Chapter 12

• The idea of foreign aid started

  After the Second World War
• There was a need to rebuild a severely devastated region that must be restored by other countries like the United States of America
• The World Bank was formed

  1944
• The United Nations was founded

  1945
• The International Monetary Fund (IMF) was started

  1944
• Foreign aid


  The donation or transfer of help in the form of money, goods and services to a country that needs it
• Aims of foreign aid

  • Foster peace and security among nations
  • Assist in the growth and development of one country
  • Enhance the health and education systems
  • Share technological advances
  • Protect the environment
  • Adjust the effect of inflation
  • Help in the time of disasters, like earthquakes, tsunamis and wars
• Official development assistance (ODA)


  International aid that comprises a wide range of financial and non-financial components
• Foreign aid


  Tends to increase a recipient's resources such as money, food and medical supplies
• Forms of foreign aid

  • Official development assistance (ODA)
  • Aid through non-governmental associations (NGOs) and unofficial aids
• Negative effects of foreign aid

  • May encourage corruption
  • Dependency becomes more evident
  • Effort for economic development tends to be neglected
  • Can be used to push for economic policies that may be favorable to the donating country that may negatively affect the recipient country
• Marshall Plan


  A recovery program aimed to rebuild Europe that was devastated by the war, with the US allocating 5% of its GDP at the time
• Foreign aid in the form of food security

  Linked to peace, especially in some countries in Africa and South Asia
• The United Nations aims to maintain international peace and security by deploying peacekeepers in various areas that are susceptible to conflicts
• The idea of foreign aid started

  After the Second World War
• There was a need to rebuild a severely devastated region that must be restored by other countries like the United States of America
• The World Bank was formed

  1944
• The United Nations was founded

  1945
• The International Monetary Fund (IMF) was started

  1944
• Foreign aid


  The donation or transfer of help in the form of money, goods and services to a country that needs it
• Aims of foreign aid

  • Foster peace and security among nations
  • Assist in the growth and development of one country
  • Enhance the health and education systems
  • Share technological advances
  • Protect the environment
  • Adjust the effect of inflation
  • Help in the time of disasters, like earthquakes, tsunamis and wars
• Official development assistance (ODA)


  International aid that comprises a wide range of financial and non-financial components
• Foreign aid


  Tends to increase a recipient's resources such as money, food and medical supplies
• Forms of foreign aid

  • Official development assistance (ODA)
  • Aid through non-governmental associations (NGOs) and unofficial aids
• Negative effects of foreign aid

  • May encourage corruption
  • Dependency becomes more evident
  • Effort for economic development tends to be neglected
  • Can be used to push for economic policies that may be favorable to the donating country that may negatively affect the recipient country
• Marshall Plan


  A recovery program aimed to rebuild Europe that was devastated by the war, with the US allocating 5% of its GDP at the time
• Foreign aid in the form of food security

  Fosters peace, especially in some countries in Africa and South Asia
• The United Nations aims to maintain international peace and security by deploying peacekeepers in various areas that are susceptible to conflicts
• Aims of foreign aid

  • Eradicate certain diseases that cause economic disruption, like HIV-AIDS, malaria, and dengue
• The World Health Organization (WHO) promotes the attainment of the highest level of health and safety, and directly responds to health emergencies worldwide
• Remittance


  The sum of money that is sent by a worker to his/her own country, predominantly developing countries
• Advantages of remittances


  • Contribute to the buying capacity of the families left behind, allowing them to participate in economic activities like buying more goods and services
• Negative impacts of remittances

  • Nurtures too much dependency on outside money
  • Dis-incentivizes growth in the home country and recipient country
  • May negatively affect the vulnerability of the country to the global economy
  • Increasing cost of transferring funds from one country to another that causes billions of dollars loss to the recipient country
• The Dutch Disease


  A paradox where something that is generally beneficial becomes an opportunity for negative exploitation and may harm the larger part of the economy
• Intergovernmental and nonprofit organizations

  • United Nations Children's Fund (UNICEF)
  • International Red Cross and the Red Crescent Movement
  • World Food Program
  • Doctors Without Borders
• These organizations are tax exempt in most countries around the world, and their funding normally comes from a few investors who believe in their goals that are mostly aiming for human development