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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 money
Lawal Reply
what is supply
Lawal
the total number of goods present at a particular area at a particular time
Offset
the meaning of elasticity
Affum Reply
how to knw the break even point in business
Edmore Reply
hello
Marshal
hello
ghulam
hi
Kakay
hi
Ornill
hi
Bakari
Good evening
owi
when TOTAL COST & TOTAL REVENUE equal each other that's break even point
Bappy
How is everyone doing
Kakay
yaah
Chris
🤙🤙
Kakay
Good evening
Amarachi
how are you feeling
Sorie
hello
Marshal
hello
McClean
Hai👋👋
Noah
Hey
Andile
hello
Offset
what's up?
Offset
what are the importance of economics
sani Reply
hello
Marshal
welcome
Zaid
am new here
Kakay
hello I'm new here
Mona
your welcome
Bakari
thanks
Mona
where are you from?
Bakari
Hello I'm new here
Amarachi
what is development?
juwel Reply
it shows how many products customers are willing to purchase as the price of those product increase or decrease
Asha Reply
economics as a science
skima Reply
What is utility
Jimoh Reply
utility is a total satisfaction derives from a consumer.
Umar
what is ranking reveal choices?
Umar
wants satisfying power of a commodity is known as utility........
SHADAB
What is elasity
bohvy
Differentiate between scarcity and choice and explain how they effect perfectly elasiticity of demand and give relevant example with type of goods affected
PATRICK
Utility is ability if of available goods to satisfy human wants
PATRICK
any idea about equilibrium?
Umar
equilibrium where price and quantity demanded equals
Bappy
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john
Equilibrium is when quantity demanded of goods and services is equal to supply to the market.
john
saaa.....
Bright
how about the profit....anybody can explain
Jeff
how about equilibrium of consumer?
Umar
bappy,john thank you the answers.
Umar
Utility Simply means the satisfaction a consumer derives from consuming a good or service
Hez
Pls can someone explain Elasticity of demand in a short terms
Osuayan
it's a degree of responsiveness to demand due to changes in prices
Ukpen
what is scarcity? pls help
Mikateko Reply
scarity is when there is a huge demand for certain goods and services but there's limited resources to actually produce those things
Mario
thank you
Kakay
what is development?
juwel
what is distribution
umar Reply
1.what is distribution? 2.what are factors affecting distribution? 3.releat what you are writing in the contest of economics and Nigeria situation
umar
what is demand
Obianyido Reply
things that are needed or wanted
Mario
The market for you In Ilorin has the following demand and supply equation Qd + 5p =9520 Qs =2.5p - 125 a) determine the equation price and quantity b) Explain the situation when the market price is below the equlibrum price
Rasheee Reply
solutions
Alex
What is scale of preference
Richmond Reply
Pls what is scale of preference
Richmond
scale of preference is a arrangement of individual wants in order of priority
Lamina
the arrangement of people want inoder of demand
Ada
explain whether decisions in microeconomics involve an opportunity cost
Sonali Reply
What is primary activity
Yeboah Reply
indigenization is the dominance or influence of people native in a particular place or
Ada

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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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