Foreign Aid: Helping or Hindering ?
The citizens of the privileged and developed countries feel the obligations in their hearts to uplift the poor countries by supporting them in many dimensions. Hence, the concept of foreign aid is introduced into the scenario. Foreign aid, the international transfer of capital, goods, or services from a country or international organization for the benefit of the recipient country or its population. Though the act sounds highly ethical and essential for better development of countries all around the globe. There has been a major contradicting theories offered in the field. Angus Deaton, a Nobel laurel in economics, states in his book The Great Escape: Health, Wealth, and the Origins of Inequality, the catastrophic effects that occur in the poor countries due to foreign aids. Deaton explains if poverty is proven not a product of lack of resources or even opportunities rather of underperforming institutions, unorganized government, and toxic politics. Providing foreign aids poor countries (especially financial helps) is likely to perpetuate and prolong poverty, not eliminate it.
The world is a tale of progress and inequality but as it is keenly observed by Deaton underdevelopment is neither due to financial nor to technical problem but rather a more local problem which is political one. Foreign Aid provided to these nations hamper the opportunities to develop their political infrastructure which is essential for a nation to rise. In underdeveloped countries, if the major source of income is foreign aid rather than its own public, then such government need no contract with its citizens, no parliament, no taxation institutions. It is stated that the government is only accountable to their donors but in reality that also does not work as the major institutes of rich countries are under pressure of their emphatic citizens who wants to contribute for development of the less fortunate countries. Hence, the country remaining in stagnant position with the cycle of receiving foreign aid and utilizing it with no real progress.
Angus Deaton, in his book The Great Escape: Health, Wealth, and the Origins of Inequality take into consideration of the comparison of skewed growth of India and China as compared to countries of African sub-continent. Visiting the past, India and China received a very little foreign aid pertaining to development but were successful in uplifting tens of millions of their population from the the trap of poverty. In addition to that, these nations are in the stepway of creating very strong political infrastructure base. While on the other hand based on reports by World Bank, the African countries received near to 25,000 million dollars per annum in the year 2005 ( as compared to about 10,000 million dollars in 1975) while its GDP per capita almost remain stuck around 575 dollars from the year 1975 to 2005 along with no substantial development in infrastructure. These comparative study strongly suggest in the favor on the ideas of Deaton regarding foreign aids.
One might say that the theory put forward by Deaton is very weakly established. The link of chain from foreign aid to poor government infrastructure is purely theoretical which do not always necessarily hold truth in reality. Some critics claimed that the comparison between cross countries to study the effects of foreign aid is biased as it impacts every country in its unique dimensions and development could happen at different paces. In addition to that, the extent of foreign trade is never discussed as there are certain countries whose population are provided with food with the help of the foreign aid they receive from other countries. In here, extracting the foreign aid would result will lead to hunger of masses and a great hit against human values. In view of large majority, steps against foreign aid is promoting inequality in the world and leaving underdeveloped nations by their own.
Whether providing foreign aid to underdeveloped countries by rich nations is helping them to grow or hindering their development process is a long lasting debate since decades. Angus Deaton put fresh perspective on the issue and discusses that aid can undermine the development of “local state capacity” and makes failing governments even less accountable and finally do not give the nations the space to prosper.