Does Foreign Aid Help Governments and Their Societies - Assignment Example

 Does foreign aid help governments and their societies? Pros 1. Foreign aid helps to develop modern economic and social structures in developing countries. 2. The aid from foreign countries increases tax revenue. 3. The foreign aid helps to tackle emergencies as they arise. 4. In developing countries, foreign aid bridges saving gap and balance of payments. 5. Foreign aid helps developing countries increase levels of technology. Cons 1. Foreign aid is a debt burden to developing countries. 2. It has led to development of the art of dependency on developed countries for aid. 3. The donor countries exploit the aided countries. 4. The production cost in developing countries has increased. 5. Foreign aid has led to decrease in local production. INTRODUCTION Foreign aid is essential in supporting developing countries to meet their development goals. It is supposed to ensure that there is balance of economic and social structures throughout the world. By so doing, the target is eliminating world poverty and ensuring that all humanity live as one. In this process, there has been significant advantages and disadvantages experienced by the aided governments. This paper points out major Advantages And Disadvantages Caused By Foreign Aid To The Developing Countries. Foreign aid helps to develop modern economic and social structures in developing countries. In developing countries, the level of income generated is not adequate to push for development of social and economic structures. The governments need to borrow loans for such kind of developments. Major statistics show that the majority of economic and social development is because of foreign aid. Apart from giving loans, developed countries have taken a step further and directly participated in launching the development projects. These projects have increased accessibility of interior areas that require infrastructure to transport raw materials. The aid has enabled the aided governments to archive dreams that could have taken a long time to archive (Akramov 25). Another boost of foreign aid is in increasing the tax revenue in the country. The foreign loan received, helps in establishing various development projects. These may include setting up of industries, importing raw materials, establishing educational institutions and introducing modern technology. All these projects will in the lead to economic growth. Meaning, industries will provide employment to individuals and manufacture goods used in trade. The educational institution helps to increase various skills in the market including modern technology, thus improve production. Above all, the loan received has improved economic development and translated to increase in tax revenue for the country (Alex & Peter 3). Foreign aid is helpful to developing countries in meeting emergencies. Developing countries faces many challenges and catastrophes. Some are due to natural causes such as floods, drought or violence caused by different scenarios. Others are due to the spread of chronic diseases that require control and creation awareness to the people. Such kind of urgencies requires a quick, large amount of money to put things back together. The taxes collected as revenue in the country may not be enough to settle all the requirements without straining the national budget a lot. Moreover, emergencies come at the time they are least expected to find the government ill prepared for them. The loans borrowed ensure that the government experiences a smooth transition from the unfortunate ordeal (Epstein 15). The governments aided by the loan from foreign countries have a prospect of saving for the future and bridge balance of payments. The aided government does not pay the money loaned immediately. Instead, it arranges for payment and it pays the loan back in bits for a long period. This arrangement allows the government to develop the country and run without going to a standstill. The government may also initiate a way of saving income from the amount generated, by the current economy, to pass it to future generations. The foreign aid has helped to establish a good economic environment that boosts their economy and that of the future generations (Eric & David 5). Foreign aid has helped to increase levels of technology in developing countries that receive it. Developing technology requires many resources, which may be absent at the disposal of these developing countries. They may lack the expertise to oversee the production and the launch of technology. Therefore, these countries have to rely on technology from the developed countries. The loans received contribute to purchase and transport these commodities to the respective countries. In addition to this, the governments may opt to collaborate, with the developed countries, to develop and use modern technology in their states. This improve in technology contributes to the development of better goods and services thus boosting the local economy (Fernando 473). Apart from being a boost in economy, foreign aid has caused a debt burden to developing countries. The developing countries do not have the capacity to pay the loans from their own resources. The country puts the income generated in local development. As a result, the interest on the borrowed loan increases to a point that it becomes a burden to the developing country (Lancaster 51). The foreign loans make the receiving governments develop the habit of dependence on the aid for development. It is common practice that the aided government is unable to the device other better methods of gaining constant income to stop depending on loans. As mentioned earlier, the loans are timely and available for every kind of major projects. The manner in which the issuing of loans takes place leads to laxity in utilizing other factors of production to ensure total independence from foreign aid. Finally, this kind of laxity results in total dependence on aid and stagnation in economic growth (Lundsgaarde 23). Giving of foreign aid has given foreign countries a reason to exploit and get into their affairs. Since the foreign countries control some of the projects that undergo in the developing countries, they decide to get into their affairs and try to influence them. There is always political interference in national elections as they try to put individuals that they can manipulate into doing things their way. In many countries that they interfere, the aiding countries end up exploiting the local natural resources living so little for the development of the local country (Monkam 15). A country receiving donor aid experiences high production costs. This is because foreign experts take control of the projects, which is expensive. The donor countries push to acquire awards for projects that their country’s donation had participated. Working with the foreign companies, turn out to be more expensive, as compared with working with the local skills (Ritzer 532). Commodity aid from foreign countries diminishes the development of local production. When aid comes in terms of a certain commodity, the production of that commodity locally faces difficulty. There will be an overflow of the commodity at the market to a point of the locally produced one gets losses. Finally, the farmers will opt to stop the production giving room for the constant receiving of the same commodity as an aid. Since the foreign aid comes periodically, there will not be a time that the country will stop receiving aids and having to produce the commodity locally (O'Leary 122). CONCLUSION Foreign aid is important in assisting developing countries to improve their economic and social structures. The aid if used in a good way can benefit the developing countries and make all in the world have the same feeling. However, that aid too comes with disadvantages to the developing countries government. These disadvantages result to a slow economic and social development in the country. The problems associated with foreign aid debts passes from one generation to another. The future generations will have to pay back the loans taken by the previous generation. Works Cited Akramov, Kamiljon. Foreign Aid Allocation, Governance, and Economic Growth. Chicago: University of Pennsylvania Press, 2012. Print. Alex, Mourmouras. & Peter, Rangazas. Foreign Aid Policy and Sources of Poverty: A Quantitative Framework, Issues 2006-2014. Warshington D.C: International Monetary Fund, 2006. Print. Epstein, Susan. Foreign Aid Reform: Studies and Recommendations. New York: DIANE Publishing, 2010. Print. Eric, S. Sheppard, David. & Robert, Faust. A World of Difference, Second Edition: Encountering and Contesting Development. Chicago: Guilford Press, 2009. Print. Fernando, A. Business Environment. New York: Pearson Education India, 2011. Print. Lancaster, Carol. Foreign Aid: Diplomacy, Development, Domestic Politics. Newyork: University of Chicago Press, 2008. Print. Lundsgaarde, Erik. The Domestic Politics of Foreign Aid. New York: Routledge, 2012. Print. Monkam, Nara. The "Money-Moving Syndrome" and the Effectiveness of Foreign Aid. Geogia: Georgia State University, 2008. Print. O'Leary, Michael. The Politics of American Foreign Aid. Chicago: Transaction Publishers, 2007. Print. Ritzer, George. The Blackwell Companion to Globalization. New York: John Wiley & Sons, 2012. Print. Read More