What is foreign aid?

The most basic definition of the term is "resources given from one country to another." But it’s usually understood to mean money, materials, and manpower given or loaned by governments, organizations, and individuals in rich countries to help people in poor countries. Also referred to as international aid, economic aid, or development aid/assistance, foreign aid is a category distinct from military aid.

Aid flows through several major channels.

What is multilateral foreign aid?

Multilateral organizations bring together multiple countries and other entities for collective action. The World Bank is one of the biggest. Funded largely by the governments of most of the world’s countries, the World Bank gives billions in loans and grants every year aimed at reducing poverty. Another example: UNICEF (United Nations International Children’s Emergency Fund) raises money from governments, individuals, corporations, and foundations to promote education, health care, and disaster relief around the world.

What is bilateral foreign aid?

Bilateral aid flows from one government to another. After slipping somewhat in recent years, bilateral aid to developing countries rebounded to an all-time high of $134.8 billion in 2013, according to the Organisation for Economic Co-operation and Development.

By dollar amount, the United States is the world’s biggest bilateral aid donor. In 2012 the U.S. handed out $31.2 billion in economic assistance to 182 countries. The money is distributed by more than 21 U.S. government agencies, mainly within the departments of State, the Treasury, Agriculture, and Health and Human Services. Afghanistan was the top recipient, taking in close to $3 billion. Kenya and South Sudan placed next.

Most Americans wildly overestimate the extent of U.S. foreign aid; 28 percent of the federal budget is the average guess. The actual figure is less than 1 percent.

How do nongovernmental organizations provide foreign aid?

The best-known givers of foreign aid are nongovernmental, not-for-profit organizations and charities. There are thousands of them, ranging from tiny grassroots outfits to venerable organizations, such as Doctors Without Borders and World Vision, that muster billions of dollars and thousands of staffers around the world.

Some businesses also dispense foreign aid. Every time someone buys a pair of TOMS shoes, for example, the company promises to donate a pair to someone in a developing country.  

Does foreign aid work?

That’s a hotly debated question. On the macroeconomic level, some economists say that foreign aid fosters dependency and corruption in recipient countries. The World Bank and the International Monetary Fund have also come under heavy criticism for the conditions they often impose with their loans, such as insisting recipients eliminate state subsidies for goods, which drives consumer prices way up.

There’s merit to the criticism. During the cold war, countless millions of dollars in aid wound up in the pockets of pro-American dictators from Latin America to Africa instead of going to help their long-suffering people. Generators given to power slum neighborhoods break down because no one provides spare parts to maintain them. Laptops gather dust in rural schools because well-intentioned donors didn't realize the locals have no electricity. Warm coats collected as emergency aid for disaster victims turn out to be useless in the tropics.

Sometimes, despite the best of intentions, aid even backfires. Giving away boatloads of food can wipe out the market for local farmers' crops, bankrupting them. Worse, aid can fuel conflict. Rival militias battle each other to snatch donated food. Aid to refugees fleeing Rwanda in the mid-1990s ended up subsidizing rebel Hutu fighters.

On the other hand, there are plenty of examples of aid making things better. The Green Revolution spearheaded by Norman Borlaug, an agricultural scientist backed by the Rockefeller and Ford foundations, brought new strains of high-yielding wheat and rice, pesticides, synthetic fertilizers, and other modern agricultural techniques to many poor countries in the 1960s and 1970s, enormously boosting their food production. The Global Alliance for Vaccinations and Immunizations, launched in 2000 by several governments, international organizations, and foundations, including the Bill and Melinda Gates Foundation (which supports TakePart World), has immunized more than 370 million children in 77 countries against a range of diseases. Meanwhile, many countries that once received lots of foreign aid, such as South Korea, have weaned themselves off it.

The bottom line: The last two decades have seen historically unprecedented gains in almost every significant measure of human well-being. In the early 1990s, for instance, some 12 million kids under age five were dying every year, mostly because of preventable diseases. Today, that number has been cut in half. Malnutrition, illiteracy, and other chronic scourges of the poor are similarly in retreat in most parts of the world. Aid can’t take all the credit for all these gains, but it can claim some.

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