America needs to rethink how we distribute our foreign aid around the world.”

Ted Yoho, Politician

Pros and Cons of Foreign Aid

advantages and disadvantages of foreign aid

Foreign aid (sometimes also referred to as international aid or foreign assistance) can be defined as the voluntary transfer of resources from one country to another in order to improve the living conditions in poor countries all over the world.

Although there are many important advantages of foreign aid, this concept also has its problems. In this article, the pros and cons of foreign aid are examined in detail.

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Advantages of Foreign Aid

  1. Foreign aid can help to make the world fairer
  2. Important tool to reduce poverty
  3. Supply with sufficient food
  4. Supply with important medical equipment
  5. Foreign aid can help to restore peace
  6. Better access to education
  7. Foreign aid can help to mitigate the problem of fundamentalism
  8. Can help to improve trade relationships
  9. Technological progress in a country might increase
  10. Foreign aid can help to reduce the spread of diseases
  11. Countries can become more independent in the long run
  12. More important infrastructure investments
  13. Foreign aid also makes sense from an ethical perspective
  14. Optimization of agricultural processes
  15. Rather small amounts of money can have a true impact
  16. Can help to increase the level of tolerance in our society
  17. Foreign aid can help to increase our global GDP
  18. Lower unemployment rates and better job opportunities
  19. Foreign aid is important to reach our climate goals
  20. Overall improvements in the quality of life of people
  21. Increase in average life expectancy

Foreign aid can help to make the world fairer

One important advantage of foreign aid is that it can help to make the world a bit fairer. We are all borne in different locations and it is much easier to succeed in life if you are borne in the rich Western world instead of being borne in a poor developing country. However, always remember that this was just luck.

Hence, in order to support those people who had been unlucky to be borne into quite poor families in third-world countries, it makes sense from a fairness perspective to help them out in order to improve their overall chances in life.

Thus, we as humanity should feel obliged to support those poor countries due to the fact that we could all have been borne there and would also be quite grateful to get support if this was the case.

Important tool to reduce poverty

Foreign aid can also greatly help to reduce poverty in poor regions around the world. Billions of people still struggle to make enough income to afford housing and other basic things in order to survive. This is often due to the fact that the overall structure in those countries is quite weak and people will often not have the opportunities to work in jobs that pay well.

Quite often, the local population is also exploited by big corporations and has to work for a quite low wage while those corporations often make big profits. Therefore, foreign aid can be a great tool to reduce the overall level of poverty across the globe.

Supply with sufficient food

Many people even struggle to supply themselves with sufficient food since food prices are too high in relation to their income and therefore, those people also often struggle to feed themselves and their families at the same time. In such a case, foreign aid can also help since it will provide financial measures to people so that they are able to buy enough food.

In some cases, food is also directly handed to those poor people and therefore, global hunger and starvation can be mitigated to a certain extent.

Supply with important medical equipment

Another benefit of foreign aid is that it can also help to supply people with important medical equipment and treatment. In many countries all over the world, especially in the Southern hemisphere of our planet, healthcare standards are still rather poor and in case people get sick, they will often not get proper treatment.

Moreover, many people can also not afford medical treatment due to a lack of health insurance. Thus, it is crucial that foreign aid also helps in this regard since everyone should have access to proper medical treatment in order to avoid several unpleasant long-term consequences.

Foreign aid can help to restore peace

In many regions of our planet, there are still serious conflicts among the local population and also across country borders. However, those conflicts often start due to the fact that people become increasingly frustrated and desperate due to their poor living conditions. In turn, frustration often turns into aggression and the chances for serious conflicts increase.

In order to mitigate those conflicts, foreign aid can help to a certain extent since it aims to improve the overall living conditions of people, which in turn will also translate into lower aggression levels and lower risks for potential conflicts in the future.

Better access to education

Another crucial upside of foreign aid is that it can help to give people much better access to education. Especially in poor parts of our planet, children often do not have the opportunity to go to school since their families are simply not able to afford it.

Moreover, many families are also quite big and quite often, only one out of many children will be enabled to go to school while the other children will never get the opportunity for proper education.

