Aid
Economics: IB Diploma, topic 3.9.1
Aid vs Trade
'Aid or trade' is a long-standing debate in economics, regarding the best way for a less-developed economy (LDE) to develop. But a combination of the two is not an uncommon model for such countries.
Types of aid
- Bilateral aid - aid between one government and another.
- Multilateral aid - aid provided by many governments instead of just one government.
- Tied / conditional aid - when one country donates money or resources to another (bilateral aid) but with conditions attached.
- Charitable aid - funded by donations from the public through organisations such as Water Aid.
- Non-financial aid - donation of items, such as malaria nets.
Trade
- Export-led growth and trade with other countries enable an LDE to be self-sufficient and reinvest the proceeds of such an approach.
- But many LDEs are restricted by issues such as worsening terms of trade - meaning that their exports are continually falling in value relative to more high-end imports.
- A lack of skilled labour and capital may also mean that LDEs don't have the resources to focus on a profitable export industry, making this strategy unrealistic.
Test yourself on Aid
Which of the following are types of aid?
Which type of aid is provided by many governments (rather than just one)?