While foreign aid is generally thought of as a positive means to help the poor, in many areas it may do more harm than good. This presentation will provide a review of literature that focuses on the effects of foreign aid on developing economies. This presentation will highlight some harmful examples of global foreign aid by highlighting these examples in several different countries. First, the presentation will discuss the history and development of America’s foreign aid. Secondly, the presentation will highlight the positive and negative effects of foreign policies. Third, the presentation will consider a more recently developed form of foreign aid through supporting locally owned business in developing countries. Lastly, we will emphasize the importance of empowering communities through evidence-based foreign aid practice and provide information on ways to get personally involved

Accas, Rachel

Kent, Ellery

Mathew, Susanna R

Ward, Jervonne

English

Digital Commons

Foreign AidSusanna Mathew, Rachel Accas, Jervonne Ward and Ellery KentDefining foreign aidForeign aid: Economic, technical, or military aid given by one nation to another for purposes of relief and rehabilitation, for economic stabilization, or for mutual defense. Types of Foreign Aid ● Bi-lateral aid: Aid from a single donor country to a single recipient country.● Multi-lateral aid: Aid provided by a group of countries (or an institution such as the UN or World Bank) to one or more recipient countries.● Project aid: Direct financing of projects for a recipient country.● Technical assistance: Funding of expertise of various types in recipient country.● Humanitarian aid: Emergency disaster relief, food aid, refugee relief and disaster readiness.● Soft loans: A loan made to a country on an agreement basis with a lower rate of interest.● Tide aid: Aid must be used by recipient according to the exact specifications that the donor country creates.● Debt relief: Cancellation, refinancing or reorganization of a country’s external debts. The history of foreign aid 19th Century: European colonial powers (Germany, France, Britain) began providing aid to their colonies to improve infrastructure. 1944-1946: Post-war Development. UN, IMF, World Bank were created.1948: The Marshall Plan. Created by the US to provide economic reconstruction for European nations. Congress pledge $13.3 billion through this assistance effort. 1949: Modernization and industrialization. Focused on helping “underdeveloped” countries. History continued1950s-1960s: Decolonization. Decade in which many Asian and African countries sought independence from European powers1970s: A humanistic approach in which health care, education, income distribution and quality of life became the objective for aid funding. 2000: Millennium Development Goals. International aid was increased by .7% by western governments for the follow 15 years. How are recipients of aid doing currently?Africa ● Africa has received 1 trillion dollars in the past 60 years ● $50 billion goes to Africa annually ● In the 1970s 10% of Africans lived on a dollar a day, now over 70% of Africans live on a dollar a day (Baker, 2014, & Moyo, 2009)Pakistan ● $73.14 billion in the form of foreign aid from 1960 to 2002● Benefits of this foreign aid have not reached the whole society● Aid has specifically served the interests of influential people and those in governmental supervisory positions ● Found to be politically driven rather than for the benefit of country's citizens (insured national security for America) (Awan, & Moeen-ud-Din, 2015)The cycle of aid The Cycle of Aid: ● Debilitating Event Causing Economy to Crash● Aid is given to country in need ● Corrupt Governments responsible for distribution of aid● Civil Wars break out in rebellion against corrupt governments● Economy begins to fall apart ● Moral obligation- continuing the cycle Aid that works ● Relief ○ Relief: the urgent and temporary provision of emergency aid to reduce immediate suffering from a natural or man-made crisis. ○● Rehabilitation ○ Rehabilitation begins as soon as the bleeding stops and it seeks to restore people and their communities to the positive elements of their pre-crisis situation. ○● Development○ Development is the process of ongoing change that moves all the