aid vs trade

Topics: Human Development Index, World Bank, Economics Pages: 6 (1624 words) Published: November 5, 2014
AID VS TRADE 20130078

The aid verses trade debate shows the strong difference and sizable reduction in severe poverty in emerging economies such as China, Thailand and South Korea that have embraced international trade, with the persistent poverty in many aid-dependent African countries. The debate of whether foreign aid is beneficial or harmful to a country in need can be seen as foreign aid directed to Africa has significantly grown yet this has not benefited the continent as it is still considered 'developing' and is in a state of widespread poverty (Alesina, Dollar, 2000). Asia, which was once also considered a third world country has developed a strong economy and infrastructure with not aid that, was introduced in Africa. Rather than seeing the two arguments as aid or trade, it should be seen as aid for trade. (Rotberg, 2009)

TRADE HAS A SIGNIFICANT LONG-TERM AFFECT ON THE DEVELOPING COUNTRIES ECONOMY; IT IS THE KEY TO DEVELOPMENT. IT ALLOWS THE COUNTRY TO DEVELOP STRONG TRADING RELATIONSHIPS WITH OTHER COUNTRIES, THUS ALLOWING A REGULAR FLOW OF FUNDS INTO THE DEVELOPING COUNTRY. TRADE IS NECESSARY AS IT ALLOWS THE COUNTRY TO USE ITS OWN NATURAL RESOURCES, WHICH NOT ONLY BENEFITS THEMSELVES BUT ALSO THE WORLD OF TRADE. AFRICA HAS BEEN GIVEN IN THE PAST 60 YEARS AT LEAST $1 TRILLION OF DEVELOPMENT-RELATED AID; EVEN WITH THIS HUGE INFLUX OF ECONOMY THE INCOME TODAY IS LOWER THAN IT WAS IN THE 1970S, AND MORE THAN 50% OF THE POPULATION LIVE ON LESS THAN ONE DOLLAR A DAY AND STILL REMAINS IN A MAJOR STATE OF POVERTY (MOYO, 2009)

Aid is beneficial for developing countries going through a period of unsteadiness and have gone through a major crisis e.g. natural disaster, this is when aid is most needed, as a country is left with nothing and needs initial funding to allow the country to start rebuilding and trading with outside countries. Aid accelerates the economy of underdeveloped countries but it is also given in the form of bilateral aid, multilateral aid, humanitarian emergency relief, NGO partnership support and Technical support and community involvement. Aid often has a positive effect in third world countries with good policies and has little or no effect when countries have poor policies. (Burnside and Dollar (2000)

Trade is a necessary tool in order to significantly develop and improve a third world countries economy and to reduce poverty. Trade is seen as difficult in these countries as there is sometimes a lack of information, institutions and infrastructure, which makes it difficult to efficiently trade globally. Advancing education, science and technology are important in order to help improve Africa's development. In order to improve the many economical and poverty issues they're confronted with, promoting this industrial development will help ensure long-term economic growth which will allow the continent to not be so aid dependant (Astier, 2006). Aid for trade increases the trade performance of developing countries; a small increase of 1 percent directed for trade, which is about $11.7 million, could generate amounts of up to $818 million (Helble, Mann, Wilson 2009)

There are various economic, social, and political factors that can cause countries to remain in a prolonged widespread poverty, almost half the world live on less than $2.50 a day (Shah, 2013). Some economical factors include the lack of improvement in agriculture, the faulty industrialisation, and unequal economic distribution. Social factors that cause countries to remain in this state are the strong religious aspects of a country. Politics is full of corruption and how many political leaders in such countries rather than have the countries best interest at heart would prefer to enhance their own wealth.

A prominent cause of poverty is the economic position of a country. A lot of countries lack advancements in agriculture, the absence of modern machinery, tools, facilities etc. result in the lack of development the current...

References: Astier, H. (2006, 1st February). Can aid do more harm than good? Bbc
Khumbah, K., & Foote, M
Aid versus trade. Okonjo-Iweala, N. (Director). (2007, July).[Video/DVD] TEDGlobal.
Robert I. Rotberg. (2009). CHINA INTO AFRICA: TRADE, AID, AND INFLUENCE . Brookings Institution Press:
Shah, A
Wilkinson, M., & McGregor, L. (2013). Preying on paradise
Burnside, C
What is Human Development?, Human Development Reports, United Nations Development Program
Sachs, Jeffrey and Andrew Warner (1999), "The Big Push, Natural Resource Booms and Growth", Journal of Development Economics, 59, 43-76.
Human Development Report (HDR), United Nations Development Program, November 27, 2007,
Kaufmann D, Kraay A 2002 'Growth Without Governance ' Economia Fall 2002, Vol
Alberto Alesina and David Dollar (2000), "Who Gives Foreign Aid to Whom and Why?" Journal of Economic Growth (March), pp. 33-63
Morrissey O
Steve Crabtree (2010) Religiosity Highest in World 's Poorest Nations http://www.gallup.com/poll/142727/religiosity-highest-world-poorest-nations.aspx
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