1 Foreign Aid

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Foreign Aid

The expanse and variance of the meaning of aid is as complex and diverse as the humansociety itself. The different interpretations and conceptions have undergone numerouschanges throughout history, so that it has been transformed from the assisting of individual safety of the primal man, to the support and safeguarding of the rule of world powers. With respect to what is regarded as 'Aid', there are varieties of

interpretations

:

a)

The governments providing foreign aid bring all their expenditures in other countries,regardless of their motivations and reasons for these expenditures, under the heading of aid. For example, all economic and military assistance (weather non-payable or repayable) the principal amount of long-term loans, private investments, short-termissuance, credits, technical and emergency aid (such as the supply of foodstuff in case of famine etc.) and their own holdings in multinational corporations, are defined asforeign aid. Even expenses incurred for the realisation of their own objectives, be ittowards the expansion of political, cultural and military influence in other countries, theyregard as foreign aid.

b)

In the United Nations' definition of foreign aid, more restrictions can be observed.According to this definition, solely economic assistance is accepted as aid, consisting of non-payable loans or the net amount of long-term loans to be utilised for non-military purposes furnished for non-military purposes furnished either by government or international organisations.The various

forms

of aid

are:

a) Non-repayable

: This kind of aid consists of monetary assistance which the recipient isnot to refund, such as in case of emergencies; earthquakes or other natural calamities, war reparations and the like. It forms but a(2 Emporium Current Essays)

b) Loans:

Loans consist of financial aid which the recipient is to repay plus interests,after a specified period of time. The main percentage of foreign aid is in the form of loans.From the

viewpoint of the capital-holders

, there are two kinds of aid:

a) MULTILATERAL AID:

Financial assistance, the responsibility for which lies uponinternational agencies, is generally referred to as Multilateral Aid.

b) BILATERAL AID:

The type of direct transactions arranged between two or moregovernments are called Bilateral Aid.Financial aid can also vary regarding its

appropriation:

a) PROJECT AID:

In case the objective of monetary assistance is in support of specificinvestments in the recipient country, such aid is referred on to as Project Aid.Whenever the purpose of financial assistance is in support of a total development programme of certain country, such assistance is called

Programmed Aid

.Financial aid also varies with the

objective:a) Economic aid:

Capital inflows which take place for specific economic plans of thegroup, although such aids are often a cover for political, cultural and military objectives.

b) Military aid:

Beside direct military aid, the lending government generally presenttheir assistance towards security and military matters under various misnomers.The type of assistance rendered might also vary from the

viewpoint of the lenders:a) Government aid:

Official aid provided by a government consists of all monetaryassistance by central governments central commercial bank financing, regionalgovernment, specific organisations affiliated with central governments or institutionsrelated to regional governments, either paid out directly to the .recipient country or arranged through multilateral organisations.

b) Private aid:

Investments effected by the private sector including private portfolio in-vestments; long-term loans, commercial credits, altogether a variety of privateinvestments such as the purchase of stocks and bonds etc. are called Private Aid.(Emporium Current Essays 3)At the most basic level, the foundation for the analysis of foreign aid is that aid issupposed to be surely for external fiscal reserves. Therefore, should foreign capital inflow be utilised for internal investments, the financial assistance can be instrumental towardseconomic growth and expansion, even in the case of foreign currency shortage which can be regarded as a deterrent economic growth, foreign aid can amend the shortage,rendering the import of structural goods possible. In brief, after WW II and the gaining of independence of most of the colonies, when the extreme poverty of the newlyindependent colonies, induced by lengthy colonisation, of these nations, becamemanifest, the colonising counties in order to find new ways to infiltrate the ex-colonies,also to remove from themselves the burden of responsibilities for creating the situation,attempted the presentation of numerous theories as to the reason for the so-called'backwardness'.In between, analytical economic jargon introduced terms such as

'vicious-cycle'

or

'chain-reaction'

. R Nurske comments on the 'vicious-cycle' and speaks of the'accumulation of capital and employment'. He opines that in the less developed countries,

due to a lower level of savings, there is decreased investment which leads to diminished production, thus lessened earnings and hence the decreased capacity of savings. Thediscussion continues to state that in this chain-reaction, the recovery of one link willresult in the improvement of the remaining links, in other words, should the shortage insavings be amended by foreign capital inflow, it would result in more investments,therefore increasing productivity and income to enable the possibility of more savings,and this chain-reaction can continue towards complete economic recovery and theattainment of the desired economics growth and expansion. Thus according to thisanalysis, foreign aid could be instrumental in compensating the shortage of fiscal reservesand result in economic growth and development.

Does foreign aid result in development?

Although theoretically the objective of foreign aid is the economic development of therecipient country, yet in effect, the result of the assistance are adverse. The French author Rene Domont states:

"The very word 'aid' tends to strangulate me. Instead of speaking for 'aid', they (the industrial countries) should make it their objective tocease colonisation and exploitation"

third world countries, as it is due to the continuedexploitation that third world countries become more impoverished by the day and small percentage-of foreign aid is placed in a situation to need increased financial assistance.(4 Emporium Current Essays)The important point of this discussion is that the flow of foreign aid is from industrialcountries to non-industrial and lesser developed nations, presumably with the intentionand wish to assist the development of the recipient countries.Yet even the purpose is contradictory, at least since the industrial revolution, industrialcountries have attempted to impose conditions upon developing nations so that twoimportant roles are created for them in relation to industrial countries, meaning that theyshould on one hand act as producers of raw materials (industrial and agricultural) needed by industrial societies, and on the other, by importers of consumer goods manufactured by the industrial countries. The continuation of economic flourish in industrial countriesis why they should financially assist the developing ones, so that first they may expandand due to this growth, be themselves the consumers of these raw materials needed by theindustrial societies. Secondly, due to the increase of internal output, not only cease theimportation of consumer goods, but taking into consideration the availability of rawmaterials and cheap labour force. Indeed the inconsistencies between the economic, political and security interests of industrial countries and development and growth of under-developed nations, become truly apparent when one considers the act thatwhenever one of the less developed nations undertakes fundamental attempts in pavingthe ground for development (such as nationalisation of foreign capital, decrease %.imports, moderation of raw material prices and the implementation of plans pertaining tothe improvement of agriculture and industry, without fail they face extreme reactions bythe industrial countries, to the point of sanctions, boycott, or even military attacks.Therefore, do the industrial countries, through their so-called financial aid,- have the

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