Does development aid, negatively effect the development of developing countries?

Development aid

Development aid or development cooperation (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 can be further defined as "aid expended in a manner that is anticipated to promote development, whether achieved through economic growth or other means".1 It is distinguished from humanitarian aid by focusing on alleviating poverty in the long term, rather than a short term response.
Development aid

Critiques of development aid

Development aid is often provided by means of supporting local development aid projects. In these projects, it sometimes occurs that no strict code of conduct is in force. In some projects, the development aid workers do not respect the local code of conduct. For example, the local dress code as well as social interaction. In developing countries, these matters are regarded highly important and not respecting it may cause severe offense, and thus significant problems and delay of the projects.

There is also much debate about evaluating the quality of development aid, rather than simply the quantity. For instance, tied aid is often criticized as the aid given must be spent in the donor country or in a group of selected countries. Tied aid can increase development aid project costs by up to 20 or 30 percent.[21]

There is also criticism because donors may give with one hand, through large amounts of development aid, yet take away with the other, through strict trade or migration policies, or by getting a foothold for foreign corporations. The Commitment to Development Index measures the overall policies of donors and evaluates the quality of their development aid, instead of just comparing the quantity of official development assistance given.
Critiques of development aid

Effect on the recipient country’s development

As long as the government of a nation receiving international aid knows that it will keep receiving it, and there will be no repercussion on the side of the donors for failing to address its constituents’ issues, it stays optimal for that government to keep ignoring the weakened demands of its citizens. With weakened bargaining power and a less responsive state, there can be no bargaining between citizen and state that will, in the long, run lead to economic and/or development within the nation. Although international has done far-reaching things with respect to increasing access to improved medical care, improving education, and decreasing poverty and hunger, only in 1997 did the World Bank began to rethink its aid policy structure and begin using parts of it specifically for building up the state capability of the aid-receiving nations 2. Even more recently, the Millennium Challenge Corporation, a US-based aid agency, started working with developing nation to provide them with strictly development aid as they set and implement goals for national development.

Effects of foreign aid in Africa

While most economists like Jeffery Sachs hold the view of aid as the driver for economic growth and development, others argue that aid has rather led to increasing poverty and decreasing economic growth of poor countries.[27] Economists like Dambisa Moyo argue that aid does not lead to development, but rather creates problems including corruption, dependency, limitations on exports and dutch disease, which negatively affect the economic growth and development of most African countries and other poor countries across the globe.[27][28] However, economist Jeffery Sachs recognizes that policy members should be held accountable for understanding the geographic effects on poverty.[29] Sachs argues that in order for foreign aid to be successful, policy makers should "pay more attention to the developmental barriers associated with geography- specifically, poor health low agricultural productivity, and high transportation costs"3. The World Bank and the International Monetary Fund are two organizations that Sachs argues are currently instrumental in advising and directing foreign aid; however, he argues that these two organizations focus too much on "institutional reforms"[5]. Foreign aid is especially multifaceted in countries within Sub-Saharan Africa due to geographic barriers. Most macro foreign aid efforts fail to recognize these issues and, as Sachs argues, cause insufficient international aid and policy improvement. Sachs argues that unless foreign aid provides mechanisms that overcome geographic barriers, pandemics such as HIV and AIDS that cause traumatic casualties within regions such as Sub-Saharan Africa will continue to care millions of fatalities.

Death of local industries

Foreign aid kills local industries in developing countries.[31] Foreign aid in the form of food aid that is given to poor countries or underdeveloped countries is responsible for the death of local farm industries in poor countries.[31] Local farmers end up going out of business because they cannot compete with the abundance of cheap imported aid food, that is brought into poor countries as a response to humanitarian crisis and natural disasters.[32] Large inflows of money that come into developing countries, from the developed world, in a foreign aid, increases the price of locally produced goods and products.[28] Due to their high prices, export of local goods reduces.[28] As a result, local industries and producers are forced to go out of business.

Neocolonialism

Foreign aid creates a system of dependency where developing or poor countries become heavily dependent on western or developed countries for economic growth and development.[37] As less developed countries become dependent on developed countries, the poor countries are easily exploited by the developed countries such that the developed world are able to directly control the economic activities of poor countries

Aid dependency

Foreign aid makes African countries dependent on aid because it is regarded by policy makers as regular income, thus they do not have any incentive to make policies and decisions that will enable their countries to independently finance their economic growth and development.[27] Additionally, aid does not incentivize the government to tax citizens, due to the constant inflow of foreign aid, and as a result, the citizens do not have any obligation to demand the provision of goods and services geared towards development.

Corruption

Foreign aid encourages rent-seeking, which is when government officials and leaders, use their position and authority to increase their personal wealth without creating additional wealth, at the expense of the citizens.[27] Most African leaders and official, are able to amass huge sums of personal wealth for themselves from the foreign aid received – they enrich themselves and do not use the aid provided for its intended purpose.

Remittances

The International Monetary Fund has reported that private remittances may have a negative impact on economic growth, as they are often used for private consumption of individuals and families, not for economic development of the region or country.
Effects of development aid on developing countries

So, does development aid negatively effect the development of developing countries?