Y376 International Political Economy February 8, 2012
North-South Aid Issues: What the Developing Countries Want
Increasing the total amount
Untying “tied” aid
Increasing the proportion of aid channeled through multilateral agencies
Making aid more automatic
Giving LDCs more control over the spending of aid
What is Aid (Official Development Assistance)?
Undertaken by governments
Main objective to promote economic development and welfare
Made on concessional terms with a grant element of at least 25 percent
Figure 6-1. Annual Bilateral ODA by the G-5 Countries, 1960-2007, in Billions of Constant 2006 Dollars Source: OECD Statistics online .
Figure 6-3. ODA from DAC Countries, OPEC, CMEA, and non-DAC Countries, 1956-2007, in Billions of Current Dollars Source: OECD Statistics Online.
ODA by Major Donors, 2006
Aid as Percentage of GDP
Example of US Aid to Iraq
US Aid to Iraq, 2004-2007
US Aid to Iraq in Comparison with Aid to Germany and Japan
Why Hasn’t US Aid to Iraq Worked?
Preference for US over Iraqi contractors (higher costs)
Huge proportion of spending went to private companies like Bechtel
US concentration on rebuilding oil fields and other infrastructure projects
Al Qaeda disruption of aid work, especially in the rebuilding of infrastructure
Table 6-2. U.S. Foreign Aid Programs, 2004 Source: Carol Lancaster and Ann Van Dusen, Organizing U.S. Foreign Aid (Washington, D.C.: Brookings Institution, 2005), p. 14. Department Name of Program $Millions Department of State Refugee 756 International Organizations and Programs 320 ESF (policy) 3,263 NIS (distribution) 584 SEED (distribution) 442 HIV/AIDS (distribution) 488 Andean Counter-Drug 727 Treasury Department Contributions to Intl. Financial Institutions 1,383 Debt Relief 94 Dept. of Agriculture PL-480 II (budget) 1,185 USAID DA, child survival, disaster 4,511 MCA 994 Iraq Reconstruction 18,439 Other 1,000-1,500
Table 6-1. Bilateral Aid to Former Colonies, 1970-1994 Source: Alberto Alesina and David Dollar, “Who Gives Foreign Aid and Why? Journal of Economic Growth , 5 (March 2000), p. 37. Donor Former Colony Share of Total Aid (in percentages) Portugal 99.6 United Kingdom 78.0 France 57.0 Belgium 53.7 Netherlands 17.1
Aid flows are strongly influenced by former colonial relationships and power politics
Net aid flows do not always remain positive because some aid takes the form of loans that must be paid back
The US share of total aid to LDCs declined markedly over time
Aid is primarily needed to deal with poverty, disasters, and wars and cannot be used in general to promote long-term economic development