Aid - Is it working? To what extent is it helping LDCs develop?

Hello - I hope everyone's revision is going well, it is hard work isnt it!!! I have had a few requests for this topic, and am going to link in African debt, so here goes.....

Aid is a rather controversial subject as is whether we should cancel LDCs debt...... How effective is the aid we give? Is it actually helping improve peoples quality of life? How dangerous is reliance upon aid? When should we stop giving aid to countries i.e India? Is trade better than aid? Should debts of LDCs be cancelled?
First up though, a few key definitions:
BILATERAL AID = aid that is directly given to the government of one country from another
MULTILATERAL AID = aid that is given by governments to international organsiations which use the money to assist programs in other pooer countries
NON-GOVERNMENTAL ORGANISATIONS (NGOs) = distribute aid in a variety of ways. Many are charities which raise money for development projects, ensuring aid is directed to the people who truly need it
SHORT TERM AID = given in response to a sudden problem within a country - usually a natural disaster
LONG TERM DEVELOPMENT PROJECTS = where help, advice and investment is given on such things like agriculture, energy supplies, infrastructure, education and medical supplies
TOP DOWN AID = where a responsible body, internally or externally, directs the operations 'from the top'
BOTTOM UP SCHEMES/GRASSROOTS INITIATIVES = often funded by NGOs, working closely with local communites and using their ideas and knowledge to bring about more change (more sustainable???)
TRADE = the act or process of buying, selling, or exchanging commodities, at either wholesale or retail, within a country or between countries.
HIPC = Heavily Indebted Poor Countries

Origins of African Debt
- For somer countries, like Ghana, debt began with ambitious development projects in the 1960s following independence and the formation of dictatorships which were a result of vast power vacuums generated
- By the 1970s most independent sub-Saharan countries were seriously in debt
- Oil crisis of 1970s dramatically increased the price of imports
- Worldwide recession decreased the willingness of the USA and former colonial powers to distribute aid in grants
- Consequently, between 1970-1976 Africa's public debt quadrupled
- Debt servicing began to take a substantial portion of GDP
- Demands of debt and structural adjustment often rendered governments less able to supply the needs of their people and less able to claim grassroots legitmacy
- Debt seen as attached to a country, not a government - therefore is transferred even when government is deemed illegitimate

Aid - NOTE: not all aid given is in the form of money!
- Since the 1970s, general trend has been a decrease in aid to Africa (halfed by 1990)
- A large proportion of what is counted as aid by donor countries is known as 'phantom' aid - e.g same 50% of all technical assistance is said to be wasted due to inappropriate usage on expensive consultants, their living expenses and training
- Aid frequently carries restrictions with regards to its use

- Most donor countries use aid as part of a broader forgein policy focused on 'national interests'
- USA has directed aid to regions which pose national security threats whereas Sweden has targetted 'progressive societies' and France to preserve and spread its language and culture
- However, as of 2000, over 2/3 of American aid was tied

Recent Improvements......
- A shift towards more grassroots projects following the successes of NGOs in small scale poverty alleviation
- Norway, Denmark, the Netherlands and the UK have untied their aid from trade agreements
BUT aid has been reduced - Value of OECD aid drops for first time in 15 years, and in the UK where the government announced last year that we were reducing our aid contributions to 0.7% of GNI - Was this a good move?
Whilst on the topic of aid given from the UK, we still give aid to India, despite the fact their economic growth is greater than ours and the country themselves say that they do not need money but that other forms of aid would be more appropriate, this short video clip is worth watching - Do you think we should still be given aid to India?



Trade vs Aid
Whilst in theory, aid sounds like a great idea, in reality this has not been the case and trade is arguably a more sustainable alternative, capable of provoking cumulative causation within a country and accelerating development. Trade is more predictable and a safer option, with aid dictated my economic climate of other countries and aid dependency a dangerous occupation. However, some countries do not have the ability to trade (especially worn torn sub-Saharan nations) or do not have desirable raw materials and for long term development this is problematic as aid often only offers a short term solution.

This area of the module is very debatable, I may try and start of focusing on this area in the next live discussion. The only way to form opinions on it is to read about it; but when you have let me know what you think.....

Development revision - the basics

Hello everyone - this is the first, of many to come, revision posts over the next few weeks, so enjoy!
Development Mindmap
Development Continuum
The development continuum is the contemporary way of viewing development; percieving it as a contiual process and recognising that it can occur in a number of different ways, not necessarily in the way the UK did, as outlined by the Rostow Model of Development. Ranking countries using HDI, a composite indicator, essentially the development continuum is a sliding scale from most to least developed with lots of intermediates such as RICs and NICs; meaning it illustrates the complexities that the Brandt Line fails to display. Therefore it also indicates the importance of the changing roles of countries such as the Asian Tigers, orginally LDCs who attracted TNCs and consequential cumulative causation accelerated development. Now they are mature NICs and their role in the global economy has changed and will change again as they continue to develop and the global shift moves. This idea has replaced older classification (like first, second, third world and MEDC/LEDC) as the use of LEDC and MEDC as discrete groups implied that all countries within that group are of the same development level, which is not the case, and subsequently the development continuum is more reflective of reality.

Gross National Product (GNP) = total value of goods and services for a country's companies at home and abroad
Gross National Income (GNI) = GDP plus or minus the interest and repayments on debt
Purchasing Power Parity (PPP) = measure of the value of the local currency
Gross Domestic Product (GDP) = total value of goods and services within a country (including foreign companies)
Issues with using GDP as a measure of development:
- Inequalities = in many LDCs wealth remains with a few and does not filter down through population
- Informal employment = in LDCs many work in informal employment, such as street vending, so money is exchaged without record
- Subsistence lifestyles = many farmers lead a subsistence lifestyle, so it is impossible to accurately measure income and population

Composite indicators vs Single Indicators
Development is the process of social and economic advancements that leads to improvements in peoples quality of life and general wellbeing, as such when trying to measure it, it is important to not only consider the economic indicators. This realisation, was one of the main driving forces behind moving away from first, second, third world classification and the Brandt Line, to the development continuum. HDI, for example, takes into account GDP using PPP, life expectancy at birth and educational attainment, thus considers several aspects of development. Therefore just because a country is rich, i.e Qatar which has a really high GDP, does not mean it scores highly on HDI, and vice versa as seen with Kerala which has a low GDP but would rank high on HDI. However, there is clearly often a positive correlation between GDP and HDI as countries with a high HDI can distribute funds to health care and education, subsequently raising life expectancy and educational attainment. Despite this, composite indicators make global comparisions a lot easier but some composites, like HPI, are subjective, meaning that it is a less accurate measure of development than solely using GDP. There are some advantages of using single indicators as they do not shroud individual measures and so, with regards to pinpointing what social and economic improvements are required for a country to develop, should also be taken into consideration when determining level of development.

Rostow Model of Development


Produced in 1960, this model can be used as a rough guide to development and, in conjunction with the Demographic Transition Model can be used to formulate population policies. Transitions between both models are very similar, illustrating the intrinsic link between population and development. Rostow suggeseted that all countries could break the viscious cycle of poverty and develop between this 5 stages. However, it is very eurocentric and underestimates the role of colonialism in early development of the 15 countries it is based on.