Combating Poverty through External Assistance?

One of the Tool to Eradicate poverty is International Aid. Let's find out whether it is good or bad for the receiving nations!

"Poverty is not an accident. Like slavery and apartheid, it is man-made and can be removed by the actions of human beings." - Nelson Mandela

What’s Poverty?

In a nutshell, If a person doesn’t have enough resources that are necessary for you to survive with dignity, he is said to be poor

Why people are poor?

There is no good single answer to the question.

Few reasons :

1. Lack of opportunity to work (Unemployment)

2. Lack of skill and education

3. Historical Factors - War trone countries lack resources for their citizens

4. Environmental Factors - Desertic regions don’t offer many opportunities for people

5. Lack of good health and illness

6. Absence enabling environment within the nation

7. Corrupt and Malpractices with Poor Governance Model

Trap that may never end if unacted upon

Sometimes factors act in such a way that one factor such as lack of education can create hindrances all along the way. Lack of education can lead to ill choices of lifestyle eventually leading to illness and lack of basic sanitation, in turn, will close the door to basic employment opportunities like working in a job that requires a strong physical ability (Coal field, Construction labor work, etc.),

Children of such parents cannot attend school for some reason. Parents see the child labor asset that will earn and hence education is largely neglected. The cycle of lack of education again leads to poverty repeats.

The Vicious loop of Poverty never sets off the poor person until some external assistance is provided.

External assistance can come in the form of Government Schemes or Private Assistance at the national level. At International Level, aid comes from International Institutions such As World Bank or International Monetary Fund or directly from the other nations

Analyzing International Assistance and Foreign Aid, is it good or bad?

In the book, The End of Poverty (2005), Sachs argues that if the rich world has committed $195 billion in foreign aid per year between 2005 and 2025 poverty could have been entirely eliminated by the end of this period.

Some equally vocal experts counter what Sach said. They are of the view that foreign aid does more bad than good. It prevents people from finding a solution to their own problems and relying on external assistance, foreign aid has a good chance of corrupting the local administration and too.

Sometimes Aid comes with conditionalities to open up the market for foreign giants that will eventually such up the untapped and valuable resources and vulnerability of the market, even creating a monopoly sometimes

Stories of MNCs taking over the market and ruining small retail businesses are not unheard of.

Most of the loans Provided by the IMF are in the form of ‘Stand-by-Arrangement’ - Which requires the countries to follow a corrective action in terms of the Washington Consensus of IMF.

Solution Put forward by those against foreign aid says that the countries should rely on one simple idea: When markets are free and incentives are right, people can find ways to solve their problems.

Both sides of the argument provide a fair share of evidence that why foreign aid is good and bad.

One more side of the argument is that few experts are of the opinion that it’s not where the money comes from, but where it goes. Liberating the poor from poverty is a matter of choosing the right project to invest the money to break the unshakable long chain of poverty, Whether the aid is used in the Health sector or is it used in the employment generating sector, or the basic of i.e, education of the mass. It may vary from nation to nation according to the requirements.

In the end, My opinion is that Nations before taking foreign aid should be conscious of the consequences of the aid. Nations must think twice and invest in such a sector that has a Multiplier effect on the Poor.

Poverty is created hence it can also be ended.