people involved closer to wholeness. Development is not done to people or for people but with people. “How do you spell effective relief? S-e-l-d-o-m, i-m-m-e-d-i-a-t-e and t-e-m-p-o-r-a-r-y.” When Helping Hurts, (Corbett & Fikkert, 2009)What are the foreign policies regarding Aid?Positive and NegativeWestern Savior Complex● Western Savior Complex○ Term that identifies the western charging to the rescue without considering how those they are rushing to help might feel about their  “rescue”● Teju Cole: Nigerian - American writer, photographer and art historian ○ “When the idea that those who are being helped ought to be consulted over the matters that concern them - listen to marginalized people, give them a platform and use our platforms to amplify their voices”Western Savior Complex● “ The Western Savior Industrial Complex is not about justice. It is about having a big emotional experience that validates privilege.” - Teju Cole○ “The wester savior complex supports brutal policies in the morning, founds charities in the afternoon, and receives awards in the evening.” - Teju ColeUnited States● Quote from President Obama in his 2009 inaugural election● ‘To the people of poor nations, we pledge to work alongside you to make your farms- flourish and let clean waters flow; to nourish starved bodies and feed hungry minds and to those nations like ours that enjoy relative plenty, we say we can no longer afford the indifference to suffering outside our borders; nor can we assume the world’s resources without regard to effect. For the world has changed, and we must change with it.United States Foreign Policies● Feed the Future○ Small farmers, multiagency “whole government” approach ● Inter Religious Council of Uganda (IRCU) ○ To fight HIV/AIDS○ Joseph Kony and the Lord’s Resistance Army○ Moral ethics ● United States Agency for International         Development ○ They received 14.1 billion○ Millennium Challenge Corporation ○ Gate keeping mechanismThe Postives and Negatives of US’s policiesUsed Human Rights as a gatekeeping tool to support countriesThought that aid is used as benevolent, charitable practice to enhance the security of the countryDemocracy promotionInvesting in PeopleUsage for national security, win allies, and to address threats.They decided to back upopular leaders (Choosing the lesser two evils)Specific about the type of economic conditions that a country has.Not about the peace & security of the countryGreat Britain's Foreign policies● Department for International Development (DFID)○ Similar to USAID○ Eight Criteria○ Funding towards these goals have been used towards what○ An example● Stabilisation Aid and Stabilisation Fund○ Work with countries that affected with conflict○ DFID, Foreign and Commonwealth Office, Ministry of Defence● Foreign Remittance○ Migrant workersPositives and Negatives of Great Britain’s policiesUnderstanding the belief that they are only supposed to be there short termDevelop a global partnership for development Aid to Education,Health, Infrastructure, Food and Social Assistance Supporting countries on the expense of different programs of the UKLack of coordination seen within the European Union’s donorsLack of staying power from the donor’s sideLack of flexibility particularly in regards to the changing situation in AfricaLack of understanding of how to ship goods without the huge expense (providing incentives to domestic agricultural producers)Foreign Aid Through BusinessPurpose of Aid through BusinessIdeal situation: to bring social and economic benefits to emerging market countries through inflow of capital, knowledge, and increased employment.(Bardy, Drew, & Kennedy, 2012)Thoughtless Charity Consequences of Free● Enersa Street Lights○ NGOs send free lights○ Decrease in sales & production for Enersa● Philanthropy○ $213 billion sent in 2007○ What is its impact?Misperceptions● Enersa - perception that Haiti was barren. ● “Stop thinking of the poor as victims or as a burden and start recognizing them as resilient, creative entrepreneurs…” (Bardy, Drew, & Kennedy, 2012)● Local communities are partners, not just aid recipients. Reducing Vs. Perpetuating Aid● “The goal should be: give me a fishing rod to teach me how to fish and then move out. But after 40 years if you’re still here, there’s a problem.” - Poverty Inc. ● Philanthropy and business collide - TOMS(Miller, Fitzgerald, Witt,Scionka, Wade, Ayittey, Chinery-Hesse, 2015)Should We Give Up?