Why do we give and receive aid?

Aid is essentially anything that’s given from one country to another in the name of helping people in need. Most of us either give aid voluntarily or as part of our taxes, or receive services from an organization partly funded by aid from around the world. Although the intention behind it is often a good one, some people question whether aid creates more problems than it solves.

There’s two main types of aid: development aid, which supports particular sectors or projects, like improving healthcare, or building a dam, and humanitarian aid, which supports a country in an emergency, such as after a flood or drought.

Advocates of development aid argue that it is necessary to help the poorest people in the world.¹ Even if there are problems with aid, the argument goes, surely it is still better to give something to those in desparate need.  There’s an economic rationale too. For an economy to grow, it needs both investment to build locally and foreign currency to buy goods off other countries. If the amount of savings in the economy isn’t enough to finance this, then aid is a way of filling that gap.

Aid, however, has many critics. The most common critique is that aid creates dependency in aid-receiving countries, fuelling corruption, and stopping local business from growing by providing people with a free, but short-term, alternative.²

Critics also argue that Western countries use aid as a smokescreen to hide the real looting of the poorest economies in the world. Giving aid therefore misses the point, as actually the real reason why countries are poor is because they are unfairly screwed over by the rich and powerful countries of the world.  For example, sub-Saharan Africa receives over $134bn each year in loans, foreign investment and development aid, and yet it still remains poor. This is because despite all this aid, an even greater amount of money ($192bn) is actually exctracted from the region through profits and debt repayments.³

Although it’s important to question the economics and politics behind aid, it’s also important to remember that it’s one of the few areas in the economy that a lot of people are involved in not out of self-interest, but out of the desire to help those in need — so it might be worth finding a way to make it work.