Growth and Development Strategies Part 2 (Aid, etc) (Not Finished)

Question 1

Foreign Aid

Answer 1

• Gifts or loans made to developing countries from official or unofficial sources
• Does not include hard loans (loans made to developing countries at market rate)

Question 2

Humanitarian Aid

Answer 2

• Emergency assistance provided in response to natural disasters or crises
• Gifts and not repaid
• Grants, food and medical aid

Question 3

Development Aid

Answer 3

• Long-term assistance aimed at promoting economic development and reducing poverty
• Concessional/conditional in nature
• Concessional long term loans, project/programme aid, comodity aid (Bangladesh)

Question 4

Debt Relief

Answer 4

Partial or total remission of foreign debt, especially those owed by low income countries

Question 5

Why is aid given?

Answer 5

• Natural disaster/wars/emergencies
• Help achieve development
• Create/strengthen political/strategic alliances
• Fill the saving gaps, encourage investment
• Improve technology
• Get rid of access goods
• Strengthen military ally
• Reward for desired behavior

Question 6

Arguments for aid

Answer 6

• Moral obligation to transfer wealth → strengthens global welfare and solidarity
• A source of foreign exchange for LEDCs - buy capital equipment from abroad
• Can act as valuable supplement to the LEDCs domestic savings
• Can provide technical assistance (engineers to build infrastructure)
• Emergency aid in times of war, natural disasters and other serious problems.

Question 7

Arguments against aid

Answer 7

• Distributed poorly, doesn’t go to those who need it - aid to Isreal for military
• Aid can be squandered by inefficient and corrupt governments.
• Aid benefits the donor more than the receiver.
• Tied aid
• No clear correlation between aid and development.
• Dependency is created = less innovation, and a welfare mentality
• Given for political reasons and not where the need is greatest

Question 8

Institutional change

Answer 8

• improved access to banking (microfinance and mobile banking)
• increasing women’s empowerment
• reducing corruption
• property rights
• land rights

Question 9

Improved access to banking

Answer 9

• Improving access to banking = improves access to credit
• Lack of access to credit → slows investment → hinders innovation and skills development of the workforce.
• Firms can’t access to credit → cannot increase the production and productive capacity of the economy - thus helping with employment.
• reduced investment → less innovation → lower productivity → fewer jobs

Question 10

Microcredit

Answer 10

Small loans given to poor borrowers who lack collateral, stable jobs, or credit history.

Question 11

Credit

Answer 11

borrower recieves somehing of value now and will repay the lender in the future, with interest

Question 12

Microfinance

Answer 12

• form of FDI
• small loans given to LEDC individuals for self-employment and income generation.
• can occur domestically or from abroad

Question 13

Mobile Banking

Answer 13

A service provided by bank that allows customers to do bank transactions remotely

E.g. M-Pesa in Kenya

Question 14

Increasing women’s empowerment

Answer 14

• Reduce excess female mortality - increase health care
• Close education gaps
• Improves access or women to participate in economic activities
• Limit continuation of gender inequality across generations.

Ghana, Rwanda

Question 15

Reducing corruption

Answer 15

• Invest in high levels of transparency
• Reform institution - make tax
• Build a professional civil service - increase police pay
• Keep pace with new challenges as technology and opportunities for wrongdoing evolve
• Strengthen anti-corruption measures through company blacklisting and legal enforcement.

Example: Colombia, Costa Rica, Paraguay

Question 16

Property rights

Answer 16

The ability to own something. To use something, to earn income from and transfer to others

Question 17

Land rights

Answer 17

• Ability to obtain, use and hold land at their will
• Strategies include: land reform, policies for dealing with sensitive issues
• Challenges: political and cultural differences, dysfunctional legal and institutional facilities

Question 18

What are drawbacks of institutional change as a development strategy?

Answer 18

• Unpopularity for those in power (corruption)
• Long run rather than short run
• Without political support, can be stopped before able to have any positive effect

Question 19

Bilateral Aid

Answer 19

Aid from one country to another

Question 20

Multilateral Aid

Answer 20

Aid originating from more than one country group such as the world bank and IMF

Question 21

Official Development Assistance (ODA)

Answer 21

• foreign financial assistance from donor governments rather than NGOs
• bilateral

Question 22

Non-governmental organisations (NGOs)

Answer 22

• Unofficial aid
• Multilateral
• primarily on a small scale, usually to meet specific developmental objectives

Question 23

Multilateral development assistance

Answer 23

Aid goes from donor → intermediary organization → recipient countries.

Question 24

9A The World Bank Group

Answer 24

• International Bank for Reconstruction and Development (IBRD) - 1945
• International Finance Corp (IFC) - 1956
• International Development Association (IDA) - 1960
• Multilateral Investment Guarantee Agency (MIGA) - 1988
• International Center for Settlement of Investment Disputes (ICSID) - 1966

Question 25

9B International Monetary Fund

Answer 25

* The IMF * Provides multilateral development assistance (MDA) * Offers short-term non-concessional loans * Helps countries with international payment difficulties * Initially focused on LEDCs

Question 26

Advantages of MDA

Question 27

Disadvantages of MDA

Question 28

Sources of Economic Growth