Routledge Dictionary of Economics, Second Edition
Grants, loans on favourable terms or the supply of services by governments or charitable bodies to less developed countries. In its favour, it has been argued that aid creates the notion of an international human community, reduces political tension within countries by encouraging balanced development and increases the priority of development within less developed countries. A shortage of domestic savings and balance of payments problems in the early stage of expansion, when imports exceed exports, will retain the need for aid. As it is difficult to decide the basis for selecting aid recipients, it has been suggested that poverty, a good record in economic and social policies or a good performance in raising the share of savings and taxes in the national income should be used as alternative criteria.
Aid is given for many purposes including relief (often consumer goods are sent to alleviate a short-term supply deficiency, e.g.
famine relief to Ethiopia), reconstruction (as in the rebuilding of an economy after a war, e.g. the MARSHALL PLAN), stabilization (especially short-term help with a country’s balance of payments until adjustments are made to its economy) and long-term development to raise the level of per capita incomes permanently. Critics of aid programmes point out that aid can have the defects of creating economic or political dependence, introducing inappropriate technology or spending disproportionately on urban populations.
See also: bilateral aid; multilateral aid; tied aid
References
Casson, R. (1986) Does Aid Work?, Oxford: Oxford University Press.
Mosley, P. (1986) Overseas Aid: Its Defence and Reform, Hemel Hempstead, Harvester Wheatsheaf.
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