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Foreign aid and its own effectiveness in producing countries

This article is through the STAR, on Wed 22 September 2010. This article is approximately the help given from a wealthy country to the indegent. When there can be an monetary downturn in US, the majority of the donors they want to reduce their spending. The best way for doing that is reducing the amount of aid to the indegent. The UN Secretary-General Ban Ki-moon pressed the wealthy nation not to divert aid from the poor. While the donors, they said that the prior aid given has been wasted by the poor country. Meaning that they didn't use the aid directed at promote their economic development. To cope with this issue several efforts conducted to ensure that the aid is utilized fully and look for alternate financing sources. The best solution is an increment in the quantity of shelling out for education. Spending on education will ensure the proper utilization of help perpetually.


Foreign help is defined as a help that is directed at a country that could not need been provided through normal market causes. The development aid is given to be able to decrease the quantity of poverty in the long run and enhance the welfare of people.

The United Region [1] (UN) is convinced that the earth will probably halve poverty and food cravings by 2015. This is part with their goals in offering aid to the indegent. Recently, scheduled to economic downturn in US, many developed countries have been infected. Thus, they are planning to reduce their spending by managing costs on the backs of the poor. Spanish Prime Minister said that countries were dealing with difficult decision as they make an effort to revive their own country's economical growth. Spanish authorities has to cut development aid because they're having fiscal crisis and high unemployment. The rich countries also stated that recently the aid given was squandered. The indegent countries invest the finance on the project that profitless. In reality, aid does not reach the neediest. You can find possibilities of corruption in the bureaucracy that take care of the funds. Thus, they won't give more since it induced them to damage.

If aid is given, poor countries will gain benefits by being able to increase spending on education, health care, and bettering infrastructure in the united states. Besides that, if the help is in the form of money, they can use the forex to import the capital and technology necessary for economic development. This often in conjunction with technical aid and technical assistance from the donors. In addition, it can help to fill the cost savings gap that is accessible in developing economies and so, encourage investment. In 21 African countries in 1997, help represented 10% or more of all GDP (gross local products). [2]

However, if the aid is given consistently, the indegent country can be too reliant on the donor country. The poor countries may be monopolized and their government will be manipulated. The donor's country will be too powerful until the rule or the policy of the indegent countries is set by them. They could lose their freedom.

On the other side if the wealthy countries do not give any aid, there is certainly high possibilities they have difficulties when they want support when they in need. Their reputation as a wealthy country will diminish. Other countries lost self-assurance to operate with them. This can slow down the economic growth in their country. Besides that, the amount of poor country throughout the world will increase. The UN's goals would not be achieved forever.

To deal with this problem there's a suggestion to form a taxes on financial transactions as a way of bringing up money to aid the world's poorest but it's been rejected. They presumed that it is not effective as it will burden the wealthy countries. Secondly is to let more transparency management of aid and have better coordination and a particular focus on supporting pregnant women and babies. Providing the aid for the pregnant women and infant to own a better entry to health care can improve their life expectancy. This group of individuals are in the category of individual capital which thought as the value of work force. Investment in real human capital through education or advanced health care could be a significant contributor to economic growth.

Capital Goods




Consumer Goods

X X1


Diagram 1: A production of opportunities curve (PPC) of poor country.

Diagram 1 can be used to illustrates the potential productivity for poor country's economic growth. If indeed they received aid it could help them to achieve point W which presents the actual result throughout the market. At point Z resources are being shared between your capital goods (e. g. food or clothing) and consumer goods (e. g. equipment). Point Z1 is unattainable for the poor country economy as it is outside the PPC

The most effective solution is the help given can be used to increase the spending on the education perpetually, because a much better usage of education will produce a high skill staff member that could produce more products at high quality. Their efficiency will increase and their creation would improve. This could assist in promoting financial development.

(753 words)

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