Foreign Aid Dependency

Foreign Aid Dependency
Emily Willis

The United States and many other wealthy countries tend to be very generous in their efforts to help developing countries. Through foreign aid, we attempt to stimulate and expand their economies. However, even though we funnel money into nations across the globe, many of the citizens are faced with poverty and horrendous living conditions. This is seen best in African nations, who receive a large portion of foreign aid and still make up some of the poorest countries worldwide. While it’s often debated, the problem with foreign monetary aid is that it forms strong dependence on the aid and doesn’t always go to the countries, and the people, who need it most.

Red countries receive US foreign aid.

The idea of foreign aid first started in the 1960s, yet as it continued to grow (particularly through the 1990s), GDP decreased and the standards of living were drastically low. Most donor countries give “official development aid” which includes grants, loans, and debt relief. These methods essentially put more money into a country’s economic system. In terms of the circular flow model, a leak (or extra input) is created, meaning that governments don’t need to tax their citizens as much as usual due to the extra income. This sounds good, but it undermines the policies needed for effective governance. Without taxes, citizens don’t necessarily feel the need to keep their governments in check, increasing the risk of corruption. As more aid is given to corrupt governments, the wealth inequality grows larger and impoverished people become stuck in the vicious cycle. This is furthered in countries with rich natural resources. Often called the “natural resource curse”,  it causes a tremendous wealth gap as aid is poured into industries for precious metals, coal, and oil. The money directly benefits those who hold the resources, while citizens and workers are left behind.



Take Liberia for example, a resource-rich nation that has been ravaged by civil war and infectious disease. In 2015, Liberia was receiving about $765 million in official development aid, 73% of its gross national income (Glencorse). In spite of all this, an estimated 84% of Liberians live below the poverty line, and the nation is ranked 182 of 187 countries on the Human Development Index (HDI). This is caused by a lack of accountability and transparency as to what the money is actually going towards. In most cases, aid is given for short-term results rather than sustainability. This means that instead of investment, the money funds supplies such as food, water, and tools. During a famine in a country like Liberia though, food is one of the worst things to provide. Food aid lowers the cost of food, making it harder for local farmers to compete with such low prices. The demand for locally grown food goes down, causing the supply to fall with it, thereby increasing the dependency on foreign food aid. While people are being fed at that specific time, it’s clearly not sustainable--the agriculture sector is shrinking, not expanding.

The prevalence of foreign aid in these African nations is hurting them in the long-run, not helping. While these countries may benefit from some limited foreign intervention, simply giving them money is not the way to go. Foreign governments who give aid should be focusing their resources on sustainable investments for that country, as well as holding the country accountable for where that money is truly going.

Works Cited

Chester, Penelope. “Liberia and Aid Dependency.” UN Dispatch, 4 June 2010, www.undispatch.com/liberia-and-aid-dependency/.

“Misplaced Charity.” The Economist, The Economist Newspaper, 11 June 2016, www.economist.com/news/international/21700323-development-aid-best-spent-poor-well-governed-countries-isnt-where-it.

Swanson, Ana. “Why Trying to Help Poor Countries Might Actually Hurt Them.” The Washington Post, WP Company, 13 Oct. 2015, www.washingtonpost.com/news/wonk/wp/2015/10/13/why-trying-to-help-poor-countries-might-actually-hurt-them/?utm_term=.c158dfd9f027.

“Why Foreign Aid Fails – and How to Really Help Africa.” The Spectator, 27 Jan. 2014, www.spectator.co.uk/2014/01/why-aid-fails/.