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For example, the average citizen of Burundi, the lowest-income country, subsists on $150 per year (adjusted to 2005 dollars). According to data collected by the Central Intelligence Agency in its CIA Factbook, as of 2013, 90% of Burundi’s population is agrarian, with coffee and tea as the main income producing crop. Only one in two children attends school and, as shown in [link] , many are not in schools comparable to what is found in developed countries. The CIA Factbook also estimates that 15% of Burundi’s population suffers from HIV/AIDS. Political instability has made it difficult for Burundi to make significant headway toward growth, as verified by the electrification of only 2% of households and 42% of its national income coming from foreign aid.

Lack of funds for investing in human capital

This is an image of children sitting in a ruined structure which serves as their outdoor “classroom.”
In low-income countries, all income is often spent on necessities for living and cannot be accumulated or invested in physical or human capital. The students in this photograph learn in an outside “classroom” void of not only technology, but even chairs and desks. (Credit: Rafaela Printes/Flickr Creative Commons)

The World Factbook website is loaded with maps, flags, and other information about countries across the globe.

Other low-income countries share similar stories. These countries have found it difficult to generate investments for themselves or to find foreign investors willing to put up the money for more than the basic needs. Foreign aid and external investment comprise significant portions of the income in these economies, but are not sufficient to allow for the capital accumulation necessary to invest in physical and human capital. But is foreign aid always a contributor to economic growth? It can be a controversial issue, as the next Clear it Up feature points out.

Does foreign aid to low-income countries work?

According to the Organization of Economic Cooperation and Development (OECD), about $134 billion per year in foreign aid flows from the high-income countries of the world to the low-income ones. Relative to the size of their populations or economies, this is not a large amount for either donors or recipients. For low-income countries, aid averages about 1.3 percent of their GDP. But even this relatively small amount has been highly controversial.

Supporters of additional foreign aid point to the extraordinary human suffering in the low-and middle-income countries of the world. They see opportunities all across Africa, Asia, and Latin America to set up health clinics and schools. They want to help with the task of building economic infrastructure: clean water, plumbing, electricity, and roads. Supporters of this aid include formal state-sponsored institutions like the United Kingdom’s Department for International Development (DFID) or independent non-governmental organizations (NGOs) like CARE International that also receive donor government funds. For example, because of an outbreak of meningitis in Ethiopia in 2010, DFID channeled significant funds to the Ethiopian Ministry of Health to train rural health care workers and also for vaccines. These monies helped the Ministry offset shortfalls in their budget.

Opponents of increased aid do not quarrel with the goal of reducing human suffering, but they suggest that foreign aid has often proved a poor tool for advancing that goal. For example, according to an article in the Attaché Journal of International Affairs , the Canadian foreign aid organization (CIDA) provided $100 million to Tanzania to grow wheat. The project did produce wheat, but nomadic pastoralists and other villagers who had lived on the land were driven off 100,000 acres of land to make way for the project. The damage in terms of human rights and lost livelihoods was significant. Villagers were beaten and killed because some refused to leave the land. At times, the unintended collateral damage from foreign aid can be significant.

William Easterly, professor of economics at New York University and author of The White Man’s Burden , argues that aid is often given for political reasons and ends up doing more harm than good. If the government of a country creates a reasonably stable and market-oriented macroeconomic climate, then foreign investors will be likely to provide funds for many profitable activities. For example, according to The New York Times , Facebook is partnering with multiple organizations in a project called Internet.org to provide access in remote and low-income areas of the world, and Google began its own initiative called Project Loon. Facebook’s first forays into providing Internet access via mobile phones began in stable, market-oriented countries like India, Brazil, Indonesia, Turkey, and the Philippines.

Policymakers are now wiser about the limitations of foreign aid than they were a few decades ago. In targeted and specific cases, especially if foreign aid is channeled to long-term investment projects, foreign aid can have a modest role to play in reducing the extreme levels of deprivation experienced by hundreds of millions of people around the world.