In turn, a lack of education often also turns into serious levels of unemployment and poverty. Since education is closely connected to succeed in all parts of life, foreign aid can also be crucial in this regard since it can provide financial measures to build schools, to employ qualified teachers and therefore to improve the overall education levels of children in poor parts of the world.

Foreign aid can help to mitigate the problem of fundamentalism

Some countries also struggle with the problem of fundamentalism. If people suffer from serious poverty and they struggle to survive every day, chances are that those people are much easier to recruit by fundamentalist groups.

Therefore, in order to mitigate the fundamentalism issue, we have to improve the overall living conditions of people in poor countries of our planet so that they will no longer be willing to join those radical movements.

Can help to improve trade relationships

Foreign aid can also significantly improve international trade relationships with other countries. If one country offers financial aid to another country, chances are that the aid-receiving country will be quite thankful and will in turn be more eager to trade with the other country.

In turn, both countries can profit in the long run since international trade is crucial to improve the overall wealth levels and living conditions in countries.

Technological progress in a country might increase

Foreign aid can also aim to improve the overall technological progress in a country. Many companies in poor countries all over the world still operate with rather outdated technologies since they don’t have the knowledge to implement the latest and most efficient technologies. In turn, companies in those countries will lose their competitiveness in the fierce global market sooner or later.

In order to make those new technologies available in poor countries of our planet, plenty of money through financial aid is needed to educate local workers and also to get the necessary hardware to implement those technologies.

Foreign aid can help to reduce the spread of diseases

Foreign aid is also crucial in order to mitigate the spread of serious diseases. It is crucial to offer contraceptives to people and to educate them about how they work in order to avoid the spread of HIV or other sexually transmitted diseases.

Moreover, it is also crucial to improve the overall hygienic conditions in a country so that epidemics or even pandemics cannot spread that easily.

Hence, especially in countries where those topics are still big problems, foreign aid can also help to mitigate those issues.

Countries can become more independent in the long run

Foreign aid can also help countries to become more independent from other countries. For instance, some countries are heavily dependent on another country due to certain trade agreements. However, this often also implies that the trade conditions for the country with the higher level of dependence are often quite bad.

In order to improve the overall trade position of a country in the global market, foreign aid can help quite a lot since it will give a country the opportunity to speed up its technological progress, to expand into other industry branches and therefore to lower the dependence on other countries which might exploit currently exploit the country.

More important infrastructure investments

In many poor countries all over the world, the over infrastructure is still quite bad. The public transport is often quite unreliable and also the streets are rather bad. In turn, processes are often quite inefficient and many small businesses will never have the opportunity to expand and to get out of poverty.

Hence, it is also crucial to improve the overall public infrastructure of a country. In order to finance a better public infrastructure, foreign aid through grants or loans may be crucial so that many people may have the opportunity to get out of poverty in the long run.

Foreign aid also makes sense from an ethical perspective

Everyone of us should also have an inner incentive to improve our global living conditions. As we all know, many people still live under quite poor conditions and those people will often rely on our rich Western world to have a chance to improve their overall quality of life.

Many people will simply never have the chance to get out of poverty without help since the infrastructure for that is just missing.

Thus, our rich Western world should aim to support those countries through foreign aid also from a human and ethical perspective.

Optimization of agricultural processes

It is also crucial to improve the agricultural processes in many countries across the world in order to enable them to produce enough food for the local population. Many farmers still do agriculture in a rather inefficient manner since they are often not able to afford sufficient amounts of fertilizer.

In turn, their crop yields will often be rather low, which can lead to a serious level of hunger among the general public since many people in poor regions rely on local farmers to ensure their food supply.

Hence, it is crucial to give farmers the opportunity to make their agricultural processes more efficient, which can be done by granting loans through foreign aid projects.

Rather small amounts of money can have a true impact

While many people in our Western world earn a six-figure-income, many people in the poor parts of our planet will only make 1% or less of that. In turn, this also implies that foreign aid payments can make a quite big impact in poor countries of our planet since one dollar will be worth much more in those countries than in the Western world.

Therefore, money can be used in those countries in a much more efficient manner and rather small amounts of foreign aid can still make a significant difference in the living conditions of people.

