What's Wrong with the United States Foreign Aid Programme

The main problem with foreign aid in today's world is that there is not enough of it. Reasonable calculations by cautious development economists suggest that the aid needed in the early 1970s to enable the developing economies to grow at the maximum possible (and presumably desirable) rate, given their capacity to absorb capital inflows productively, is only about one per cent of the aggregate net national income of the rich countries. From this it follows that there is in general no insuperable economic problem in expanding foreign aid and that the fundamental donor problem is a political one of acceptance. Still, although the required total volume of aid looks small in relation to prospective donor national income, it is much larger than current flows, especially when netted of debt service charges and shorn (as they should be) of such essentially commercial transactions as loans at free market rates of interest and easy credit terms designed primarily to subsidize domestic industries. The basis for these statements is, I believe, a relatively hardheaded and conservative appraisal of the probable economic performance of major individual developing and developed countries, of the prospects for commodity exports, and so on. No account has been taken in these calculations of the need, passionately felt by some, for vastly increased international redistribution of income and wealth on purely humanitarian or egalitarian grounds. Yet, even this minimal prospectus of what is needed by way of aid -needed on any reasonable terms -looks wildly Utopian in the light of the recent experience of slackening aid outflows and lessening enthusiasm for the whole idea in most Western countries

Political science · International Development and Aid