The Benefits Of The Development Aid - Essay Example

DEVELOPMENT AID Development Aid Development Aid as the s, is a medium for the eradication of poverty from the face of this earth. This medium is extended as help from the developed and progressed countries such as the United States of America, Canada, United Kingdom, and other such developed countries to the yet developing and the poor countries through monetary means. Using the so termed development aid, the third world countries try to develop the infrastructure of their governments and countries to provide a stable platform for the citizens to prosper and progress. Since poor third world countries never had the means of high income or GDP and since they do not attract big investments from other countries and markets, they are in a state where they cannot even take care of their own infrastructure (Erixon, 2005). Such countries began to borrow capital from other well to do rich countries to start developing their own economies and thus began the concept of Development Aid. There has been a lot of monetary transfer between the poor countries and the developed countries with regard to the development aid. Development Aid was made mandatory by the United Nations in the year 1946 to ensure that the countries which were destroyed and affected adversely during the World-War II, to recover from their state. The concept of providing Development Aid was to help the third world countries recover from their poverty and help them come on to the path of progress. Development Aid was meant to be the means of maintaining a peace accord between two rival countries affected by war for quite some time. Development Aid helps countries to develop and progress instead of sliding back into the stages of conflicts and war. Idea Development Aid also termed as foreign aid was meant to promote improvement in economic growth of the third world countries and to bridge the gap between the poor and rich. Foreign Aid or Development Aid does not include aids given for emergency relief programs which usually take place in case of natural or intentional disasters. The idea dates back to economist John Maynard Keynes who in the 1930s argued that government could stimulate development by financing investments. Keynes' ideas for the domestic economy were taken up by a new breed of development economists who argued that investment in less developed countries could be stimulated by injections of cash from overseas. The logic of this new development theory was simple: investments are determined by savings - and savings are determined by per capita income. Since poor countries have low incomes and accordingly, low savings, they are caught in a 'vicious circle of poverty': they experience a 'low-level equilibrium trap' where higher income does not lead to increased saving but only results in higher population growth. Thus, it was argued, investment financed by foreign aid will dissolve this vicious circle and connect the less developed countries to the virtuous circle of productivity and growth. Pros and Cons Good Governance is the latest term being used for the diplomatic as well as the bilateral issues of Development Aid. Good Governance is a term which is very common amongst the general public with regard to Development Aid; mostly hearing at public speeches or through some media like the television, the newspaper, etc. Good Governance as told is like a diplomatic and bilateral condition in multi aid proposals (O'Neill, 1997). Bilateral issues in multi-aid proposals include the two countries coming to a common understanding between each other, signing some pacts which would have to be followed in the following times after the pacts have been signed. Many people and governments are of the opinion that Good governance is an integral concept and entity to improve the flow of aid thereby proving to be a bolster to the economic growth of a country as well as a means to alleviate poverty from that particular country. Many have different views about good governance which might mean different things to different people. However, many think good governance has some relation to supporting families, living a good life and to have decent earnings. This expectation of the general public, however, is challenged by the fact that there have been several scams and corruption cases which are on an increase especially in the regions where good governance has been implemented. Like the two sides of a coin, good governance does not always lead to the support of development aid nor does it always support proper living environment. It has studied and proved that although good governance has been implemented successfully in several developing countries, many of the development projects supposed to bring uplifting of the local people have failed to do so. Even the development aid which was provided was a little less than a hazard. Development aid too could not do much good to the local people (Gwyer et al, 2007). This can be attributed to the fact that development in developing countries cannot be achieved only by implementing good governance. The need of awareness about the projects and awareness about governance has to be realized. In due time, as a result of all these issues, good governance, consequently, has become just an explicit condition which was integrated into the aid policies of the aid donors which compulsorily has to be followed and exercised by the aid receiving third world countries. If we look into the economic terms, in order to achieve economic growth, free market capitalism is an essential entity. Also the promotion of neo-liberal market is necessary to obtain economic growth which in due time leads to tremendous economic growth. Several economic reforms like deregulation, tax reforms and labor reforms can be achieved only through economic growth which is a result of the implementation of