SOC300 Week 2: International FinanceSlide #Slide TitleSlide NarrationSlide 1IntroductionWelcome to the Sociology of Developing Countries. In this week’s lesson, we’ll see how the machinery ofInternational Finance works to reduce poverty. Slide 2TopicsThe following topics will be covered in this lesson:Aid and corruption; and Loans and interest.Slide 3Aid and Corruption The global economy is more integrated than ever. Countriesare exchanging more goods and services, internationalfinancial flows have increased and private investors are activein many developing countries. But even in an expandingworld economy, many countries cannot finance their owndevelopment, and it is here that aid is especially helpful infilling the gap. Development is a partnership between developing and donorcountries. Donor countries help recipient countries build thecapacity to foster change and recipient countries invest in theirpeople and create an environment that sustains growth.Countries that have difficulty tapping financial markets mustrely on aid flows from wealthier countries to funddevelopment programs. Official development assistance todeveloping countries reached over one hundred and thirtybillion dollars in 2010, the highest ever in nominal termsrepresenting a three point two percent increase over the 2009level.In 2010, the top four international donors the United States,the European Commission, France, and Germany contributedfifty-three percent of all global aid, but alarge part of thisincrease came as debt relief, not new aid flows. Aid inabsolute terms is measured as a share of donors’ grossnational income and has declined between 2005 and 2007, buthas increased since then. Still, a significant increase in donorcommitment is required to meet the targets set by the UN.The form of aid and purpose for which it is given makes adifference. Debt-related aid provides relief from liabilitiesthat recipient countries have difficulty servicing, and can free
up public resources for other purposes, but it may not result inan equivalent expansion of development activities.Humanitarian assistance provides relief for suddendisasters and emergency situations, but it does notgenerally contribute to financing long-term development.Moreover, the administrative costs of providing aid are mainlyspent in the donor economy. Aid is not the only source ofdevelopment finance or, for many countries, the mostimportant. Remittances and private capital flows are agrowing source of financing for some. Remittances receivedworldwide more than tripled in the past decade, from onehundred and thirty six billion dollars in 2000 to four hundredand forty-nine billion dollars in 2010, but extremely poorcountries, especially in sub-Saharan Africa, still requiresubstantial increases in aid to reach their development goals.