Development aid  

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Development aid (also development assistance, technical assistance, international aid, overseas aid, official development assistance (ODA), or foreign aid) is financial aid given by governments and other agencies to support the economic, environmental, social, and political development of developing countries. It is distinguished from humanitarian aid by focusing on alleviating poverty in the long term, rather than a short term response.

The term development co-operation, which is used, for example, by the World Health Organization (WHO) is used to express the idea that a partnership should exist between donor and recipient, rather than the traditional situation in which the relationship was dominated by the wealth and specialised knowledge of one side. Most development aid comes from the Western industrialised countries but some poorer countries also contribute aid.

Aid may be bilateral: given from one country directly to another; or it may be multilateral: given by the donor country to an international organisation such as the World Bank or the United Nations Agencies (UNDP, UNICEF, UNAIDS, etc.) which then distributes it among the developing countries. The proportion is currently about 70% bilateral 30% multilateral.

About 80-85% of developmental aid comes from government sources as official development assistance (ODA). The remaining 15-20% comes from private organisations such as "non-governmental organisations" (NGOs), foundations and other development charities (e.g., Oxfam). In addition, remittances received from migrants working or living in diaspora form a significant amount of international transfer.

Some governments also include military assistance in the notion "foreign aid", although many NGOs tend to disapprove of this.

Official development assistance is a measure of government-contributed aid, compiled by the Development Assistance Committee of the Organisation for Economic Co-operation and Development (OECD) since 1969. The DAC consists of 34 of the largest aid-donating countries.

History

Origins

The concept of development aid goes back to the colonial era at the turn of the twentieth century, in particular to the British policy of colonial development that emerged during that period. The traditional government policy had tended to favor laissez-faire style economics, with the free market for capital and goods dictating the economic role that colonies played in the British Empire.

Changes in attitudes towards the moral purpose of the Empire, and the role that government could play in the promotion of welfare slowly led to a more proactive policy of economic and developmental assistance towards poor colonies. The first challenge first by Britain was the economic crisis that occurred after World War I. Prior to the passage of the 1929 Colonial Development Act, the doctrine that governed Britain (and other European colonizers) with their territories was that of financial self-sufficiency. What this simply meant was that the colonies were responsible for themselves.

Britain was not going to use the money that belongs to the metropole to pay for things in the colonies. The colonies did not only have to pay for infrastructural development but they also were responsible for the salaries of British officials that worked in the colonies. The colonies generated the revenues to pay for these through different forms of taxations. The standard taxation was the import and export taxes. Goods going out of the colonies were taxed and those coming in were also taxed. These generate significant revenues. Apart from these taxes, the colonizers introduced two other forms of taxes: hut tax and labor tax. The hut tax is akin to a property tax today. Every grown up adult male had their own hut. Each of these had to pay a tax. Labor tax was the work that the people had to do without any remunerations or with meager stipends. As the economic crisis widened and had significant impact on the colonies, revenues generated from taxes continued to decline, having a significant impact on the colonies. While this was going on, Britain experienced major unemployment rates. Parliament began to discuss ways in which they could deal with Britain's unemployment rates and at the same time respond to some of the urgent needs of the colonies. This process culminated in the passage of the Colonial Development Act in 1929, which established a Colonial Development Advisory Committee under the authority of the Secretary of State for the Colonies, then Lord Passfield. Its initial annual budget of £1 million was spent on schemes designed to develop the infrastructure of transport, electrical power and water supply in colonies and dominions abroad for the furtherance of imperial trade. The 1929 Act, though meager in the resources it made available for development, was a significant Act because it opened the door for Britain to make future investments in the colonies. It was a major shift in colonial development. The doctrine of financial self-sufficiency was abandoned and Britain could now use metropolitan funds to develop the colonies.

By the late 1930s, especially after the British West Indian labour unrest of 1934–1939, it was clear that this initial scheme was far too limited in scope. A Royal Commission under Lord Moyne was sent to investigate the living conditions in the British West Indies and it published its Report in 1940 which exposed the horrendous living conditions there.

Amidst increasing criticism of Britain's colonial policies from abroad and at home, the commission was a performance to showcase Britain’s “benevolent” attitude towards its colonial subjects. The Commission's recommendations urged health and education initiatives along with increased sugar subsidies to stave off a complete and total economic meltdown. The Colonial Office, eager to prevent instability while the country was at war, began funneling large sums of cash into the region.

