To Aid or Not to Aid – That is The Question!

International Aid and International Development

• International aid (aka foreign aid) is a voluntary transfer of resources from one country to another, given at least partly with the objective of benefiting the recipient country.

• Development aid is aid given by developed countries to support development in general which can be economic development (ex. loans to build infrastructure) or social development (ex. building schools or hospitals) in developing countries. It is distinguished from humanitarian aid as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term.

• Donations can come on the form of money, goods (food, weapons, water, medicine) or expertise (knowledge)

• Aid may be given by individuals, private organizations, or governments.

• The main recipients of development assistance are developing countries and the main contributors are developed countries.

Marshall Plan• After WWII, George C. Marshall, US Secretary of

State, proposes a plan to help rebuild non-communist Western European countries devastated by war

• Altruism – doing an act out of kindness or generosity vs. doing something to get something in return (Random Acts of Kindness Day)

• U.S. motives• 1. Money – U.S. companies are the market for W.

Europe to rebuild• 2. Prevent the spread of communism (ideology)

during a time of hardship when countries are very vulnerable

Motives for Assistance?

• 1. Religious/Humanitarian Motive –Wealthy parts of the world (and some Middle Eastern countries) have a strong belief that it is important to provide assistance to those in need.

• 2. Economic Motive – Giving assistance may benefit the economy of the donor country. Aid is given in kind (food, industrial equipment) or is linked directly to purchases from the donor.

• Example Canada may provide wheat from Saskatchewan or provide money to purchase farm equipment from Ontario. This is commonly known as tied aid.

Motives for Assistance?

• Political Motive – Assistance may be given to foster strong relationships between the donor and recipient (or not given to punish a country that a donor might disapprove of for whatever reason).

• Historical Motive – Assistance is often linked to former colonial relationships. In Canada we have a stronger tradition providing assistance to former British or French colonies. Recent article – Canada pledges 43.4 million in aid to Francophone African countries (to protect mothers/children)

Aid after the Marshall Plan

• UN commission led by then Prime Minister, Lester B. Pearson, sets target of countries to aim towards contributing .7% of country’s GDP (still the standard target used today)

• After WWII, (1950-80’s) development assistance was fairly successful (indicators such as life expectancy, fertility rates, infant mortality, % of population with diseases related to poverty and hunger)

• 1960’s was the Decade of Development (peak of assistance), while the 1980’s became known as the “Lost Decade” (assistance starts downward spiral)

Aid or Not to Aid??

• Why did aid start to taper off? • Cold War – countries were funding wars vs. aid• Developing a periphery country is more complex vs. a

core country –lacking infrastructure, corrupt governments etc.

• Flawed models of aid – imposing core economic models on developing countries!

• 1. Food aid – can be taken by corrupt leaders, dumping food can depress local food markets

• 2. Mega-projects, like dams can displace many people and push them into poverty or cause environmental problems that affect the health of locals

Sources of Assistance

• Two different sources of development assistance• 1. Official development assistance (ODA) comes directly

from the government (an example of this is CIDA) • An example of ODA in Canada is the Canadian

International Development Agency (CIDA) which not only provides assistance to countries directly, but also funds NGO’s working in developing countries

• 2. Private development assistance (PDA) which is delivered via NGO’s (non-governmental organizations)

• Examples include Free The Children, Oxfam, Red Cross, Engineers Without Borders

Canada’s Foreign Aid

• Initially Canada was generous with aid, and likened to Scandinavian countries (Denmark, Finland, Norway, Sweden)

• The U.N. has once again asked that the developed rich countries try and meet this target to help reach the Millennium Development targets of reducing poverty and hunger by half by 2015

• At present, Canada provides .34% of its GDP in foreign aid

• Canada’s GDP is $1.4 trillion x .7% = 10 billion dollars

Confused Eh’d?

• 1995 earthen dam breaks in Guyana• Dam was built to hold waste from the Omai gold mine

owned by Cambior (a Canadian mining company) • When the dam broke, vast quantities of cyanide-laden

water was released into a local river which was a vital source of drinking water for local people and the most important fishing source in the country (not good)

• CIDA funded the training of workers in the Omai mine, and…

• At the same time provided funds for activist indigenous groups who opposed the dam and predicted its collapse

Icewine and Lingerie Aid

• A recent report of CIDA found that $108 000 in aid was given to a Niagara firm who was studying icewine prospects in China, and;

• $103, 000 to a Montreal company who makes women’s underwear in China

• Question – Should aid be given to help one of the emerging country’s in the world or be reserved for the poorest of nations?

