While foreign Aid is one tool for economic development, some of the international aid programs have come under criticism because of benefiting the donor country over the recipient country. Evidently, there are many positive effects of the foreign aid programs. However, the majority of this programs are always tied to the donor country interests and their stakes in the country receiving the aid. Besides, the foreign aid can have adverse effects on the economic and political development of the nation as the benefactor country can also act in its interest. Of course, aid is not the sole driver of economic growth, but it remains one development tool among the several. Because of this, foreign aid works best in conjunction with transparency, working economic policies, good governance, and the coming up of efficient technologies (Duncan et al. 2011). The role of this essay, therefore, is to highlight the pros and cons of foreign aid in a country and thus indicate whether there is the need of continued assistance to the developing nations or it should be reevaluated and other strategies adopted to alleviate poverty.
In the contemporary world, it is filled with two contrasts. On the one hand, the developing nations experience instances of people dying of starvation. In retrospective, in other countries, there is always the concern about consumption being too high to be sustainable. Because of this sharp differences in the wealth of the nations, some ideologist thus argues that there is the need for the redistribution of wealth. According to Alesina and Dollar (2000), the majority of the donor countries offering aid to the developing countries do so especially with the concerns about the eradication of poverty. However, there lack legal frameworks in the developing nations to establish whether the foreign aid was indeed used for eradication of poverty as there are many other factors that come to play (Alesina and Dollar 2000). Notably, the donor countries postulate that the developing nations are not capable of eradicating poverty as their citizens are unable to work and thus spur economic development. Because of this, foreign aid is supposed to be a significant sum of capital whose primary intent is to spur economic growth in that given country.
While financiers, economists, and politicians debate the effectiveness of foreign aid, the allocation of the financial assistance is always dependent on the political and other strategies of the donor. Notably, there is evidence that indicates that foreign aid has assisted the recipient country in their national security (Burnside and Dollar 2004). With the help of the international aid, the recipient country can combat terrorism as it can decrease poverty, weak institutions, and corruption. Moreover, foreign aid has been shown to assist in the improvement of infrastructure, and this gives the citizens of such countries the ability to be mobile and thus have access to necessities such as water and electricity. According to (Burnside and Dollar 2004), the impoverished countries through the foreign aid can manage to handle humanitarian issues and come up with efficient modes of combating natural disaster. Further, through the foreign aid, a country can manage to import more than it is capable of financing through its exports. As a result, foreign aid if used through frameworks set in place by the recipient country can assist in its economic growth.
Some of the most visible criticism of foreign is the direct link to rampant corruption in the recipient countries (Burnside and Dollar 2004). Notably, the funding intended to assist the average citizens can end up sustaining the bloated bureaucracies in the form of governments in the developing nations. According to the African Union, which is an organisation of the African countries, in the year 2002, it estimated that corruption was costing the continent more than $150 billion each year (Tarp 2006). Notably, the majority of this money was from foreign aid, and therefore international donors were turning a blind eye on the use of their money to fuel graft. In the majority of the cases, the foreign aids in such countries have not been used for their intended purposes save for some few development agendas. Although it would be wrong to say that foreign aid is solely the reason for the corrupt dealings in the continent, it can be argued that it has aggravated the shady deals and leaders (Tarp 2006).
Because of such occurrence, the continent cannot be able to achieve its millennium development goals, their long-term and sustainable economic growth, and the alleviation of poverty. The billions of dollars of foreign aid pumped into the continent have in no way assisted in increasing the economies or poverty alleviation in the scale that it should have managed. As a result, it would be wise to conclude that one repercussion of foreign aid is mega corruption (Duncan et al. 2011). The continuous giving of foreign aid to countries with high levels of corruption can make them more dependent on the assistance, and this can lead to increased levels of corruption and mismanagement of public funds. The ripple effect is that very few entrepreneurs can be willing to invest in such a country as the majority of the investments can stagnate leading to the need for more aid.
According to Whitfield (2010), foreign aid is not a sufficient condition for a country’s development. Notably, countries such as Hong Kong, Singapore, and the past experiences of Japan and England indicate that these countries developed without any foreign aid. Nevertheless, whether foreign aid produces the growth that it is earmarked to achieve depends upon the country's uses. The opponents of foreign aid argue that the dependence on aid destroys self-reliance, leads to the formation of authoritarian regimes, and prevents economic development (Whitfield 2010). Further, such countries end up accruing immense debt from the foreign aid and this proceeds in destabilising the economy of the given country. The burden of the debts can also lead to financial crisis and social-political problem in the country. When such nations end up in debts, they often expend their resources on repaying their debts, and this makes them lack the funds for their economic growth. Besides, there is always the probability that the donor country can end up ceasing to support such countries when they are not able to service their loans as per the agreed terms (Whitfield 2010).
Conclusion
There is no doubt that foreign aid can be of significant use to some developing countries. As a result, the wealthy western nations have managed to lighten the short-term problems such as food shortages and the setting up of infrastructure that have helped the poor. Nonetheless, it is evident that some countries are misusing the foreign aid and this has made them worse off with the presence of funding. More so, it is imperative to note that some western countries are also faced with the same challenging financial and social issues. Thus there is the need of coming up with frameworks that guide on the usage of the foreign aid, or if the demerits of the foreign funding outweigh the merits in a given country, then it is eminent that it is withdrawn.
References
Alesina, A. and Dollar, D. (2000). Who Gives Foreign Aid to Whom and Why? Journal of Economic Growth, [online] 5(1). Available at: http://www.jstor.org/stable/40216022 [Accessed 20 Mar. 2018].
Burnside, C. and Dollar, D. (2004). Aid, Policies, and Growth: Reply. American Economic Review, 94(3), pp.781-784.
Duncan, R., Cali, B., Willem te Velde, D. and Razzaque, M. (2011). Effectiveness of Aid for Trade in Small and Vulnerable Economies: an empirical assessment -. Asian-Pacific Economic Literature, 25(2), pp.175-176.
Tarp, F. (2006). Foreign Aid and Development: Lessons Learnt and Directions for the future. 1st ed. London: Routledge.
Whitfield, L. (2010). The Politics of Aid: African Strategies for Dealing with Donors. 1st ed. Oxford: Oxford University Press.
