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Foreign aid: its speckled past and future prospects

Published online by Cambridge University Press:  22 May 2009

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At the present time, the political popularity of foreign assistance, both bilateral and multilateral, has reached a low point in the United States. The lack of enthusiasm is epitomized by the vote of the House of Representatives in January 1974 against the United States's pledge of $550 million to support the International Development Association (IDA), the soft-loan subsidiary of the World Bank (even though that vote was subsequently reversed). Total US commitments of official development assistance have declined from 0.59 percent of GNP in 1963 to 0.29 percent in 1972.

Type
Section II
Copyright
Copyright © The IO Foundation 1975

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References

1 Organization for Economic Cooperation and Development, Development Cooperation: Efforts and Policies of the Members of the Development Assistance Committee (Paris: Organization for Economic Cooperation and Development, 1973), p. 189Google Scholar.

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4 See “India Seeking Renewal of U.S. Economic Aid”, Washington Post, 5 April 1974.

5 See Sunkel, Osvaldo, “Big Business and ‘Dependencia’: A Latin American View”, Foreign Affairs 50 (04 1972): 517–31CrossRefGoogle Scholar.

6 See “India Seeking Renewal of U.S. Economic Aid”, Washington Post, 5 April 1974.

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8 See Colago, Francis X., Economic and Political Considerations and the Flow of Official Resources to Developing Countries (Paris: Organization for Economic Cooperation and Development, 1973)Google Scholar.

9 As defined by the Development Assistance Committee of the OECD in Development Assistance: Efforts and Policies of the Development Assistance Committee (Paris: Organization for Economic Cooperation and Development, 1969), pp. 241–43Google Scholar.

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11 For a much more extended discussion of Japanese aid programs, see Caldwell, Alexander, “The Evolution of Japanese Economic Cooperation, 1950–1970”, in Malmgren, Harald B., ed., Pacific Basin Development: The American Interests (Lexington, Mass: D.C. Heath & Co. for the Overseas Development Council, 1972), pp. 2360Google Scholar.

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13 A good discussion of the Soviet aid program is contained in Goldman, Marshall I., Soviet Foreign Aid (New York: Praeger, 1967)Google Scholar.

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18 Countries or subregions are: Colombia, East Africa, Ethiopia, Ghana, Guyana, Indonesia, Korea, Malaysia, Morocco, Nigeria, Peru, the Philippines, Sri Lanka, Sudan, Tunisia, and Zaire. Formal meetings for ten of these were conducted in fiscal 1973.

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30 See: Griffin, Keith B., “Foreign Capital, Domestic Savings and Economic Development”, Bulletin; Oxford University, Institute of Economics and Statistics 32 (05 1970): 99112Google Scholar; Rahman, Anisur, “The Welfare Economics of Foreign Aid”, Pakistan Development Review 7 (Summer 1967): 141–59Google Scholar; Weisskopf, Thomas E., “The Impact of Foreign Capital Inflow on Domestic Savings in Underdeveloped Countries”, Journal of International Economics 2 (02 1972): 2538Google Scholar; Houthakker, Hendrik S., “On Some Determinants of Saving in Developed and Underdeveloped Countries”, in Robinson, E. A. G., ed., Problems in Economic Development, proceedings of a conference held by the International Economic Association, London (New York: St. Martin's Press, 1965), pp. 212–24Google Scholar; and Griffin, Keith B. and Enos, John L., “Foreign Assistance: Objectives and Consequences”, Economic Development and Cultural Change 18 (04 1970): 313–27Google Scholar.

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33 Papanek, Gustav F., “The Effect of Aid and Other Resource Transfers on Savings and Growth in Less Developed Countries”, Economic Journal 82 (09 1972): 934–50Google Scholar; and Papanek, , “Aid, Foreign Private Investment, and Growth in Less Developed Countries”, Journal of Political Economy 81 (01/02 1973): 120–30Google Scholar.

34 Chenery, Hollis B. and Carter, N. G., “Internal and External Aspects of Development Performance”, World Bank Discussion Paper No. 141, 12 1972Google Scholar.

35 Frank, Foreign Trade Regimes and Economic Development: South Korea.

36 J. William Fulbright, The Arrogance of Power (New York: Random House, 1966)Google Scholar.

37 For a thorough analysis of the way United States aid officials have tried to influence policies in less developed countries, see Nelson, Joan M., Aid, Influence and Foreign Policy (New York: Macmillan Co., 1968)Google Scholar.

38 Schmidt, Wilson, “Default of International Public Debts”, The National Banking Review 2 (03 1965): 403–8Google Scholar.

39 In July 1974, for example, Brazil placed controls on soybean exports and many African and Asian countries control their exports of primary products through government-run marketing boards.

40 See, for example, Renewing the Development Priority, Implementation of the International Development Strategy: First Overall Review and Appraisal of Progress During the Second United Nations Development Decade, comments and recommendations of the Committee for Development Planning, Department of Economics and Social Affairs (New York: United Nations, 1973)Google Scholar; and OECD, Development Cooperation: Efforts and Policies of the Members of the Development Assistance Committee (Paris: Organization for Economic Cooperation and Development, 1972), pp. 3137Google Scholar.

