32. Aid, debt and economic development Flashcards

1
Q

Define aid

A

Aid (foreign aid) - any assistance that is given to a country that would not have been provided through normal market forces

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2
Q

Reasons for providing aid

A
  • natural disaster
  • war
  • political alliance
  • fill savings gap -> encourgae investment
  • improve human resources
  • improve technology
  • fund specific development projects
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3
Q

What are the types of aid? what are the types of aid based on the purpose?

A
  1. Official ODA (by government) - unofficial (by NGOs)
  2. Humanitarian - development
  3. Official aid also classified:

bilateral (directly from one country to other) - multilateral (through international aid agencies: World Bank, IMF)

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4
Q

Explain humanitarina aid

A
  • for short-term suffering (drougts, wars, natural disasters)
  • many forms, usually grant aid
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5
Q

Define grant aid and three main forms of it

A

Grant aid - short-term aid provided as a gift and does not have to be repaid

FORMS:

  • food aid: food, money for food, its distribution and transport
  • medical aid: provision of medical services and equipment
  • emergency aid: emergency supplies: shelters, tents, clothing, fuel, lighting
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6
Q

Define development aid and explain its types

A

Development aid is given to alleviate poverty in the long run and improve welfare of individuals (usually referred as ODA, prvided by govs)

Development aid must pass the tests:

  • administered for ptomoting economic development and welfare
  • at least 25% of it is a grant

TYPES:

  • long-term loans: usually repaid (concessional loans / soft loans - repayed in various currencies)
  • tied aid: grants / loans with condition that it will be sued to buy production of odonor country
  • project aid: given for a specific project - no repayment (to improve infrastructure)
  • technical assistance aid: to raise level of technology or human capital
  • commodity aid: to increase productivity (oils, seeds, fertilizers, chemicals)
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7
Q

What are the concerns about aid?

A
  • aid usually doesn’t reach the people in need - the wwealthier ones - curruption
  • aid given for political reasons and not for countries which most need it
  • tied aid is uneffective comapred to untied aid (does not create employment or extra output, harms domestic industries)
  • food supply is necessary in short-term but in long term it may reduce domestic food prices - better to eliminate subsidies in developed countries
  • dependency on aid might little incentive to innnovate -> develop welfare mentality
  • aid usually promotes indutrialization - destroy local agriculture
  • some aid comes if developing countries approve policies - favour developed countries - use of power
  • developing countries become indebted
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8
Q

Explain NGOs

A

NGOs - non-governmental organisations interested in promoting economic development, sustainability

Examples: Oxfam, Greenpeace, Doctors Without Borders

Focus on:

  • poverty reduction
  • workers’ rights
  • human rights
  • environment
  • women

By raising funds in developed countries and spreading awarness, work directly with the fields they support

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9
Q

Explain indebtedness

A

World Debt Crisi in 1970s: dveloping countries borrwoed form Western banks - money was not used for development - worldwide recession started - commodities price fell - developing countries made little revenue - developing countires not able to pay back the loan and its interest

IMF lent funds to developing to pay back if they adopted policies - SAPs (Washington Consensus):

  • ttrade liberalization
  • encouraging exports of commodities
  • devaluing currency
  • encouraging FDI
  • privatisation
  • reducing gov expenditure
  • making education, healthcare little price
  • removing subsidies, price controls
  • reducing corruption
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10
Q

Why are SAPs critisised?

A

Limits development because:

  • reduced gov provision of education / healthcare
  • increased unemployment (privatisation)
  • fall in wage levels
  • increased prices of essential products

=> countries experienced de-development - SAPs in short term not effective

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11
Q

Explain debt relief

A

Debt relief - reducing or cancelling the debt of developing countries

FOR:

  • countries ont able to pay back - only can repay the interest but not the loan - for some debt keeps growing
  • by financing debts govs cannot finance development: education, healthcare, infrastructure - opportunity cost
  • the debt is odious debt - debt incurred by a regime and used for purposes that do not serve the needs of the people
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12
Q

define odious debt

A

Odious debt - debt incurred by a regime and used for purposes that do not serve the needs of the people

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