The Colonial Development and Welfare Act was passed in 1940 to organize and allocate a sum of £5 million per year to the British West Indies for the purpose of long-term development. Some £10 million in loans was cancelled in the same Act. The Colonial Development and Welfare Act of 1945 increased the level of aid to £120m over a twenty-year period. Further Acts followed in 1948, 1959 and 1963, dramatically increasing the scope of monetary assistance, favourable interest-free loans and development assistance programs.

Postwar expansion

The beginning of modern development aid is rooted in the context of Post-World War II and the Cold War. Launched as a large-scale aid program by the United States in 1948, the European Recovery Program, or Marshall Plan, was concerned with strengthening the ties to the West European states to contain the influence of the USSR. Implemented by the Economic Cooperation Administration (ECA), the Marshall Plan also expanded its reconstruction finance to strategic parts of the Middle East and Asia. The rationale was well summarized in the 'Point Four Program', in which United States president Harry Truman stated the anti-communist rationale for U.S. development aid in his inaugural address of 1949, which also announced the founding of NATO:

"In addition, we will provide military advice and equipment to free nations which will cooperate with us in the maintenance of peace and security. Fourth, we must embark on a bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped areas. More than half the people of the world are living in conditions approaching misery. Their food is inadequate. They are victims of disease. Their economic life is primitive and stagnant. Their poverty is a handicap and a threat both to them and to more prosperous areas. For the first time in history, humanity possesses the knowledge and skill to relieve the suffering of these people."

In 1951, the Technical Cooperation Administration (TCA) was established within the Department of State to run the Point Four program. Development aid was aimed at offering technical solutions to social problems without altering basic social structures. The United States was often fiercely opposed to even moderate changes in social structures, for example the land reform in Guatemala in the early 1950s.

In 1953 at the end of the Korean War, the incoming Eisenhower Administration established the Foreign Operations Administration (FOA) as an independent government agency outside the Department of State to consolidate economic and technical assistance. In 1955, foreign aid was brought back under the administrative control of the Department of State and FOA was renamed the International Cooperation Administration (ICA).

In 1956, the Senate conducted a study of foreign aid with the help of a number of independent experts. The result, stated in a 1959 amendment to the Mutual Security Act, declared that development in low-income regions was a U.S. objective along with and additional to other foreign-policy interests, attempting thus to clarify development assistance's relationship with the effort to contain Communism. In 1961, the Congress approved the Foreign Assistance Act of 1961 with President J.F. Kennedy's support, which retained the 1959 policy of international development as an independent U.S. objective and set up a new Agency for International Development, USAID.

The volume of international aid to the Third World grew dramatically from the 1960s. This aid came mainly from the US and Western European countries, but there were also significant contributions from the Soviet Union in exchange for overseas political influence in the context of the heightened global tensions of the Cold War.

The practice of extending aid to politically aligned parties in recipient nations continues today; Faye and Niehaus (2012) are able to establish a causal relationship between politics and aid in recipient nations. In their analysis of the competitive 2006 Palestinian elections, they note that USAID provided funding for development programs in Palestine to support the Palestinian Authority, the US backed entity running for reelection. Faye and Niehaus discovered that the greater the degree of alignment the recipient party has with the donor entity, the more aid it receives on average during an election year. In an analysis of the 3 biggest donor nations (Japan, France, and the US), Alesina and Dollar (2000) discovered that each has its own distortions to the aid it gives out. Japan appears to prioritize giving aid nations that exercise similar voting preferences in the United Nations, France mostly sends aid to its former colonies, and the U.S. disproportionately provides aid to Israel and Egypt. These allocations are often powerful tools for maintaining the strategic interests of the donor country in the recipient country.

The Development Assistance Committee was established in 1960 by the Organisation for European Economic Co-operation to coordinate development aid amongst the rich nations. A 1961 resolution decreed that:

The Committee will continue to consult on the methods for making national resources available for assisting countries and areas in the process of economic development and for expanding and improving the flow of long-term funds and other development assistance to them. {{#if:Development Assistance Committee|

– Development Assistance Committee{{#if:Mandate (1961)|, Mandate (1961)}}{{#if:|, {{{4}}}}}

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National development aid programs

• Australian Agency for International Development
• China foreign aid
• Department for International Development (United Kingdom)
• International economic cooperation policy of Japan
• Saudi foreign assistance
• Swedish International Development Cooperation Agency
• United States foreign aid
• United Arab Emirates foreign aid

See also

• Reparations for slavery
• Dead Aid (2009) by Dambisa Moyo

Effectiveness and anti-corruption measures:

• Conditionality
• Aid effectiveness
• Tied aid
• International Health Partnership

General:

• Development economics