Aid is a term used for major financial and material donations given from a donor country to a recipient country. Aid can be given directly from the donor government to the recipient government (bilateral aid), or go from donor to recipient through an international organization such as the World Bank (multilateral aid). It can also take the form of loans from banks to the recipient country, or donations managed by non-governmental organisations and charities.
There are two types of aid: humanitarian aid, which is basically material assistance (in the form of food and water supplies, shelter, sanitation, health care) that relieves the immediate impact of war or natural disasters on the population. Long-term aid, on the other hand, deals with the causes of poverty and aims at establishing the bases for sustainable development in the future. Long-term aid includes, for example, investments in projects (agriculture, infrastructures) that will benefit the country in the long run, and education of local doctors, engineers, administrators, lawyers.
In situations like natural or human-induced disasters, emergency aid is a precious resource. In the long term, however, this type of aid can have negative effects on development: the recipient country could become dependent on the continuous supply of products from abroad instead of mobilizing its own resources. Emergency aid cannot be considered as a strategy for economic development, and for this reason, this discussion will focus on long-term aid only. About 70% of the total aid given in the world is bilateral aid. Another great percentage of aid is multilateral.
Bilateral aid has often been criticized because it can be very arbitrary: it is not always given to those who need it the most. Since 1976, the main recipient of USA’s bilateral aid has been Israel, which has a GDP per capita among the thirty highest in the world, and is 17th in the 2011 Human Development Report (data from Wikipedia). Such a choice in the distribution of aid has historical and political, rather than economic, origins. International organisations are considered more objective than governments in distributing aid.
However, expensive projects that do not mirror the country’s needs are often financed. Another disadvantage is the difficulty, for donor countries, to ensure that aid goes to the people it is intended for as some of the obstacles are internal to the recipient countries. These obstacles can be social structure (in a country like India, whose society is still heavily divided in casts, aid will hardly be distributed equally), corruption, ignorance or incompetence (people in recipient countries don’t have the sufficient knowledge to use aid in a fruitful way).
In the end, aid can easily end up in the wrong hands: those of greedy politicians, dictators and war lords who make the country’s conditions even worse. Tied aid (aid given on conditions that are often only beneficial to the donor) and loans make the recipient countries fall deeper and deeper into debt, while becoming even more dependent on the donors. In my opinion, the main advantage of aid is that it can speed up the development of a country that might otherwise take centuries.
With the benefit of hindsight and the existing technologies, the many errors that constellated the history of development could be avoided. For example, an LEDC could be taken from an agricultural to a post-industrial condition, avoiding the industrial revolution which disrupted the social order and damaged the environment. Another advantage of aid is that, through investments in education, it can involve local people in managing their resources, making decisions and ultimately support themselves.
Many worry that Western countries are once again trying to impose their political, economic and cultural influence over the LEDCs, buying influence with aid as both the Eastern and the Western Bloc did during the Cold War, when aid was used in the Third World as a weapon in the struggle for hegemony. Such concerns seem realistic to me. However, I think that in most cases what motivates MEDCs is the increasing awareness that the inequalities between rich and poor have severe global consequences and international collaboration is the way to achieve progress.
In conclusion, aid is important for economic development only if rightly distributed and efficiently used. The attitude of simply throwing money at the problem risks to make the recipient countries dependent on it, and decreases the chances they will one day be self sufficient. Aid should be given to developing countries keeping in mind that the aim is to make them capable to rely solely on themselves.