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The Effects of Economic Aid to Third World Nations - Term Paper Example

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The Effects of Economic Aid to Third World Nations According to World Bank (1998), foreign aid is linked with the assistance of official development, which is part of the finance for official development and is usually focused on the indigent countries (Third World nations) of the world…
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The Effects of Economic Aid to Third World Nations
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The Effects of Economic Aid to Third World Nations

Download file to see previous pages... This question has been repeatedly being asked and emphasized on by various scholars over a long period of period. In 1972, Papanek was the first one to develop a constructive relationship between growth and aid. In 1985, Singh also seconded Papanek that a cohesive relation exists between the economic growth and aid in Third World nations. In 1993, Synder also propagated the ideas of Papanek and Singh but taking into consideration the size of the country. In 1997, Dollar and Burnside acknowledged this positive relation on the premise that it works nicely if the country is meticulous in making policies and it also implements policies according to donor countries, policymakers in beneficiary’s countries and also considers multilateral support firms. In 1999, El-Kaissay and Fayissa profound into this thought and reap the same positive correlation. (Duc) Aids come in several forms; for instance food assistance, military aid, humanitarian emergency support, etc. The growth aid has always been recognized as important for helping poor nations of the world to bring them out of impoverishment. The affluent nations of the world decided to give aid of 0.7% of their Gross National Income to poor nations in 1970 as an official global development support each year. But this target has never been achieved. Regardless of the fact that countries have given billions of dollars in cash to poor countries each year they have never met the standard set by them. Some scholars believe that aid has a pessimistic affect on the development of developing countries. In 2000, Knack argued that excessive aid destroys the quality of government, exploits it, and augments the corruption in that region and thus growth is affected negatively. In 2003, Roodman, Levine, and Easterly examined a huge sample size to test the premise of Dollar and Burnside, and the result they found didn’t quite support the positive relation proposed by Dollar and Burnside. (Schoolland) Every rose has a thorn. And thus aid does not come for free. It bears an expensive price to the developing nations. Mostly, the top most condition for aid is that the recipient country must buy over expensive services and goods from the donor nations. Also, the amount of aid is planned and set by affluent countries that following their protectionist policies restrict poor nations to access the market. Most assistance does not really go to the poor nations who are in most need of it. Furthermore, huge projects or enormous striking strategies are deemed to failure to assist the susceptible as mostly, money is used the wrong way. On the contrary, it has also been observed that developing countries with strong economic policies and high-quality governmental institutions have augmented their growth with aid rather than without it. The Gross Domestic Product of countries receiving aid has increased by 2.7% per capita in contrast to countries not receiving aid, with 0.5% per capita. But, some countries who only received some aid have achieved a 2.2& per capita of growth. It all basically depends how the aid is utilized; a sound management and high-support by rich countries leads to 3.7% per capital Gross Domestic Product according to World Bank. (Bovard, 1996) Let’s look at the impact foreign aid has on some countries. The current experience of South Asian countries is exemplary. With foreign aid, Bangladesh has ...Download file to see next pagesRead More
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