Many scholars have formulated views on why foreign aid is a venture doomed to fail. We examine the prospect using the competitive, individualistic and competitive views.
The competitive view states that nations use foreign aid as a means of gaining political and economic advantage over other nations. What drives them is the desire to polarize power towards them. We can find many examples of this in history. The Cold War saw the Soviet Union and the United States pouring out aid to countries who pledge allegiance to them. Cuba saw crude oil worth billions of dollars coming from the USSR with the agreement that they let USSR build missile silos directed against major cities of the United States. The United States was also guilty of buying out allegiances such as pre-war Vietnam and the Philippines. Foreign aid fails to fulfill its function of helping others because allegiances imply certain trade-offs. Trade liberalization, for example, opens up the poor country's market to the donor. What happens is that the local industry fails to grow because they can't compete with the highly mechanized firms of the donor. Donors would also require that the poor country direct majority of its export destinations to them and prohibit them from doing any kind of business with the other 'competitors'.