Can help to increase the level of tolerance in our society

Many people still have significant levels of prejudices against people from foreign countries. However, those prejudices often rely on flawed arguments. Hence, through social aid programs, the awareness of many people regarding why it is important to support foreign countries can be increased, which may lead to a higher level of tolerance towards foreign aid and towards those poor people in general.

Foreign aid can help to increase our global GDP

Foreign aid may not only be beneficial for aid-receiving countries, it can also increase our global GDP. If we support poor countries, chances are that those countries will invent more new technologies, which in turn can also be used in many other countries across the world.

Thus, through the invention of new technologies and the spread of ideas across country borders, we as humanity as a whole could profit from granting foreign aid in the long run.

Lower unemployment rates and better job opportunities

Foreign aid can also help to reduce unemployment rates in structurally weak regions of our planet. With more money from financial aid, governments can subsidize their local economy, which in turn can create many new jobs. In turn, more people will be able to find a job and will be able to provide for their families.

Foreign aid is important to reach our climate goals

Also in the context of climate change, foreign aid can play a crucial role. Many poor developing countries still use motor vehicles that emit large amounts of harmful greenhouse gases into our atmosphere. However, in order to slow down global warming, we have to reduce our greenhouse gas emissions on a global scale.

Hence, in order to accomplish the transition from fossil to alternative energy sources as soon as possible, it is crucial that developing countries receive significant amounts of foreign aid so that they will be able to finance this transition.

Overall improvements in the quality of life of people

Foreign aid offers numerous advantages and due to all those improvements in the lives of people in poor developing countries, chances are that also their overall quality of life will significantly improve over time.

We as humanity should always strive to optimize the living conditions of as many people as possible and foreign aid is a big step in the right direction.

Increase in average life expectancy

Not only the overall quality of life can be significantly improved through foreign aid for billions of people on our planet, also the overall life expectancy can be increased as well. Thus, foreign aid can also make people live much longer since the overall healthcare system and other important facilities could be improved quite a lot with more money from foreign aid programs.

Disadvantages of Foreign Aid

  1. Part of the money will not end up where it should be
  2. Some countries are favored over others
  3. Foreign aid is often done with a hidden agenda
  4. Money from foreign aid may be used quite inefficiently
  5. Foreign aid may contribute to higher inflation
  6. May lead to frustration in the country where money flows off
  7. Countries who give the money will also gain power in aid-receiving countries
  8. Free market forces may no longer work properly
  9. Smaller businesses may lose their competitiveness
  10. Investors may exploit foreign countries
  11. May not be enough to solve structural problems
  12. Foreign aid can do more harm than good if not implemented properly
  13. May increase global tensions among countries

Part of the money will not end up where it should be

Apart from the numerous crucial advantages of foreign aid, this concept also has some problems. One disadvantage of foreign aid is that part of the money may not end up where it should be. Especially in countries where corruption is still a big problem, significant fractions of money from foreign aid may be used by small political elites instead of handing this money to the general public.

Hence, if the money from foreign aid does not benefit the people who most urgently need it, it may not make sense to give away too much money through those aid programs.

Some countries are favored over others

Foreign aid often also favors some countries over others. Even though countries often claim that foreign aid is meant to benefit every country of our planet which urgently needs help, the reality is that some countries will get much higher better financial support compared to others.

This is often due to important trade agreements that exist between countries and therefore, while some countries will struggle to get sufficient foreign aid, other countries will get excessive amounts of money and will progress much faster.

Foreign aid is often done with a hidden agenda

Quite often, foreign aid is also not given away out of pure charity. Politicians of countries often have their own agenda and foreign aid is often used to improve the relationships with other countries in order to benefit from those relationships in the long run.

Thus, even though politicians may often claim that it is our human responsibility to help other countries, those politicians often have a hidden agenda and don’t actually care too much about the aid-receiving countries too much.

Money from foreign aid may be used quite inefficiently

Another downside of foreign aid is that the money that is granted through those programs is often used in a rather inefficient manner. Quite often, a significant part of this money is lost in administrative processes and also the distribution of this money is subject to significant levels of discretion. Hence, a big fraction of the money from foreign aid may not benefit the general public of poor countries at all.

Foreign aid may contribute to higher inflation

If more money is available to the general public and the economy grows faster due to foreign aid, chances are that also the inflation rate will increase in those countries.