the free market capitalism concept. The reforms also include other activities like encouraging and providing growth incentives to the private sector to develop through privatization, globalization, etc. and downsizing of the public sector to enable economic growth. Many think that Development Aid is provided only through providing financial assistance. However, this is not true as development aid is provided even through the means of technical assistance, providing advisors and trainers and also through scholarships. The policies regarding the international aid, especially regarding the International Financial Institutions (IFIs) have observed a shift towards the concept of good governance. This shift has been observed both as an objective and a precondition for development aid. This fact is a disturbing phenomenon which is fit to be questioned rigorously (cgdev, 2007). The following three things can be deduced by looking back at the above discussion: It is observed that to achieve economic progress and growth and to alleviate poverty from their countries, the third world countries have to compulsorily borrow capital in the terms of development aid without which they cannot afford to come out of the dire situation. It is observed and quite evident from the present day situations that there are several social evils facing up in both the developed and the developing economies. These social evils consist of corruption and financial scams. All of this can be attributed to the improper implementation of governance which results in the ill-being of these countries. As we have seen, good governance is thought to be the basic fundamental concept behind the proper working of economies. It is also observed that development aid is necessary for a developing country to start making progress in economy and thus development aid was mandated by the United States for the developing countries to receive aid from the international donors. Social Reforms are considered to be the basic entities required to provide development aid to the third world countries. Thus reforms were included in the main objective of providing the development aid. The two generations of reforms indicate the changes in the reforms taking place. The first generation reforms mainly deals with liberalizing the economy. This generation of reforms included economic and structural reforms. The second generation reforms were mainly directed at redesigning the state or country and its institutions. This was to enable a smooth and unrestrained economic progress. The second generation reforms included political reforms and the good governance agenda. Consequently, promotion of good governance has become an integral part of the emergent global economic order. According to the World Bank, good governance is supposed to symbolize that entity which is used effectively in keeping corruption in check and also encourages certain qualities and accountability in a democratic economy thereby providing stability and consistent growth to an economy. Such an approach to good governance is supposed to be and considered narrow and rules out any kind of link to the rights of the people (Casimira, 2003). Many think it is advisable to impose good governance from outside the economy and it is assumed to be so. However, it is best to impose such laws from the inside rather than from outside. This assumption is made because it is believed that the best institutions, organizations and other such entities are always situated in the developed countries and it is also believed that it is the developed countries that can bring about and influence a major milestone. It is appropriate to give credit to the other countries who strive to develop yet contribute much to the development of the world and most often they are not appreciated for this fact. It has to be realized that there could be many other models of development. The problem with good governance indicators is that they are mostly aimed at foreign investors and lenders for assessing political risks in countries where they invest, instead of addressing the issues of people at large for whom governance really matters. It is thought that poverty can be reduced just by implementing good governance. As we have seen earlier, this could be wrong. It is not guaranteed that good governance will eventually lead to alleviation of poverty and also the improvement in the living standards of people in the third world countries. Poverty, infant mortality and illiteracy rates have remained high in several countries which have established democratic governance norms and institutions for decades (e.g. Somalia). It is also observed that reduction in poverty, excellent economic growth have all occurred in the Indonesian countries under poor governance. The fact that the issue of good governance provides an open door for all the official and diplomats to place extreme constraints on the aid receiving countries under the pretext of good governance and the need for economic development and alleviation of poverty (Clasimira, 2003). The other major providers of development aid are the International Aid agencies. They are by far one of the major development aid donors to the third world countries. The main motive again is personal gains rather than to help the poor countries on their way to development. International aid agencies attract more donations from the public than any other charitable cause, beating cancer, children's and animal charities to bring in 486m in 2001-02 (Shifrin, 2004). The International Aid agencies instead of helping people in the calamity struck areas, they make a big fuss about the events which results in a hype about the situation. The main reason again behind these actions of the aid agencies is personal gain and benefits. Some aid agencies exaggerate the grievousness of the situation in order to receive more incentives. An