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6 Cards in this Set
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Trade vs aid |
Trade is the sale of goods or services to other countries for profit. Profit leads to increased wealth in the nation and could improve the level of development. e.g. India trades services, Brazil trades raw materials and China trades basic manufactured goods Development is an improvement in quality of life. It includes an increase in GDP per capita, a decrease in IMR, a change to a democratic system of govt., etc. Aid is when a country, organisation or charity gives money, equipment or technical assistance to another country to help them develop. |
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Aid pros |
* Aid can be given in a range of ways, from food aid to economic development, and can be given for humanitarian purposes, social development or environmental improvement * Aid can prevent humanitarian catastrophes such as famine after a drought --> in 2005 a drought in Malawi caused 5mill people to suffer from food shortages, and they may have died without emergency aid from Oxfam and the UN The UN has also been funding projects to reduce transmission of HIV/AIDS and provide people with access to antiretroviral drugs * Aid can prepare the ground for future economic development to take place * Aid can improve people's quality of life regardless of whether there is significant economic development, e.g. the land re-distribution programme in Malawi * Some countries do not have a realistic prospect of developing via trade (e.g. landlocked Malawi), so aid is a useful means of helping people out of poverty and is needed for the country to develop * In Malawi aid and debt cancellation have led to decent progress towards achieving some of the MDGs * Carefully targeted aid projects (usually bottom up schemes) can help people lead more sustainable lives and reduce the risks they face in everyday life, e.g. Oxfam irrigation project in Malawi, and the charity ASAP worked in Burkina Faso, loaning baby goats to villagers. The villagers could sell the mature goats, repay the loans and increase household incomes by 30%, and the project also helped empower women |
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Aid cons |
* Trade leads to far more sustainable amounts of capital entering a country, and is therefore more effective at developing a country quickly * Aid can often fail to reach the people who need it or is used ineffectively --> much aid can go missing through corruption --> 10% of people helped in Malawi to own their own land abandoned it as it was too remote * In Malawi governmental systems are so poor that it is almost impossible to use aid effectively, e.g. so few areas have electricity it is difficult to develop a decent functioning school system * Countries can become dependent on aid. UK aid is 40% of Malawi's income. DFID provided food aid to Malawi after the 2005 drought but withdrew as soon as possible to prevent dependency, but if there is another drought then emergency aid will be required again, as nothing has been done to help the country to become richer so it could cope with droughts itself. * Aid often comes with strings attached (tied aid). The IMF has, on 2 occasions, halted the cancellation of debts because the govt. failed to reduce its expenditure enough, even though the reduction caused the closure of some schools and hospitals. * The most effective aid projects tend to only be on a small scale |
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Trade pros |
* Trade can lead to rapid development, for example in South Korea, and has the potential to revolutionise quality of life in a country on a much larger scale than aid can --> In SK, Japanese investment lead to the multiplier effect --> workers had more money and spent it on domestic goods and services which increased demand --> Chaebols made products to sell to the local populace --> profits were taxed and this allowed the govt. to invest heavily in infrastructure |
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Trade cons |
* Trade only works if there is a 'trickle down' of wealth from the top to the bottom --> in African and South American countries there is often a very rich political elite and a very poor population. In South Korea there was no trickle down and wages only rose when people rioted and a democracy was introduced. * If South Korea had relied totally on foreign TNCs to invest, it would not have been very effective. Japanese firms were engaged in trade, but a lot of the profits made would not have stayed in South Korea, limiting spending on infrastructure and so development would have been slow. It could be argued that South Korea developed through lack of trade. Japanese firms made products in SK but were not allowed to sell them there to protect domestic firms. But this was only in the early stages of development --> if Samsung were not trading globally today then SK would be poorer. * Trade is not an option for all countries. Malawi is landlocked, so there are very high import and export prices. Also it only exports low value agricultural products like tobacco and suffers regular droughts, and most of the population are subsistence farmers, so the govt. raises little tax revenue and cannot spend money on infrastructure. Most of the money made from exports is spent on debt repayment. Without aid the country cannot develop. |
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Conclusion |
Recently, both South Africa and India stopped receiving UK aid as they have reached a point in their development where trade has made them wealthy enough to no longer need assistance. Without aid these countries may never have reached this point. Aid can enable a country to boost its economy to the point that it can sustain itself through trade |
