what the best assistance is. Amaryta Sen conveys that before sending aid to the third world state, we would need to fully understand the limitation of freedom in the country. Redistributing wealth to global countries requires it to be evaluated by the economic shortage that they are suffering and to see whether it will be efficient in the long run. The more effective ways to contribute would be to international relief agencies or NGO’s that would pursue international development projects to help those in poverty or the alternative option by Tom Campbell’s idea of a ‘Global humanitarian levy’ which suggests a more appropriate taxation on all citizens to collectively aid those in need.
Page, J. (1994). The East Asian Miracle: Four Lessons for Development Policy. NBER Macroeconomics Annual , 219 - 282.
Priscilla. “The World Economy and Africa.” JSpivey – Home – Wikispaces. 2010. 29 January 2010. .
Concluding thoughts on this book are as follows. The author does a supreme job organizing the topics in this book rationally. He takes things that would seem obvious to others in relation to a particular topic, and describes them so in depth that it is almost as though a personal epiphany is reached in each section. To put it plainly, this book just makes sense. Nothing in it had the feel of new information; rather it takes old information and applies it perfectly to pertaining topics. The author does a lot to ensure that all of his arguments are grounded in logic and reasoning rather than in facts and figures. Granted he does use history to prove many points, but for many others he makes arguments that just seem sensible. This book, however difficult to read due to a wide use of vocabulary, is very thought provoking and should be read by anybody who has ever sought justification for the way societies act in different situations.
“Africa is failing to keep up with population growth not because it has exhausted its potential, but instead because too little has been invested in reaching that potential.” Paarlberg backs this claim with evidence that India’s food issue was solved with foreign assistance in development and offers that the solution to Africa’s food shortage is also development and farm modernization endorsed by foreign aid.
The United States is one of the leading suppliers of Foreign Aid in the world, and even though the US gives billions, European countries give aid money to the same countries, this causes many areas of the Middle East, Africa, and Asia to be almost fully dependent on foreign aid. This means that without aid from other countries, they would not be able to support themselves at all. Foreign aid is meant to help countries that are struggling with civil unrest, disease, or natural disasters, it is not meant to help keep the country out of debt, but that is where more and more of the US and The EU’s foreign aid budget is going. The question is, does all this money actually go where it is intended? It should be going towards the government and to help the people, but in many cases, the countries government does not have the resources to properly track the flow of money. The countries in most cases have poor infrastructure and corrupt or oppressive leaders, not always at a national level, but in the towns and cities. So this means there is almost no way to oversee the flow of foreign aid through the country, all we can see is that their situations aren't getting any better and the countries are still impoverished. If this is the case, where are the millions of dollars going? Countries like Afghanistan and Iraq receive the most money from American foreign aid and European aid, yet they are still under oppressive governmental rule and there is still an extreme difference between the rich and poor. Garrett Harding’s theory of “Lifeboat Ethics” exemplifies how not giving aid to others will allow the strongest of society to thrive, while teaching the impoverished to help themselves. He believes that giving aid to poor countries will only make ...
It is thought-provoking, in the sense that Africa’s need for foreign created a race to the bottom, much like what Pietra Rivoli described in The Travels of a T-Shirt in the Global Economy. Due to some African states’ reliance on foreign aid in order to mine and profit on their resources, they allow business standards to be lowered and for Chinese firms to tip the contracts moresoever in the favor of Chinese firms. This lowers the potential earnings of African states by lowering royalty rates, for example. Additionally, Burgis’ research was thorough and transparent. When he did not receive a response or if his questions were dodged, he made it obvious to the readers. Sure, some could view this book as too anecdotal to be used as a credible source of Africa’s situation. However, this is due to the nature of the system Burgis is writing about; after all, they are shadow states for a reason. Some readers will be saddened by this text, others angry, most curious to learn more, but above all, everyone will be intellectually stimulated and
Loungani, Prakash, and Nathan Sheets. "Central bank independence, inflation, and growth in transition economies." Journal of Money, Credit, and Banking (1997): 381-399.
Poverty has conquered nations around the world, striking the populations down through disease and starvation. Small children with sunken eyes are displayed on national television to remind those sitting in warm, luxiourious houses that living conditions are less than tolerable around the world. Though it is easy to empathize for the poor, it is sometimes harder to reach into our pocketbooks and support them. No one desires people to suffer, but do wealthy nations have a moral obligation to aid poor nations who are unable to help themselves? Garrett Hardin in, "Lifeboat Ethics: The Case Against Helping The Poor," uses a lifeboat analogy to expose the global negative consequences that could accompany the support of poor nations. Hardin stresses problems including population increase and environmental overuse as downfalls that are necessary to consider for the survival of wealthy nations. In contrast, Peter Singer's piece, "Rich and Poor," remarks on the large differences between living conditions of those in absolute poverty with the wealthy, concluding that the rich nations possess a moral obligation to the poor that surpasses the risks involved. Theodore Sumberg's book, "Foreign Aid As Moral Obligation," documents religious and political views that encourage foreign aid. Kevin M. Morrison and David Weiner, a research analyst and senior fellow respectively at the Overseas Development Council, note the positive impact of foreign aid to America, a wealthy nation. Following the examination of these texts, it seems that not only do we have a moral obligation to the poor, but aiding poor nations is in the best interest of wealthy nations.
International aid furthers economic laziness among the poor nations, making them stay longer in poverty when they could work ways easily out o...
In order for any country to survive in comparison to another developed country they must be able to grow and sustain a healthy and flourishing economy. This paper is designed to give a detailed insight of economic growth and the sectors that influence economic growth. Economic growth in a country is essential to the reduction of poverty, without such reduction; poverty would continue to increase therefore economic growth is inevitable. Through economic growth, it is also an aid in the reduction of the unemployment rate and it also helps to reduce the budget deficit of the government. Economic growth can also encourage better living standards for all it is citizens because with economic growth there are improvements in the public sectors, educational and healthcare facilities. Through economic growth social spending can also be increased without an increase of taxes.
“…increasing international trade and financial flows since the Second World War have fostered sustained economic growth over the long term in the world’s high-income states. Some with idle incomes have prospered as well, but low-income economies generally have not made significant gains. The growing world economy has not produced balanced, healthy economic growth in the poorer states. Instead, the cycle of underdevelopment more aptly describes their plight. In the context of weak economies, the negative effects of international trade and foreign investments have been devastating. Issues of trade and currency values preoccupy the economic policies of states with low-income economies even more than those with high incomes because the downturns are far more debilitating.1”