POL201Y1 Lecture 7: Lec 7 POL201_
The role of Foreign Aid to the Global South
Definition
What is foreign aid?
According to the OECD definition, overseas development (ODA) refers to the loans and grants
allocated to developing countries and which fulfill three criteria.
1. The loans and grants must come from the public sector
2. They must be granted with the aim of fostering economic development
3. They must be concessional and contain a grant element of at least 25%
In addition to financial flows, technical co-operation is included in aid
Military aid is excluded.
The Justification of Development Aid
- Foreign aid supplements local savings
- Enhances investment which makes possible expansion in productive capacity
- It furnishes foreign exchange for essential imports such as machinery, fuel, and food.
- Aid builds large construction projects.
The Origins of Foreign Aid
- It was one of the most original political innovations of the century
- Since the late 1940s, the developed countries were said to have allocated US $1
TRILLION TO DEVELOPMENT COOPERATION
- It was associated with the creation of the welfare state (the 1930s and 1940s), the
establishment of the UN System and the creation of the World Bank and the launching of
the Marshall plan (1948-1952) successful plan works for both Europeans and poor
countries.
- Aid has become so well entrenched as a pillar of modern North-south relations that
many observers now regard it as an integral part of the customary international law.
- Everyone benefited, Americans helped the French and Italians
- Truman doctrine 1947 invested money to recover the Marshall plan and save American
goods.
- The economy was so successful, they got it back
- Europeans got American goods.
Categories of Aid
1. Humanitarian Aid- short-term relief assistance with temporary aims to lessen the
sufferings of individuals struck by the natural or man-made disaster
2. Development aid- aims at long-term goals: boosting economic growth in a given
country or region.
Sources:
- Bilateral aid- between two governments