41 See Robert S. McNamara, Address to the Third UN Conference on Trade and Development, Santiago, Chile, 1972; McNamara, Address to the Board of Governors, International Bank for Reconstruction and Development, Nairobi, Kenya, 24 September 1973; and McNamara, , One Hundred Countries, Two Billion People (New York: Praeger, 1973)Google Scholar.

42 Francis X. Colaço, however, shows that at least as concerns distribution of bilateral aid among less developed countries, political considerations are the most important. See Colaço, Economic and Political Considerations and the Flow of Official Resources to Developing Countries.

43 World Bank/IDA, Annual Report 1973, p. 5Google Scholar.

44 Inter-American Development Bank, Annual Report 1972, p. 27Google Scholar; US Congress, House, Committee on Foreign Affairs, The United States and the Multilateral Development Banks (Washington, D.C.: US Government Printing Office, 03 1974), p. 68Google Scholar.

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46 See Caldwell, “The Evolution of Japanese Economic Cooperation.”

47 See, for example: “U.S. Foreign Assistance in the 1970's: A New Approach”, report by the Task Force on International Development to the President of the US (Peterson Report), 4 March 1970; Asher, Robert E., Development Assistance in the Seventies; Alternatives for the United States (Washington, D.C.: Brookings Institution, 1970)Google Scholar; Ohlin; and Fulbright.

48 Cline, William R., Potential Effects of Income Redistribution on Economic Growth: Latin American Cases (New York: Praeger, 1972)Google Scholar; Reynolds, Clark W., “The Recent Evolution of Savings and the Financial System in Mexico in Relation to the Distribution of Income and Wealth”, paper prepared for the Workshop on Income Distribution and Its Role in Development, Rice University, the Program of Development Studies, 25 04 1974Google Scholar.

49 A particularly strident proponent of this view is Hayter, Teresa, Aid as Imperialism (London: Penguin Books, 1971)Google Scholar.

50 Statistical studies indicate that actual aid disbursements are not significantly correlated with performance or self-help efforts. The studies regressed aid flows against variables thought to be indicative of good performance. The independent variables used included: tax effort, savings effort, growth in the country's export earnings, inflation policy, the efficiency of resource use as measured by the incremental output/capital ratio, and the growth rate of GNP per capita. See Cline, William R. and Sargen, Nicholas P., “Performance Criteria and Multilateral Aid Allocation”, Washington, D.C., 1973Google Scholar (mimeographed); and Baird, Mary, Perkins, William, and Zook, Christopher, “The International Development Association: A Critical Analysis”, Williams College, Williamstown, Mass., 1973Google Scholar (mimeographed).

51 US Congress, House, Committee on Foreign Affairs, The United States and the Multilateral Development Banks, p. 68Google Scholar.

52 For an elaboration of these points, see Frank, Charles R. Jr, “Comment: Debt Adjustment; the Tyranny of Bankers, Brokers and Bondholders”, in Lewis, John P. and Kapur, Ishan, eds., The World Bank Group: Multilateral Aid and the 1970's (Lexington, Mass: D.C. Heath & Co., 1973)Google Scholar.

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54 For further discussion of the role of the World Bank as a development institution, see Mason and Asher, The World Bank Since Bretton Woods; Lewis and Kapur, The World Bank Group, Multilateral Aid and the 1970's; Reid, Escott, “McNamara's World Bank”, Foreign Affairs 5 (07 1973): 794810Google Scholar; and Reid, Escott, Strengthening the World Bank (Chicago, III.: Adlai Stevenson Institute, 1973)Google Scholar.

55 For a discussion of a world food stock program and the costs of maintaining reasonable stock levels, see Schertz, Lyle P., “World Food: Prices and the Poor”, Foreign Affairs 52 (04 1974): 511–37CrossRefGoogle Scholar; and US Congress, Senate, Select Committee on Nutrition and Human Needs, “National Nutrition Policy: Report and Recommendations-VI”, prepared for the Panel on Nutrition and the International Situation, which argues for a food stock reserve program for the benefit of less developed countries only, but with costs borne by the developed countries.

56 SirJackson, Robert G. A., A Study of the Capacity of the United Nations Development System, 2 vols. (Geneva: United Nations, 1969)Google Scholar.

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60 Ronald I. McKinnon has argued against heavy reliance on support of this kind on the grounds that such support provides an incentive to delay necessary adjustments in the structure of production and demand. Obviously, if the financial support is excessive, none of the necessary changes in production and demand will take place, but a carefully designed support program can permit less costly, smoother, and more efficient adjustment to occur in the poor countries. See McKinnon, , Money and Capital in Economic Development (Washington, D.C.: Brookings Institution, 1973), pp. 170–72Google Scholar.

61 See OECD, Development Assistance: Efforts and Policies of the Development Assistance Committee, 1971, pp. 100102Google Scholar; and OECD, Development Cooperation: Efforts and Policies of the Members of the Development Assistance Committee, 1973, pp. 54151Google Scholar.

62 Samuel P. Huntington, “Foreign Aid: For What and for Whom?”, in Hunter and Rielly, eds., Development Today; A New Look at U.S. Relations with Poor Countries.