1、Unit 15Text:Foreign Aid（外国援助）1.Key words2.Definition of foreign aid3.Why donors give aid4.Why LDC recipients accept aid5.The effects of aid6.Conclusions:Toward a new view of foreign aid7.Questionsforeign aidless-developed countries(LDCs)official grantsconcessional loansin kinddonor countryrecipient
2、countryMarshall PlanTwo-Gap Modelforeign-exchange constraintforeign-exchange bottleneckintermediate goodscapital goodsabsorptive capacitytied aiddebt repaymentsecond-best optionconscience moneystructural transformationaid wearinessaid disillusionmentmultilateral assistanceNongovernmental Organizatio
3、ns(NGOs)poverty alleviationofficial development assistanceinternational economic orderEconomists have defined foreign aid as any flow of capital to the less-developed countries(LDCs)that meets two criteria:(1)its objective should be noncommercial from the point of view of the donor,and(2)it should b
4、e characterized by concessional terms;that is,the interest rate and repayment period for borrowed capital should be softer(less stringent)than commercial terms.Foreign aid encompasses all official grants and concessional loans,in currency or in kind,that are broadly aimed at transferring resources f
5、rom developed to less developed nations on development or income distribution grounds.3.1 Political motivations3.2 Economic motivations:Two-gap models and other criteria3.3 Economic motivations and self-interestThe United States has viewed foreign aid from its beginnings in the late 1940s under the
6、Marshall Plan,which aimed at reconstructing the war-torn economies of Western Europe,as a means of containing the international spread of communism.When the balance of cold-war interests shifted from Europe to the Third World in the mid-1950s,the policy of containment embodied in the U.S.aid program
7、 dictated a shift in emphasis toward political,economic,and military support for“friendly”less developed nations,especially those considered geographically strategic.The successive shifts in emphasis from South Asia to Southeast Asia to Latin America to the Middle East and back to Southeast Asia dur
8、ing the 1950s and 1960s and then toward Africa and the Persian Gulf in the late 1970s and the Caribbean and Central America in the 1980s reflect changes in U.S.Strategic and political interests more than changing evaluations of economic need.In the 1990s,both bilateral and multilateral aid are being
9、 conditioned on a recipient countrys willingness to promote free markets,open its economy,and structure itself in accordance with the donors capitalist and democratic principles.3.2.1 Foreign-exchange constraints3.2.2 Growth and savings3.2.3 Technical assistance3.2.4 Absorptive capacityExternal fina
10、nce(both loans and grants)can play a critical role in supplementing domestic resources in order to relieve savings or foreign-exchange bottlenecks.This is the so-called two-gap analysis of foreign assistance.The basic argument of the two-gap model is that most developing countries face either a shor
11、tage of domestic savings to match investment opportunities or a shortage of foreign exchange to finance needed imports of capital and intermediate goods.Most developing countries,however,are assumed to fall into the second category,where the foreign-exchange gap is binding.These countries have exces
12、s productive resources(mostly labor),and all available foreign exchange is being used for imports.The existence of complementary domestic resources would permit them to undertake new investment projects if they had the external finance to import new capital goods and associated technical assistance.
13、Foreign aid can therefore play a critical role in overcoming the foreign-exchange constraint and raising the real rate of economic growth.External assistance also is assumed to facilitate and accelerate the process of development by generating additional domestic savings as a result of the higher gr
14、owth rates that it is presumed to induce.Financial assistance needs to be supplemented by technical assistance in the form of high-level worker transfers to ensure that aid funds are used most efficiently to generate economic growth.The amount of aid should be determined by the recipient countrys ab
15、sorptive capacity,a euphemism for its ability to use aid funds wisely and productively(often meaning as donors want them to be used).Even at the strictly economic level,definite benefits accrue to donor countries as a result of their aid programs.The increasing tendency toward providing loans instea
16、d of outright grants(interestbearing loans now constitute over 80%of all aid,compared to less than 40%in earlier periods)and toward tying aid to the exports of donor countries has saddled many LDCs with substantial debt repayment burdens.4.1 Economic reason4.2 Political motivation4.3 Moral motivatio
17、nForeign aid supplements scarce domestic resources,it helps transform the economy structurally,and it contributes to the achievement of LDC takeoffs into self-sustaining economic growth.Thus the economic rationale for aid in LDCs is based largely on their acceptance of the donors perceptions of what
18、 the poor countries require to promote their economic development.Naturally,LDCs would like to have more aid in the form of outright grants or long-term low-cost loans with a minimum of strings attached.This means not tying aid to donor exports and granting greater latitude to recipient countries to
19、 decide for themselves what is in their best long-run development interests.In some countries,aid is seen by both donor and recipient as providing greater political leverage to the existing leadership to suppress opposition and maintain itself in power.In such instances,assistance takes the form not
20、 only of financial resource transfers but of military and internal security reinforcement as well.The problem is that once aid is accepted,the ability of recipient governments to extricate themselves from implied political or economic obligations to donors and prevent donor governments from interfer
21、ing in their internal affairs can be greatly diminished.Whether on grounds of basic humanitarian responsibilities of the rich toward the welfare of the poor or because of a belief that the rich nations owe the poor nations conscience money for past exploitation,many proponents of foreign aid in both
22、 developed and developing countries believe that rich nations have an obligation to support the economic and social development of the Third World.They then go on to link this moral obligation with the need for greater LDC autonomy with respect to the allocation and use of aid funds.5.1 Economic tra
23、ditionalists5.2 Critics5.3 Official aidEconomic traditionalists argue that aid has indeed promoted growth and structural transformation in many LDCs.Critics who argue that aid does not promote faster growth but may in fact retard it by substituting for,rather than supplementing,domestic savings and
24、investment and by exacerbating LDC balance of payments deficits as a result of rising debt repayment obligations and the linking of aid to donor-country exports.Official aid is further criticized for focusing on and stimulating the growth of the modern sector,thereby increasing the gap in living sta
25、ndards between the rich and the poor in developing countries.The combination of aid disillusionment on the part of many Third World recipients and aid weariness among some traditional developed-country donors does not augur well for the continuation of past relationships.Dissatisfaction on both side
26、s creates the possibility for new arrangements characterized by greater congruence of interests and motivation on the part of donor and recipient.In the future,aid is more likely to be linked to market reforms and the building of institutional capacities and more effective forms of governance as pre
27、conditions for structural adjustment.It is also being linked once again to poverty alleviation as well as growth and to rising concerns about environmental consequences.As the realities of global interdependence slowly penetrate the political perceptions of developed-nation governments,and perhaps e
28、ventually their populaces as well,it may lead to the realization that their real long-run economic and political interests in fact lie with the achievement of broad-based development in Third World nations.(1)Explain the definition and characteristics of the foreign aid.(2)How important is foreign a
29、id for the economies of the Third World in relation to their other sources of foreign-exchange receipts?(3)What is meant by tied aid?Most nations have increasingly shifted from grants to loans and from untied to tied loans and grants.What are the major disadvantages of tied aid,especially when this aid comes in the form of interest-bearing loans?(4)Under what conditions and terms do you think LDCs should seek and accept foreign aid in the future?If aid cannot be obtained on such terms,do you think LDCs should accept whatever they can get?Explain your answer.
