14 - 12.14 14/12/201011:37:00 12.14 PoliticsofForeignAid

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12.14 14/12/2010 11:37:00 12.14  Politics of Foreign Aid Is it given for the benefit of the recipient or the donor? o Upwards of 70% of US bilateral aid is “tied” aid  must be used to a  certain reason, or you can buy whatever you want with it but it  must be made in the US  o Conditions are meant to change the policies of recipient country,  usually in line with donor’s goals  food aid, grown and produced in  US  Foreign Aid Millennium Challenge Corporation (2004) o Aid to HIPCs  o Competitive grant based on governance criteria Board of Directors o Sec. of Treasury  o Sec. of State o USTR  o Director of USAID  o 4 Representative from private coporations nearly $8 billion given to date  (now about $10 mil) MCC Why the MCC? Long call for a “new model” in foreign aid. o Concern over waste and inefficiency  Ex. Food for Peace program o Has fed 3 billion people in 150 countries  is tied aid but how can be  sure that country is doing what they say they are doing with it
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o Targeted to vulnerable populations, especially children Problems o Congo aid was funneled to markets, lowering crop prices. Profit used  to buy weapons for government o Ethiopia – same story but used to profits to buy Soviet Weapons  Creating a New Model Academic research in 1990s suggested that foreign aid was effective only  under particular conditions  need culture of rule of law Ex: Burnside and Dollar study o Interaction of foreign aid with governance indicators = increased  economic growth o Other world bank studies began to find similar evidence. .. Easterly: $2.3 trillion wasted/lost to corruption over last 50 years  The Oxfam model – private flow Small grants to individuals or to villagers  Deliberately “micro” level development work o Ex. Computers for web access  o Ex. Phones for villages  Upside: very successful; creates long-run growth and less dependence on aid 
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This note was uploaded on 02/17/2012 for the course POLI SCI 103 taught by Professor Pevehouse during the Spring '08 term at University of Wisconsin.

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14 - 12.14 14/12/201011:37:00 12.14 PoliticsofForeignAid

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