Trade vs Aid
Econ Essay
Foreign aid vs. international trade is a long lasting debate as to which strategy leads to the greatest level of economic development. Foreign Aid is defined as any assistance that is given to a country not provided through normal market forces. There are numerous forms of aid, from humanitarian emergency assistance, to food aid, military assistance, etc. Development aid has long been recognized as crucial to help poor developing nations grow out of poverty. International trade is the exchange of goods or services across international borders. Economic development as defined by AmartyaSen, 1998 Nobel prize laureate, “requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation.” (1)
In 1970, the world’s affluent countries agreed to give 0.7% of their GNI (Gross National Income) as official international development aid, annually. Since then, these rich nations have rarely met their actual promised targets. “The US is often the largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7% target.” The two charts below, reproduced from the OECD publications (2012) shows aid granted in constant dollars and as a percentage of GNI. Both support the conclusion regarding the failure to meet agreed upon aid commitments and the level of decreasing donations. (2)Billions have been donated, but it appears that Africa which has received the most aid remains a continent impoverished. As Dambisa Moyo in the Wall Street Journal writes “money from rich countries has trapped many African nations in a cycle of corruption, slower economic growth and poverty. Cutting off the flow would be far more beneficial…….the insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. It 's increased the risk of civil
Foreign aid vs. international trade is a long lasting debate as to which strategy leads to the greatest level of economic development. Foreign Aid is defined as any assistance that is given to a country not provided through normal market forces. There are numerous forms of aid, from humanitarian emergency assistance, to food aid, military assistance, etc. Development aid has long been recognized as crucial to help poor developing nations grow out of poverty. International trade is the exchange of goods or services across international borders. Economic development as defined by AmartyaSen, 1998 Nobel prize laureate, “requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation.” (1)
In 1970, the world’s affluent countries agreed to give 0.7% of their GNI (Gross National Income) as official international development aid, annually. Since then, these rich nations have rarely met their actual promised targets. “The US is often the largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7% target.” The two charts below, reproduced from the OECD publications (2012) shows aid granted in constant dollars and as a percentage of GNI. Both support the conclusion regarding the failure to meet agreed upon aid commitments and the level of decreasing donations. (2)Billions have been donated, but it appears that Africa which has received the most aid remains a continent impoverished. As Dambisa Moyo in the Wall Street Journal writes “money from rich countries has trapped many African nations in a cycle of corruption, slower economic growth and poverty. Cutting off the flow would be far more beneficial…….the insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. It 's increased the risk of civil
Bibliography: 8. OECD Development Statistics Online, last accessed April 7, 2012 9