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Promoting Development - Aid

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by

Hugo Flower

on 14 January 2015

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Transcript of Promoting Development - Aid

Promoting Growth & Development - Aid
You will be able to evaluate the effectiveness of international aid in promoting growth and development

You will be able to apply this to different situations

Advantages of Aid
•Reduce poverty / end starvation.

Evaluation of Aid
•Possible misallocation of resources. May undermine domestic producers (eg Ghana rice production undermined by US aid donations of rice).

Aid
Aid: Definition: donations to a country which are NOT commercial. Can be in form of cash, or consumer goods (eg food) or capital goods (eg infrastructure).


Different forms –
Financial aid
can be gifts or soft loans or debt cancellations. Eg Overseas Development Assistance (govt to govt).


Aid can also be in form of
physical aid
or
humanitarian aid
(goods or infrastructure rather than money).


Tied aid
is when the aid is restricted / conditional (eg infrastructure has to be built by a company belonging to the donor country).

Non Governmental Organisations (NGOs) also can donate aid at a local level, bypassing the domestic government.
June 2010:
Evaluate the effectiveness of aid in promoting growth and development in a country of your choice (20)

•Build new infrastructure


•Reduce Savings gap (Harrod-Domar model of economic development).

•Shift AD and LRAS to right, increasing real output, including multiplier effect.
•Fills foreign exchange gap.
•Improve human capital (health and education), shift LRAS top right – BUT time lag.
•Access to new technology and improved methods.
•Provision of managerial expertise

•Tied aid may not be purely in the interests of the recipient, but may actually unfairly favour the donor.


•Creation of dependency culture.

•Aid can support rogue regimes (China not interested in human rights in recipient countries).
•Tied Aid might mean low multiplier effect in domestic economy.
•Aid may not get to those most in need – trickle down theory and Lorenz curve (income distribution).
•Corruption
Ethiopia
HDI rank: 173
Africa
Population: 1.033 billion
different countries with HDI chart - aid?

different countries - giver or receiver?
How much?
Activity:
You will be shown a country. I would like you to guess whether they are an aid giver or receiver.
Also, how much as a percentage of their GDP are they receiving/giving?
The UK
HDI Rank:
26
Giver:
0.56%
Note: In 1970, a target for aid given was 0.7% of the donor nation's GNI
Sie
rra Le
one
HDI Rank:
177
Receiver:
15%
Zambia
HDI Rank:
163
Receiver:
6%
Luxembourg
HDI Rank:
26
Giver:
1%
Afgh
ani
stan
HDI Rank:
175
Receiver:
35%
In
d
ia

HDI Rank:
136
Reveiver:
0.2%
U
S
A

HDI Rank:
3
Giver:
0.19%
Is this right?
Haiti
20th January 2010
Would aid be important here?
To Summarise:
When is aid beneficial?
When is aid not effective?
However, on the other hand...
Typhoon Haiyan
5,000 people dead
4 million left homeless
Export crops destroyed
Full transcript