Aid as a Strategy for Economic Development

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Discuss the advantages and disadvantages of aid as a strategy for economic development.

Aid is a term used for major financial and material donations given from a donor country to a recipient country. Aid can be given directly from the donor government to the recipient government (bilateral aid), or go from donor to recipient through an international organization such as the World Bank (multilateral aid). It can also take the form of loans from banks to the recipient country, or donations managed by non-governmental organisations and charities. There are two types of aid: humanitarian aid, which is basically material assistance (in the form of food and water supplies, shelter, sanitation, health care) that relieves the immediate impact of war or natural disasters on the population. Long-term aid, on the other hand, deals with the causes of poverty and aims at establishing the bases for sustainable development in the future. Long-term aid includes, for example, investments in projects (agriculture, infrastructures) that will benefit the country in the long run, and education of local doctors, engineers, administrators, lawyers. In situations like natural or human-induced disasters, emergency aid is a precious resource. In the long term, however, this type of aid can have negative effects on development: the recipient country could become dependent on the continuous supply of products from abroad instead of mobilizing its own resources. Emergency aid cannot be considered as a strategy for economic development, and for this reason, this discussion will focus on long-term aid only.

About 70% of the total aid given in the world is bilateral aid. Another great percentage of aid is multilateral. Bilateral aid has often been criticized because it can be very arbitrary: it is not always given to those who need it the most. Since 1976, the main recipient of USA’s bilateral aid has been Israel, which has a GDP per capita among the thirty highest in the world, and is...