Foreign Aid as Cause of Socio Economic Issues

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Essay, Pages 2 (300 words)

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Foreign aid is the voluntary transfer of resources from one country to another given at least partly with the objective of benefiting the receipt country. It defines the financial flows, technical support or assistant, commodities that are declined to promote economic development and welfare as the main objectives. Culture of dependency is the way that characterises people way of living by depending on state benefits. I strongly agree that foreign aid should be discontinued as it creates culture of dependency in receipts countries.

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Therefore, this essay will discuss this argument related to three preview points. Foreign aid could lead to economic issues in the sense that it erodes the quality of governance index; that is bureaucracy, corruption and corruption in law (Lancaster, 2000, p. 23). Therefore, it can undermine institutional quality, encouraging rent seeking and corruption, fomenting conflicts over control of aid funds and alleviating pressures to reform inefficient policies and institutions.

It has been used as a tool for controlling recipient’s countries by the donors.

Therefore, the receipt country does not control itself economically. It has to be controlled in all stages involving economical growth by the donors, because it relies on the donor countries for major help of foreign aid. Their decisions rely on the hands of the donors. Foreign aid can also be considered as a way of decreasing investment in recipient country.

The permanent rise in foreign aid reduces the long run state of labor supply as well as capital accumulation which leads to a linear decrease of investment in receipts countries. The recipient’s countries tend to relax in the field of investments since there is an increase in foreign reliance through the provision of foreign aid (Lancaster, 2000, p. 78).