● “I have not failed. I’ve just found 10,000 ways that won’t work.” - Thomas Edison○ Not the principle of engagement but the function of development projects.A New Business Model● Projects designed in national capitals and foreign embassies divorced from the realities of the local lives of the people they intend to help.○ Failure of top-down and centrally planned aid models ● “Opportunistic Innovation” - William Easterly○ Seeks targets of opportunity, not rigid, long-range goals set by donor agencies○ Decentralized and more flexible○ Freedom to try different approaches, adapting to local values and initiatives (Lockhart, 2014) (Adelman, 2009)Outside Factors● Education levels, political stability, government effectiveness, etc.○ Ability to own property● Cultural Competence○ Priorities and values○ Who’s setting the goals and expectations?○ Moral Standards (Legatum Institute, 2016)Moral But Effective Business● Corporate Social Responsibility ○ Effects on environmental and social well-being○ Complication: Corporations are to act morally but also to not injure the interests of stakeholders. ■ Tension-filled relationship between profit and morality.● Western thought:○ Utilitarianism: evaluates actions on the basis of their outcomes or consequences■ “Was it worth it?○ Social Income: the monetary earnings of a person; the monetary value of that person to the social environment■ What can you offer to society?(Bardy, Drew, & Kennedy, 2012)● The market serves humanity. ○ “Globalization is seen through the eyes of women and men in terms of the opportunity it provides for decent work; for meeting their essential needs for food, water, health, education, and shelter, and for a livable environment.”■ Close relationship between value systems and effects of business activity(Bardy, Drew, & Kennedy, 2012)Strengths of Local Businesses● Takes away the complication of deciding between morality and profit.● Local ownership ensures sustainability.● Develops responsibility not dependency.● Indigenous Philanthropy.○ Reflects the actual needs of the recipients. (Adelman, 2009)Helping to EmpowerHow to invest your money● According to the UN, about one in five persons in developing regions live on less than $1.25 per day● According to the CGAP (Consultative Group to Assist the Poor), those with financial struggles address their financial need through informal means.Limitations of Informal Financial Structures● In-kind savings are subject to fluctuations in commodity prices○ (Destruction of goods by insects, fire, illness)● Informal Savings Groups produce small amounts of money with rigid amounts of investment on set dates. ○ High chance of group mismanagement and fraudWhy don’t banks serve poor people?Microfinancing● Microfinance is the supply of loans, savings, and other basic financial services to the poor.● MFI’s (Microfinance Institutions) range from small NGO’s (Non-governmental agencies) to large commercial banks. http://www.visionmicrofinance.com/en/vision-microfinance/social-benefit/Kiva: How does it work?Kiva is a non-profit organization with a mission to connect people through lending to alleviate poverty. Leveraging the internet and a worldwide network of Microfinance Institutions, Kiva lets individuals lend as little as $25 to help create opportunity around the world. - KivaMicrofinancing Positives and NegativesPositives: Negatives:Those with little to no assets gain access to a formal financial programMFI’s can charge high interest ratesEmpowers women Loans are not always used in the manner they were intendedBuilds small businessesExtends educationCreates jobsAgricultural Aidhttps://www.irishaid.ie/what-we-do/our-priority-areas/hunger/agriculture/● According to the Irish Aid: Department of Foreign Affairs and Trade, by 2050 the food needs of a growing world population will require that food           production increases by                 60-70% worldwide.