Questions & Answers

what is production
Imoro Reply
what is a monopolistic competition?
moniman Reply
who is barter
Tening Reply
exchange goods each other
what is economic
is the use of scares resources to satisfy our unlimited needs and wants
how many kinds of utility functions?
What is partnership?
the legal association of two or more people as co-owners of a business for profit.
Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different product?
James Reply
what is supply
Mizta Reply
what is opportunity cost
The opportunity gained interms of opportunity lost is known as opportunity cost Or The second best alternative use of resources
forgone alternative: like forgoing Something our of two to buy one
what is macro economic s
Addo Reply
macroeconomics is the study of economic as a whole level.
meaning of positive science
Sumit Reply
positive science it is focused on facts and cause and effect and behavioural relationship and include developmental testing in economic theoreis.
what is inflation
Sama Reply
inflation is the general price increase of goods and services in an economy.
Inflation is the persistent rise in the general price level
inflation is characterized by increase in the general price of goods and services. when there is too much money in circulation. increase in demand of goods pursuing fewer goods. when purchasing power of money decreases .
inflation is the persistent rise general price level
inflation is the persistent increase in price
how are you
increase in the general level of price...
what is deflation
is the gradual decrease of currency exchange in a country.
why ecnomics important ? give answer plz
Because is a field of science study that reflects on our day to day activities with human behavior.
why economic is a science
Economics is referred to as a social science not a pure science. It's regarded as a social science because it makes use of the scientific method to solve problems. The scientific method refers to observation, asking questions, forming hypothesis, experimentation etc
Economics is a social science because it study human behavior how he relates with his daily activities with the available limited resources to satisfy his wants.
what are the factors affecting the demand
yeah it uses the scientific method to study human behaviour.
inflation referes to the persistant increase in the general price of goods and services over a given period of time say a year.
factors affacting Demand of good and services are 1.price of a commodity in question 2.price of related commodity 3.Income of a consumer 4.Population 5.tast and prefereance 6.Season or weather condition
what is difference between perfect and non perfect market.
different between demand and quantity demand
Farhan Reply
No difference
demand is the overall demand for it
actually theres no difference
quantity demanded is used in Equilibrium of d and s
for evrything else u use deman
the difference of it is that when demand simply denotes the willingness and a person's ability to purchase. And as against quantity demand represent the amount of an economic good or services desire by a consumer at a fixed price .☺
how to calculate inflation
Richard Reply
Explain the factors that have led to high quantity demanded
Ogwang Reply
price of the product increase of price substitute product as people shift to cheap one
what are the methods used by trade union to increase wages of their members?
Black Reply
the size of the commodity
increase demand of labour decrease supply of labour
I do support your answer Jackel.
but how do they do it?
by increasing more labour and reduced the suppliers
they can not increase labour, they increase demand of labour.
how do they increase demand for labor?
by analyzing the market equilibrium , cost reduction and cost control , savings in time .
decreasing supply of labour are achieved through training and certification that require for you to employed, you must have certificate, also trade union encouraged government to restrict migration into the country causing shortage of labour supply. Note that the aim of union is to enhance life
objective of union: better working conditions, liveable wage, protect member from unfair treatment which are done through negotiations betweens representative and management. known as collective bargaining.
what is the nature of economics?
Tyscar Reply
economics is a social science since it seeks to solve social problem of scarcity
main concerns is the decision individuals make on the allocation of scarce resources among the competing wants
in the short run firm produce a positive as long as the price is larger than what?
yoel Reply
what is economic
Bah Reply
economics is the study of managing the resources in order to maximize the needs and satisfy the wants to a great extent in a regulated set-up..
One explanation for deviation when there is no impact on balance of trade
economic s is a social science that deals with human behavior as a relationship between ends and scarce means which has alternative uses
economic is a study of mankind in ordinary business of life
economics it is the study of social science that deals with human behaviour as relationship between ends and scarce means which have alternative uses
Economic is the use of scarce recourses to attain economic dough effectively and efficiently.
economics is the study of how humans make decisions in the face of scarcity. Eg. family decision, individual decision, and societal decision.

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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