If people have more money on average but the supply with good stays constant, chances are that the prices of basic goods will also increase significantly.

In turn, many people may not be able to afford more things with foreign aid compared to a state where foreign aid didn’t exist.

May lead to frustration in the country where money flows off

Foreign aid can also lead to serious frustration in countries from which the money flows off. There are still many people in our rich Western world who struggle to make enough money to cover their bills.

Hence, those people may get quite angry if other countries are supported too much through foreign aid since those people often think that the state should focus on its own citizens before helping foreign countries.

In turn, this frustration may turn into anger and serious social tensions.

Countries who give the money will also gain power in aid-receiving countries

Even though proponents of foreign aid often make the claim that aid-receiving countries will become more independent, the opposite may actually be true. Many countries only get foreign aid if they agree to certain trade conditions and therefore, the level of dependence on other countries actually increases rather than decreases through foreign aid schemes.

Free market forces may no longer work properly

Foreign aid can be regarded as some kind of financial subsidy for foreign countries. However, even though the local economy may benefit from those grants, those subsidies may also lead to a state where free market forces may no longer work properly.

If those market forces do not work properly, economic inefficiencies will result in the long run, which can do plenty of damage to the local economy.

Smaller businesses may lose their competitiveness

Depending on how foreign aid is set up, many small businesses and farmers may also greatly suffer from those schemes. If only big corporations in poor countries are supported, chances are that smaller companies will lose their competitiveness and may go out of business. Therefore, foreign aid should always aim to also support small businesses and farmers in order to ensure their livelihood.

Investors may exploit foreign countries

Another issue with foreign aid is that it often makes it attractive for international investors to invest large sums of money in those countries and to open branches in those regions.

Even though investments and jobs are usually quite beneficial for the local economy, the opposite can be true in case those international investors exploit workers in foreign countries.

Quite often, those international corporations often just pay quite low wages and do not care about the local population at all.

May not be enough to solve structural problems

The volume of foreign aid may also not be enough to solve crucial structural problems. Many countries all over the world still struggle to improve their overall infrastructure and our rich Western world should feel obliged to grant much more money to solve those issues.

Foreign aid can do more harm than good if not implemented properly

Also the implementation of foreign aid schemes should be done with great care. Otherwise, foreign aid may benefit some countries in an excessive manner while even hurting some other poor countries. Hence, every poor country should profit from foreign aid programs and those programs should be set up in a way that makes this goal possible.

May increase global tensions among countries

Foreign aid can also be a quite controversial topic, which often leads to plenty of discussions. Countries often have different opinions regarding the amount of money each country should pay for foreign aid programs. In turn, the social tensions between rich countries may increase as well.

Top 10 Foreign Aid Pros & Cons – Summary List

Foreign Aid ProsForeign Aid Cons
Foreign aid can make the world a fairer placeMoney may not benefit the general public
Can help to reduce povertyMay lead to tensions between countries
Better education opportunitiesMay contribute to higher inflation
Foreign aid can help to improve infrastructureMoney may be used quite inefficiently
Can help to prevent radical movementsCan lead to frustration in the local population
Improvement of agricultural processesFree market forces may no longer work properly
May help to increase tolerance in our societyInternational investors may exploit countries
Lower local unemployment ratesNot enough to solve structural problems
Can help against the spread of diseasesSmaller businesses may suffer from foreign aid
Foreign aid can increase overall life expectancyForeign aid may do more harm than good

Do We Need Foreign Aid?

From the previous discussion, it has become clear that foreign aid programs have numerous important advantages and that they are crucial in order to improve the living conditions of billions of people all over the world.

Yet, those programs should also be set up properly in order not to waste any money and to improve the overall quality of life of as many people as possible.

Sources

https://www.britannica.com/topic/foreign-aid

https://en.wikipedia.org/wiki/Aid

https://www.investopedia.com/terms/f/foreign-aid.asp

About the author

My name is Andreas and my mission is to educate people of all ages about our environmental problems and how everyone can make a contribution to mitigate these issues.

As I went to university and got my Master’s degree in Economics, I did plenty of research in the field of Development Economics.

After finishing university, I traveled around the world. From this time on, I wanted to make a contribution to ensure a livable future for the next generations in every part of our beautiful planet.

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