Is foreign aid the solution to global poverty?”?

Question

A 2005 United Nations report called for a doubling of foreign aid to poor countries as the means to reduce poverty. Yet the 2006 Nobel Peace Prize was awarded to a for-profit microloan bank and its founder, an apparent vindication of the ideas of Peter T. Bauer, Henry Hazlitt, Deepak Lal, and others. As Bauer wrote, “Development aid, far from being necessary to rescue poor societies from a vicious circle of poverty, is far more likely to keep them in that state.… Emergence from poverty requires effort, firmly established property rights, and productive investment.”

Answer 1

No, free trade is much better at reducing global poverty.

"A new WTO Secretariat study published today (19 June) finds that trade liberalization helps poor countries to catch up with rich ones and that this faster economic growth helps to alleviate poverty. WTO Director-General Mike Moore said: “This report confirms that although trade alone may not be enough to eradicate poverty, it is essential if poor people are to have any hope of a brighter future. For example, 30 years ago, South Korea was as poor as Ghana. Today, thanks to trade led growth, it is as rich as Portugal.”"
- 19 June 2000

Currently, the U.S. and the E.U. have very significant restrictions on trade imports from third world countries in areas such as aggriculture and cotton production.

"If the most forceful moral and political justification for subsidies is that they are needed to save the peasants", UNCTAD Secretary-General Rubens Ricupero told the UN’s Economic and Social Council in June 2003, "then the facts demonstrate they are not achieving their purpose. … Not only do farm subsidies cruelly fail to help the poor in the North, they also seriously harm poor peasants in the South. … In more than one sense, poor-country farmers are financing the social welfare doled out to rich-country farmers. … The farm support systems of OECD nations are seriously aggravating poverty and having an equally serious and direct impact on the prospects for poverty reduction to which the Millennium Development Goals (MDGs) aspire. … More than an economic or trade problem, cotton subsidies pose a moral dilemma for women and men of good will worldwide."

Answer 2

Foreign aid is obviously a temporary measure, but when used in the right way (NOT bilateral loans from country to country, but given in grants by the US government to nongovernmental organizations or institutions like the UN to do specific work targeted at poverty reduction) can make a huge difference. Most peoples in poverty are stuck in poverty traps, unable to help themselves because of structural situations out of their control, with their government or other organizations unable to help because of lack of resources. Increasing foreign aid specifically intended to target individuals or communities does work, so long as the aid is used in the right way. So often the debate over foreign aid focuses on sheer numbers. The amount of aid is important, do not doubt that, but what is even more important is the way in which it is being used. Much of the aid given by the US over the past 50 or so years has not been what most call effective: most has gone directly to governments, with little reaching those most in need, and has been tied to political decisions rather than need. If the aid given were given well, and if it were given enough to actually make a difference, peoples' lives could change for the better and they would no longer need the aid. The Borgen Project has many links to sites explaining this more, but essentially the most important aspect to remember is that aid is an investment. People cannot help themselves all the time without a push in the right direction; the aid would not (should not) be infinite, but should rather be targeted to allow for a sustainable escape from poverty.

Answer 3

Prof,.Bauer is absolutely right. Foreign Aid is the most disastrous environment to lift people from poverty. Foreign aid is actually a proftable business for the bureacracy in the international economic agencies, the bureacracy and politicians of both the aid giving and aid receiving countries. These people won't let this business come to an end. So, they will always say, even after a few centuries, that foreign aid is necessary to eradicate poverty. They will show case small aid projects in removing poverty to win accolades and more aid money, but they will not allow poor peple to get benefited by commercialy viable private investments in the locations where the poverty-stricken people live. The Grameen Bank's private sector commercially oriented non-bureacratic methodology needs to be encouraged by removing the national govts. and international aid agencies from coming into any direct contact with such private sector investnents. It is private initiative which can really be innovative. Aid butreacracy is all language, time and money wasting effort that has remained an elitist fashion without any good to the poor.

Answer 4

Much of the large government to government aid in the past has not been effective, but much of it was given to buy support in the cold war, or more recently middle east not to relieve poverty. The UN world health programs have worked to cut infant mortality and birth rates. The Bank and it founder are asking for financial support to expand the program to other countries. There are many things aid from wealthy nations could do that would help including cutting agriculture subsidies to their own farmers, which drive down world market prices for produce of poor countries. I would listen to the people on the ground who started the successfully program 30 years ago, not an economist that wrote about it years later.

Answer 5

Foreign aid it is not a solution! The true solution comes from true state and economic development! The infrastructure of a country plays a key role to that! Many times infrastructure is being neglected because people "depend" on natural resources, like petroleum, or "foreign aid"! Both have the same effects! That is the problem that Venezuela faces and not "big interests". This is the same thing that happens with many African countries!

Answer 6

I think you would find this interview extremely interesting:
http://www.spiegel.de/international/spiegel/0,1518,363663,00.html

Give it a look.

Hundreds of Billions in Domestic aid doesn't solve poverty in the US. Foreign aid won't solve poverty on the other side of the globe.
If more people listened to Mr. Bauer, ther would less poverty in the world right now.
.

Answer 7

What is Bauer's solution for Haiti? Please ask him.

Development aid in and of itself is no panacea. But it is a necessary component for many countries that have no infrastructure, no sanitation, no health care.

So far development aid has come with so many conditions attached (esp. SAPs) that it is impossible to have any gauge as to how successful they could be. Further, the Millennium Development Goals set in 1992 have only been half met by numerous countries including Canada and US. These goals include 0.7% of GDP of western nations should be given in development aid to the least developed countries.

Trade policy also needs to be addressed. ILO recommendations should be respected by all countries and multinational corps. The absurdity of western countries propping up our crops and livestock industries needs to be combated.

If anything, open the dang taps to the level necessary that a sustainable level of infrastructure and capital can be attained by those poorer countries. We have yet to see that type of generosity.

No, foreign aid won't work so long as the west determines how it should be spent, who should spend it, and who will control the country it is given to. Neither will it work in a vacuum; other programs of aid, trade and diplomacy have to offered. But I disagree that foreign aid itself somehow keeps a poor country poor.

Peace

Answer 8

Ask this question: what happens to local farmers if grain is imported and given away?

On the other hand, what about this: what would happen to the productivity of local industry if local laborers were given free or highly subsidized technical educations?

You get very different answers. Foreign aid isn't *the* answer, but it could be part of the answer if done correctly.