Affectiveness of Development Aid from Developed to Emerging Economies (Essay Sample)

Why Aid from Developed Countries to Poorer Countries is Not Working Student’s Name Institutional Affiliation Course Name and Number Instructor’s Name Date of Submission Why Aid from Developed Countries to Poorer Countries is Not Working The debate on the effectiveness of foreign aid from developed countries to developing economies. At the onset, it is important to note that the rationale for aid to emerging economies is to support economic growth and institutional reforms. The rationale is that these two factors can catalyze the growth and development of poorer countries and help bridge the gap between the wealthy nations, ideally, the United States and European countries, and the poor countries mainly domiciled in Africa and some parts of Asia. However, despite the increase in foreign aid over the last six decades, the aid has failed to achieve the intended outcome. The reasons for this failure include corruption, increased dependency on aid, the propensity of foreign aid to disincentive savings domestic savings and investments, loss of political autonomy, and lack of poor countries’ capacity to absorb the capital inflows. Corruption is a critical impeding factor to the success of aid from developed countries to developing countries. Arguably, foreign aid compounds the adverse effects of corruption by adding resources to already systematically corrupt regimes. According to Bauhr et al. (2013), a significant number of developing economies are characterized by high rates of corruption, and skewed allocation of resources. Consequently, the flow of aid from developed countries to poor countries only serves to catalyze the corruption culture, thereby impeding the ability of the aid to achieve the intended goals. For example, in African countries, aid is insufficient to meet capital needs such that stakeholders in the economy resort to bribery and corruption to influence the allocation of aid resources in the economy (Krasniqi & Demukaj, 2021). The observation, therefore, corruption handicaps foreign aid’s ability to achieve the intended economic and institutional reforms in developing countries. Increased dependency on aid by poorer countries erodes the political, social, and economic complexity of a country. Ideally, aid from wealthy countries comes attached with specific conditions such as structural adjustments of the economy, foreign-induced austerity measures, and conditions on constitutional changes (Kamguia et al., 2022). The effect of the conditions is that the growth and development of the recipient countries are not intrinsic. Instead, the leaders of these countries are likely to embrace the proposed changes, albeit for the short term. A classic example is the conditions attached by the World Bank and the International Monetary Fund (IMF) when extending loans and grants to African countries, whereby they yield short-term benefits that cannot be sustained to ensure growth and development (Kamguia et al., 2022). Notably, the extensive dependence on aid creates short-term benefits and impairs the effectiveness of the aid in achieving plausible outcomes. Sustainable economic growth and development results from domestic savings and investments. This model of economic development has been operationalized by a majority of developed countries such as China (Kamguia et al., 2022). The implication is that foreign aid serves as a disincentive against savings and investments. For example, the aid flowing into African countries is diverted into capital-intensive infrastructure projects that are supported by the government (Kamguia et al., 2022). Unfortunately, infrastructure projects are not accompanied by investments in the private sector to support production, savings, and investments. Lack of domestic savings and investments diminishes the level of industrialization and ultimately erodes the success of foreign. Political autonomy is a major factor in the social and economic prosperity of a country. Aid from developed countries to emerging economies fails to enhance political autonomy by imposing conditions on political and judicial reforms. Conversely, poorer countries that lack the capacity to implement political and judicial reforms turn to developed countries for aid (Jakupec & Kelly, 2019). The effect is that the donors attach conditions for reforms to the recipient countries, effectively depriving these countries of their political autonomy. There are two major consequences of this that could impair the effectiveness of aid. First, developing countries lose their ability to create a unique political and judicial environment ideal for the dynamics of developing nations. Secondly, the countries become dependent on the donors for subsequent support since they cannot support organic political and judicial changes (Jakupec &...