Arguments for/agains foreign aid
...ses foreign aid is seen as being necessary in order to maintain power. Often foreign aid in the form of military goods provides the power base that suppresses opposition and maintains the existing government in power. During the period of the cold war such aid was donated to maintain the balance of power between NATO and the Soviet Union within the continent of Africa. Moral reasons Many people within the LDCs and the MDCs consider that the MDCs have a moral responsibility to provide development assistance for the poorer countries. This may be because of basic humanitarian reasons or a feeling that the colonial powers such as the UK that occupied countries such as Zambia have a responsibility to redistribute resources, having exploited so many of the resources of the LDCs during colonisation. The Arguments Against Foreign Aid Zambia has been a recipient of considerable foreign aid over the years. There are a number of arguments put forward against development assistance. The arguments come from different philosophical standpoints. The political right argues that foreign aid will have a number of negative effects 1. Foreign aid crowds out private investment Foreign Development Assistance may provide funding for production that the private sector might have invested in for commercial reasons. This argument is used against some of the microcredit facilities operated by NGOs. Microcredit lends comparatively small sums of money to small-scale entrepreneurs. This could have been undertaken by commercial banks that might have operated this service on a more commercial and profitable basis. It creates and perpetuates a welfare dependency. 2. Foreign Aid distorts markets Transfers of low interest concessionary finance or grants to fill the savings or foreign exchange gaps will interfere in the market determination of interest rates and exchange rates. 3. Foreign aid funds inefficient infrastructure projects Supporting projects that are non-commercially viable may give benefits such as reducing unemployment whilst the project is being constructed. However, when the development assistance is withdrawn the project may fail to stand on its own feet and either collapse or require additional funding. 4. Foreign aid falls into the hands of corrupt officials The political left argues that foreign aid will also create problems 1. Foreign aid leads to a culture of dependency Dependency theory argues that aid ensures the continuation of the LDCs on the periphery and the dominance of the MDCs in the core. The LDCs, rather than relying on transfers of funds from the MDCs, need to build and de...