What’s wrong with Foreign Aid?

Search for the definition of aid and the first definition that you will come across is “help, typically of a practical nature”. Most of us have donated money to someone or something in some point in our lives. Whether it be from watching a 5 minute video of David Beckham in Uganda which shows the overly endorsed, commercialised star wearing an ‘edgy’ beanie, or from watching some long forgotten member of the Sugarbabes along with someone who ’you think was on blue peter once’ climbing a mountain and somehow managing to survive 5 nights in a tent, most of us have given at some point. The act of donating feels us as an individual with an overwhelming sense of morality, virtue, rectitude, chastity and integrity, well maybe not quite that, you just feel a bit less guilty. We sleep easy that night in our 4 bedroom semi-detached houses, knowing that the £10 we donated earlier when giving our credit card details to some 29 year old volunteer called Lance will make a huge difference to the world. You can’t wait to see what the EastEnders cast might mime to next year, thinking that maybe if Phil Mitchell joins in you might even donate £20.

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But what difference will it make? Well it will help, but just how much of foreign aid helps people in the developing countries? And just how right are the rich and powerful in who they give to?

Who do you think the USA gives the most amount of aid to? That country David Tennant went to last year looked pretty bad didn’t it? While you list of countries in your head, you’ll probably fail to guess right, I didn’t either. It’s Afghanistan. Nothing outrageously immoral or degenerate about that, is there? Well what does most of the money given to Afghanistan go towards? Healthcare? Education? No, not quite. In 2012 the USA gave 9,559.90 million dollars in military assistance to Afghanistan. Almost three times more was given to Afghanistan in military assistance than general economic assistance. The list of who receives the most amount of aid from the USA carries on in this order: Israel, Iraq, Egypt, Pakistan, Jordan, Ethiopia, Kenya, Colombia, Haiti, West Bank/Gaza and South Sudan. All of these countries do receive great deals of money from the USA, which don’t get me wrong is great. But all of these countries receive, if not more, the same amount in military assistance as general economic aid.

The next country on the list really surprised me. Ahead of Somalia, Nigeria, Yemen, Mozambique and others, lying 13th highest in the amount of financial aid received from the USA is Russia. Maybe it’s just from some pact from the cold war? Maybe Russia gives just as much back? Russia doesn’t need 395.00 million dollars of economic assistance from the USA, does it?

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Search ‘Why does the US give Russia so much aid?’ into an internet search engine and one of the top results will be an article by NBC News with the headline ‘Russia tells US: We don’t want your aid money’. It turns out that Russia are actually not happy with being 13th highest in the amount of aid received from the USA. Why not?

The money doesn’t exactly go to the Russian government. In reality the money actually goes towards pro-democracy NGOs in Russia. The fact that the US gives more money to what is seen as a developed country because it wants to effect the way it is run and the way elections are held rather than struggling countries which are crippled by poverty and disease is surely not right. So why does one country give aid to another?

Let me introduce you to tied aid. Tied aid often comes at a large expense. When a country gives aid to another country, there are often conditions. It might be a condition that LEDCs cut trade tariffs for TNCs. Elsewhere, bilateral aid might involve requirements to purchase from donor countries. A recognised dependency theorist named Hayter (1989) argues that aid is often used for political leverage. It allows the country that gives the aid to make decisions about the country receiving the aid and their economy. A real life example of this is Greece. In 2008 Greece suffered from a financial crisis. Subsequently the EU helped them out. Nice of them, right? However the EU now has powers in Greece due to the conditions of the aid and help they gave them which means they can dictate policies there. Does it not seem unjust that the country receiving the aid can be seen worse off for it in the long term than the country giving it?

Neo Liberalists would also argue that aid is very bad for another reason. When a country receives aid it is arguable that they could become dependent. Neo Liberalists argue that it discourages innovation and entrepreneurship.

But don’t underdeveloped countries need some aid to start with to generate development? Look at Hong Kong and Singapore. They were not saved by foreign aid. Alternatively, they cut down on governmental interference with business, slashed taxes and opened their boarders to trade. Consequently, they flourished. Furthermore Britain wasn’t given aid to help start the industrial revolution.

I’m sure you’ve heard a story of someone, or maybe you know of someone, who has taken out a loan and become crippled be the impregnably growing interest rates. Many have even become ill over debt repayment and it can be a very serious problem. Well this happens to countries also.

Many countries find themselves in a very serious problem when having to repay loans. So serious that there are often terrible consequences. Many have to make cuts, and these cuts often come in the form of healthcare. In the 90s it was estimated that due to cuts in healthcare from countries trying to repay loans, half a million children were dying.

The way that you donate money is probably likely to be through something like a charity or maybe something like Comic Relief. Comic Relief is brilliant, I love it, it’s a great concept and has done the world a lot of good. But in 1991 Comic Relief raised 12 million pounds. Brilliant, right? By the end of the day 12 million pounds had already been paid back in the form of developing countries paying off loans. 1985 saw the year of Live Aid. A fantastic year and another brilliant event. But the money raised by Live Aid in a year was paid back to us by developing countries by double. The harsh reality is although we are giving lots, we are getting back just as much. The money that gets donated from Comic Relief and Live Aid obviously doesn’t have to be paid back as it is a donation. But nevertheless, it is scary to think that maybe the money we as individuals donate, might just be going straight back into our governments pockets.

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Don’t get me wrong aid can be brilliant. But countries receiving it should be able to receive it without any tied political promise, nor should they have to pay back even more than they have been given.

Many loans come with compounding interest. This is the idea that when interest is added onto a payment that needs to be paid back the next lot of interest is added in to the total amount of money including previous interest. For example say someone is loaned £20 and the interest rate is 10% every month, the first month it will go up to £22. And then the next month it will be an extra 10% of £22 not £20, so now it will be £24.20. Compounding interest can be crippling and should not be used when giving aid, nor should any interest in my opinion.

The first word from the definition of aid is ‘help’. But the idea that a country giving aid actually benefits out of it more than the country receiving it does not appear to be great ‘help’. Actually it’s disgusting. A country giving aid for me is like a very rich man investing in stocks and shares. He gives away his money to start with but he knows in the end he’ll end up with even more.

The change does not need to come from us, it needs to come from the people in higher positions. But we can make the changes happen.

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