Types of Assistance

• Aid can be broken into three broad categories

• Foreign/Emergency Aid

• Military Aid

• Development Aid

Types of Aid

• Humanitarian or emergency aid is assistance used to alleviate suffering caused by a humanitarian crisis such as genocide, famine, or a natural disaster (Hurricane Katrina, Asian tsunami of 2005)

• Aid could be in the form of food, water, temporary shelters, medicine, clothing etc.

• Recent emergency/humanitarian aid from Canada to • Haiti – cholera• Indonesia – after naturals disasters tsunami/volcano • Pakistan – money to help rebuild agriculture sector hit

by flooding• Japan – earthquake/tsunami

Two Sides of Emergency Aid

• Food aid can help feed people in times of emergencies

• "Foreign aid works directly against the hungry." U.S. aid in particular is used to promote exports and food production -not to increase the poor's ability to buy food. ''Even emergency, or humanitarian aid, which makes up five percent of the total, often ends up enriching U.S. grain companies while failing to reach the hungry."

Military Aid

• Military aid is used to assist an ally in its defense efforts or to assist a poor country in maintaining control over its own territory.

• Americans supplying weapons to the Afghans to fight against their enemy the Russians

• Canada trains police/army in Afghanistan to help secure itself vs. relying on our aid

To Aid Or Not?

• Many people feel that foreign aid is a band-aid solution to deeply rooted problems within the recipient countries, and instead of having an incentive to fix the problem, become dependent on handouts from the donor countries

• Some countries also suffer from aid fatigue, whereby they see that no real progress is made within a country from to which aid is provided, and start to question if aid is still necessary

Development Aid Is BEST

• Instead of money or food, the country should be provided with the means to help them develop their own economy, thus becoming less dependent on foreign aid

• This involves working with the government, NGO’s and local communities

• It places an emphasis on the sharing of information and education to help the local populations get the right type of resources they need.

Development Aid Continued

• Instead of providing a country with fresh water, teach them some simple methods to construct water purification systems

• Instead of providing food aid teach them about basic farming techniques to conserve topsoil so they boost their local harvests

• Development aid strives to provide long-term solutions to problems within a country (kind of like preventative medicine)

• Development aid is also grassroots (trying to solve the problem at the local level vs. just giving handouts)

“Give a man a fish and you’ll feed him for a day, teach a man to fish

and you’ll feed him for a life”

Give a man a fish and you feed him for a day.

Teach a man to fish and you feed him till stocks run out.

Teach a man to grow fish and you feed him for a lifetime.

Tied vs. Untied Aid

• Tied aid is foreign aid that must be spent in the country providing the aid (the donor country) or in a group of selected countries.

• Untied aid is when the country receiving the aid, can spend the money as they choose.

• A developed country will provide a bilateral loan or grant to a developing country, but mandate that the money be spent on goods or services produced in the selected country.

• This means that aid subsidizes corporations in the donor country instead of using resources in the recipient country, which would in turn stimulate their economy more

Absolute Power Corrupts Absolutely

• A World Bank study has shown that aid is being directed at the least economically free countries.

• Often times aid is intercepted by corrupt officials (rich) and never gets to the intended destination (poor)

• More often now countries are funding NGO’s (such as CIDA funding NGO’s) - Why?

• NGO’s use this money in a more responsive, less bureaucratic fashion than would a large government or international agency

• Recent examples• Canada funding Afghanistan which is cited as one of the most

corrupt nations on the planet• Ethiopia politicizing aid – report suggesting that aid ($150 million)

given from Canada to Ethiopia is used by the ruling party to reward supporters of the party. (ie) refuse or withold aid to starving families unless they refuse to support the party (this country is one of the largest recipients of aid)

Trade, Not Aid

• Other critics contend that instead of aid, developed nations should lift trade or economic pacts between rich nations as they often isolate the poorest countries, thereby keeping them in poverty.

• Focus on fair trade vs. free trade

Where does my money go anyway?

• Over the past few years, reports are coming out that some agencies spend large amount of donated money on administrative costs (advertising, websites, transporting aid, salaries etc)

• In some instances up to $.80 per $1.00 is spent on administrative costs, so essentially if you give an organization $100.00, only $20.00 actually goes to help the people that need it the most

• Remember to ask what percent of you dollar is being eaten up by administrative costs, and if the organization is using third-party companies to fundraise for them. Is it really not-for-profit if this is happening?

Transparency…

• The International Aid Transparency Initiative (IATI) is a global campaign to create transparency in the records of how aid money is spent. The initiative hopes to thereby ensure that aid money reaches its intended recipients. The ultimate goal is to improve standards of living worldwide and globally reduce poverty.

• The initiative was launched on September 4, 2008, at a High Level Forum on Aid Effectiveness held in Accra, Ghana. The goal of the forum was to refocus attention worldwide on the steps needed to reach the United Nations' Millennium Development Goals.