● Asia has experienced great success in agricultural productivity● Africa has yet to see such successesAgricultural Interventions● Research on improving seeds● Irrigation● Improved transportation         infrastructure● Livestock● Training and technology         to cope with climate changePractical Action http://practicalaction.org/how-we-are-fundedAgricultural Aid Road Bumps● Sustainability: inability to continue maintaining programs long enough to create impact● Inaccurate knowledge of and insufficient adaptation to local conditions● Poor management that create overly complex projectsSuccessful Foreign Aid ● Evidence and data should drive policy and practice● Non-linear aid-growth relationship○ The goal should be to empower a community rather than to create a dependency/charity culture● Aid is given to the people, not corrupt government officialsWhat can I do?● Research charities and NGO’s before donating○ http://www.givewell.org○ http://www.charitynavigator.org● Advocate for evidence-based foreign aid policy changes● Consider microfinancing, supporting agricultural aid projects, or taking part in long-term international community development workReferencesThe definition of foreign aid. (n.d.). Retrieved March 17, 2016, from http://www.dictionary.com/browse/foreign-aidFactsheet - The IMF and the World Bank. (2016, March 15). Retrieved March 17, 2016, from http://www.imf.org/external/np/exr/facts/imfwb.htmSorens, J. (2009). Development and the Political Economy of Foreign Aid. Journal Of Private Enterprise, 24(2), 87-100.Awan, A. G., & Moeen-ud-Din, M. (2015). THE IMPACT OF FOREIGN AID ON PAKISTAN'S ECONOMY. Science International, 27(4), 3455.Moyo, D. (2009). Dead aid: Why aid is not working and how there is a better way for Africa. New York: Farrar, Straus and Giroux.Corbett, S., & Fikkert, B. (2009). When helping hurts: How to alleviate poverty without hurting the poor-- and yourself. Chicago, IL: Moody.Adelman, C. (2009). Global Philanthropy and Remittances: Reinventing Foreign Aid. Brown Journal Of World Affairs, 15(2), 23-33.Ali, M., Banks, G., & Parsons, N. (2015). Why Donors Give Aid and to Whom? A Critique of the Historical and Contemporary Aid Allocation Regime. Dialogue (Pakistan), 10(2), 116-131.Bardy, R. r., Drew, S. s., & Kennedy, T. t. (2012). Foreign Investment and Ethics: How to Contribute to Social Responsibility by Doing Business in Less-Developed Countries. Journal Of Business Ethics, 106(3), 267-282.Furuoka, F., & Munir, Q. (2011). An Empirical Analysis of the Motivations Behind Foreign Aid Distribution. IUP Journal Of Applied Economics, 10(2), 28-39.Gonzalez, A. (2014). Stepping up the fight against poverty through trade. International Trade Forum, (4), 3.Lockhart, C. (2014). Fixing US Foreign Assistance. World Affairs, 176(5), 84-93.Miller, M. M., Fitzgerald, J. F., Witt, J., Scionka, S., Wade, M., Ayittey, G. N., & ... Chinery-Hesse, H. (2015). Poverty, Inc. [videorecording]. [Sausalito, CA] : Ro*co Films Educational, [2015?].Nwaogu, U. G., & Ryan, M. J. (2015). FDI, Foreign Aid, Remittance and Economic Growth in Developing Countries. Review Of Development Economics, 19(1), 100-115. doi:10.1111/rode.12130Agriculture. (n.d.). Retrieved March 14, 2016, from https://www.irishaid.ie/what-we-do/our-priority-areas/hunger/agriculture/Alabi, R. A. (2014). Impact of Agricultural Foreign Aid on Agricultural Growth in Sub-Suharan Africa. African Growth &  Development Policy Modeling Consortium. Retrieved March 8, 2016, from http://www.iwim.uni-bremen.de/Siakeu/AGRODEPWP.pdfCharity Navigator. (n.d.). Retrieved March 4, 2016, from http://www.charitynavigator.org/GiveWell. (n.d.). Retrieved March 4, 2016, from http://www.givewell.orgHow we are funded. (n.d.). Retrieved April 17, 2016, from http://practicalaction.org/how-we-are-fundedEasterly, W.. The New Tyranny. Retrieved March 11, 2016, from http://foreignpolicy.com/2014/03/10/the-new-tyranny/Kiva. (n.d.). Retrieved March 1, 2016, from https://www.kiva.orgNordmeyer, B. (n.d.). What Is the Difference Between a Microloan and Microcredit? Retrieved from http://smallbusiness.chron.com/difference-between-microloan-microcredit-39307.htmlRadelet, S. (2006). A Primer on Foreign Aid. Center for Global Development. Retrieved March 10, 2016, from http://www.cgdev.org/files/8846_file_WP92.pdfSustainable Development Goals: 17 Goals to Transform Our World. (n.d.). Retrieved March 14, 2016, from http://www.un.org/sustainabledevelopment/poverty/

Foreign Aid

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