evaluation commissioned by the Disasters Emergency Committee criticized some charities for exaggerating the seriousness of the situation (oecdobserver, 2005). It has been pointed out that instead of getting together and helping the people, they conflict with one another as to who can pool in more money into their pockets. There have been many cases of tensions between the charity organizations and trusts. It has been observed that Development Aid is beginning to do more harm than good to the third world countries. With aid tied not only to foreign policy aims but linked with commercial interests and privatization, the whole aim of development aid is defeated. It is found that developing countries do not have a choice to keep essential services with the public sector (europa, 2005). Most of the services are forced into the private sector under the pretext of privatization which if done otherwise, the countries faced a risk of getting their aid cut off. Also the issuing of the development aid is found to be biased. European emergencies were given much more aid than the emergencies in Africa put to whole since 1997. This shows that the goal of rendering development aid is not met in the end. This reflects a bias of resource distribution to more strategic countries rather than non-strategic countries. Perhaps it is no coincidence that in an increasingly politicized climate a number of aid agencies have seen a change of hands at the top, recruiting new chief executives, and an even more fundamental change is under way at Oxfam. More aid is being directed to the development of the already established organizations rather than to help the upcoming organizations to function and perform better in today's market. Development Aid is also an alternative way of using the resources of poor countries for the betterment of own economy which is a weapon used by the richer countries. May several constraints are imposed on the receiving countries by the funding countries. For example, the railways sector of the Nigerian government was extremely corrupt and the railways sector never developed to the necessary extent (Naim, 2007). Nigeria faced the necessity of improving the quality of the railways. Since they did not have the necessary technology and capital, China offered to help them rebuild the railways sector of the Nigerian government costing USD9 billions. However, there were certain conditions that the Nigerian government had to accept. These conditions included the setting up of some of the manufacturing plants of the Chinese companies in Nigeria free of cost. These manufacturing plants were not ecosystem friendly. These manufacturing plants caused a lot of pollution thereby polluting the environment in the nearby regions. Besides this, even the resources of the country are being exploited to the maximum extent. In this manner, more harm than help is being done to Nigeria. Development aid is also viewed as a tool or a weapon for increasing the national economy by exporting the goods to the developing countries. Once, development aid is given, constraints are imposed on the receiving countries. These constraints could include trading conditions such as reducing or removing duties off the goods exported to the developing countries. The European countries which provide development aid to developing countries import much more to the developing countries than to developed countries (Europa, 1997). For example, United Kingdom exports more goods than to African countries than it does to United States of America. Conclusion It is observed that even though development aid is put forth as a helpful tool to assist the third world countries in developing their infrastructure, there are hidden facts to development aid that suggest that it is in fact detrimental for a country to take a development aid. Many countries are in heavy debts due to development aid. Inorder to get back the loan, the rich countries who provide the development aid impose several constraints on the third world countries which in turn hampers the growth of the country. No rules at present exist which can control the flow of development aid and thus there is a lot of wealth drain from the third world countries to the rich countries due to development aid. This will continue unless there are some laws laid down to control such drain. References Erixon, Fredrik, (2005), "Aid & Development-Will it Work This Time", Hanway Print Centre, found at: http://www.policynetwork.net/uploaded/pdf/Aid_&_Development_final.pdf Naim Moises., (2007), "Rogue Development Aid", Online Article, found at: http://www.iht.com/articles/2007/02/15/opinion/ednaim.php Casimira Aisake., (2003), "The Misuse of the Term - 'Good Governance'", Online Article, found at: http://www.ecrea.org.fj/publications_files/Papers/21.doc Europa., (1997), "Development Aid: Building for the Future with Public Support", Online Article, found at: http://ec.europa.eu/public_opinion/archives/ebs/ebs_105_en.pdf cgdev., (2007), "Commitment to Development Index", Online Article, found at: http://www.cgdev.org/files/14716_file_CDI_Report.pdf Shifrin Tash., (2004), "International Aid and Development: The Issue Explained", Online Article, found at: http://www.guardian.co.uk/society/2004/may/04/internationalaidanddevelopment.comment oecdobserver., (2005), "Development Aid: Getting it Right", Online Article, found at: http://www.oecdobserver.org/news/fullstory.php/aid/1579/ europa., (2005), "Attitude Towards Development Aid", Online Article, found at: http://ec.europa.eu/public_opinion/archives/ebs/ebs_222_en.pdf O'Neill June., (1997), "The Role of Foreign Aid in Development", Online Study Book, found at: http://www.cbo.gov/ftpdoc.cfmindex=8&type=0 Gwyer Julius., Oropeza Cosette., Petras Rudolphe., (2007), "Aid Effectiveness", Online Article, found at: http://topics.developmentgateway.org/aideffectiveness Read More