Does Foreign Aid Help or Hurt Developing Economies?

Traditionally, foreign aid is given to the developing countries as a means of alleviating their poverty. Such developing countries usually possess the distinct characteristics of having neither a capitalist nor a socialist economy and these countries usually have recently just emerged from colonial rule. Otherwise known as "Third World" countries, they have little economic management, a dominance of subsistence production, unequal income distribution and a low per capita income.

The foreign aid given by the developed countries usually serves two purposes. Firstly, it is given in order to resolve the immediate problems faced by many developing countries such as Ethiopia, such as the problem of starvation and malnutrition. Such foreign aid, which is usually in the form of subsidised food imports from the West, only reach a small proportion of the poverty-stricken people in the rural areas. This is because most of these food aids are diverted into the urban areas where they are distributed by the government to urban supporters. This is therefore done at the expense of the poor people in these countries who continue to suffer from malnutrition. A good example of this could be seen in Ethiopia, a country which experienced ten years of civil war. The problem of malnutrition in the country continues to worsen despite efforts by the developed countries to try and alleviate it through fundraising concerts such as "Live Aid". Although "Live Aid" caused many countries in the West to focus on the problem of poverty in the Third World countries and managed to raise a huge amount of aid for these poverty-stricken areas, the results of such campaigns. are yet to be seen. The problem in Ethiopia is compounded by the droughts that occur frequently and the government's desire to withhold from the rebel-occupied areas.

As a result, it is seen that such foreign aid is not useful to the developing countries, as seen through the eyes of the people in the West, as it is only beneficial to a small minority and the aid is not targeted at where it is most needed.

In the long term, foreign aid is also given by the developed countries to enable the developing countries to eradicate poverty through further development of `the infrastructure within the countries. The aim of such foreign aid is to allow these people to realise their own potential to generate economic growth. It is done by ensuring that these people in the developing countries have direct involvement in the schemes set up with the foreign aid, which is usually in the form of grants. Without the active participation of the people, in particular the rural poor, no profound changes can be made. This type of aid given to the developing countries is a relatively new concept developed after traditional forms of aid such as the transfer of expertise and technology failed to show any marked improvement in the situation faced by the developed countries where, according to figures from the United Nations, one- fifth of the world is living in absolute poverty.

Such foreign aid is given through government agencies such as the "United States Agency for International Development". Because of existing government legislation, these agencies are made to devote a certain amount of economic aid to the poor. Presently, such aid given to the developing countries seers to be of great use to the poverty-stricken in these places as it is seen that more than half of the aid given is usually targeted at the right areas, as in the case of Thailand. However, the only loophole in these otherwise ideal schemes is that the recipient countries are given the freedom to choose from a wide range of uses for such aid, which is usually in the form of grants. More often than not., the governments of such countries would choose to devote this foreign aid to buying of military arms, which as a result, defeats the purpose of the aid.

Although foreign aid is given by the capitalist and socialist countries alike in order to win the support of the developing countries, they are also given for humanitarian reasons. However, foreign aid is not necessarily the only way to eradicate poverty. It, can also be done by alleviating the debt crisis usually faced by such countries as well as solving the problems brought about by poverty, such as overpopulation, in order to allow these countries to get out of the vicious cycle of poverty.

Therefore, we can see that foreign aid would be useful to the developing countries, so long as it ensures economic growth of the countries involved. It must also be aimed at eradicating the poverty faced key certain groups of people in such countries, brought about. by the social inequality usually prevailing in these countries. Foreign aid is usually given by the developed countries. However, it must be recognised that it is man's duty to eradicate poverty and limit its consequences for humanitarian reasons and ac-hieve a state of peace, which is necessary for all living creatures to thrive in this world.