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Y376 Y376 International International
Political Political EconomyEconomyFebruary 10, 2011February 10, 2011
North-South Aid Issues: North-South Aid Issues: What the Developing What the Developing
Countries WantCountries Want Increasing the total amountIncreasing the total amount Untying “tied” aidUntying “tied” aid Increasing the proportion of aid Increasing the proportion of aid
channeled through multilateral channeled through multilateral agenciesagencies
Making aid more automaticMaking aid more automatic Giving LDCs more control over the Giving LDCs more control over the
spending of aidspending of aid
What is Aid (Official What is Aid (Official Development Development Assistance)?Assistance)?
Undertaken by governmentsUndertaken by governments Main objective to promote economic Main objective to promote economic
development and welfaredevelopment and welfare Made on concessional terms with a Made on concessional terms with a
grant element of at least 25 percentgrant element of at least 25 percent
Figure 6-1. Annual Bilateral ODA by the G-5 Figure 6-1. Annual Bilateral ODA by the G-5 Countries, 1960-2007, in Billions of Countries, 1960-2007, in Billions of
Constant 2006 DollarsConstant 2006 Dollars
Source: OECD Statistics online.
Figure 6-3. ODA from DAC Countries, OPEC, Figure 6-3. ODA from DAC Countries, OPEC, CMEA, and non-DAC Countries, 1956-2007, in CMEA, and non-DAC Countries, 1956-2007, in
Billions of Current DollarsBillions of Current Dollars
Source: OECD Statistics Online.
ODA, 2000-2006ODA, 2000-2006
ODA by Major Donors, ODA by Major Donors, 20062006
Aid as Percentage of GDPAid as Percentage of GDP
Example of US Example of US Aid to IraqAid to Iraq
•Infrastructure
•Water
•Electricity
•Health system
•Schools
•Reconstruction
•Elections
Source: http://www.usaid.gov/iraq
US Aid to Iraq, 2004-US Aid to Iraq, 2004-20072007
US Aid to Iraq in US Aid to Iraq in Comparison with Aid to Comparison with Aid to
Germany and JapanGermany and Japan
Why Hasn’t US Aid to Why Hasn’t US Aid to Iraq Worked?Iraq Worked?
Preference for US over Iraqi Preference for US over Iraqi contractors (higher costs)contractors (higher costs)
Huge proportion of spending went to Huge proportion of spending went to private companies like private companies like Bechtel
US concentration on rebuilding oil US concentration on rebuilding oil fields and other infrastructure projectsfields and other infrastructure projects
Al Qaeda disruption of aid work, Al Qaeda disruption of aid work, especially in the rebuilding of especially in the rebuilding of infrastructureinfrastructure
Table 6-2. U.S. Foreign Aid Programs, Table 6-2. U.S. Foreign Aid Programs, 20042004
Department Name of Program $Millions
Department of State Refugee 756
International Organizations and Programs
320
ESF (policy) 3,263
NIS (distribution) 584
SEED (distribution) 442
HIV/AIDS (distribution) 488
Andean Counter-Drug 727
Treasury Department Contributions to Intl. Financial Institutions
1,383
Debt Relief 94
Dept. of Agriculture PL-480 II (budget) 1,185
USAID DA, child survival, disaster 4,511
MCA 994
Iraq Reconstruction 18,439
Other 1,000-1,500
Source: Carol Lancaster and Ann Van Dusen, Organizing U.S. Foreign Aid (Washington, D.C.: Brookings Institution, 2005), p. 14.
Table 6-1. Bilateral Aid to Former Table 6-1. Bilateral Aid to Former Colonies, 1970-1994Colonies, 1970-1994
DonorDonor Former Colony Share Former Colony Share of Total Aid (in of Total Aid (in percentages)percentages)
PortugalPortugal 99.699.6
United KingdomUnited Kingdom 78.078.0
FranceFrance 57.057.0
BelgiumBelgium 53.753.7
Netherlands Netherlands 17.117.1
Source: Alberto Alesina and David Dollar, “Who Gives Foreign Aid and Why?Journal of Economic Growth, 5 (March 2000), p. 37.
SummarySummary Aid flows are strongly influenced by Aid flows are strongly influenced by
former colonial relationships and power former colonial relationships and power politicspolitics
Net aid flows do not always remain Net aid flows do not always remain positive because some aid takes the form positive because some aid takes the form of loans that must be paid backof loans that must be paid back
The US share of total aid to LDCs The US share of total aid to LDCs declined markedly over timedeclined markedly over time
Aid is primarily needed to deal with Aid is primarily needed to deal with poverty, disasters, and wars and cannot poverty, disasters, and wars and cannot be used in general to promote long-term be used in general to promote long-term economic developmenteconomic development
Petro-Dollar RecyclingPetro-Dollar Recycling
Oil-importing ICs
Oil-exportingCountries
InternationalBanks
Third Worldborrowers
$$
$
$
Figure 6-2. Total Official and Private Flows Figure 6-2. Total Official and Private Flows from DAC Countries to Developing Countries, from DAC Countries to Developing Countries,
1960-2006, in Billions of Constant 2006 1960-2006, in Billions of Constant 2006 DollarsDollars
Source: OECD Statistics Online
Figure 6-5. Long-Term Debt Outstanding, Low- Figure 6-5. Long-Term Debt Outstanding, Low- and Middle-Income Countries, 1970-2006, in and Middle-Income Countries, 1970-2006, in
Trillions of Current DollarsTrillions of Current Dollars
Source: World Bank, World Development Indicators.
Figure 6-6. Debt/GDP and Debt Figure 6-6. Debt/GDP and Debt Service/Exports of Goods and Services in Service/Exports of Goods and Services in Percentages, 1981-2006, Emerging and Percentages, 1981-2006, Emerging and
Developing CountriesDeveloping Countries
Source: World Bank, World Development Indicators; InternationalMonetary Fund, World Economic Outlook Database, April 2008. Debt service data are for low and middle income countries.
Origins and Origins and Consequences of the Consequences of the
Debt CrisisDebt Crisis Recession in the industrial world Recession in the industrial world
meant that banks had to find meant that banks had to find borrowers in the developing worldborrowers in the developing world
Petro-dollar recycling was the was the consequenceconsequence
Growth in the developing world was Growth in the developing world was hurt by the anti-inflationary policies hurt by the anti-inflationary policies adopted at the end of the 1970sadopted at the end of the 1970s