5 .

Direct Aid - Reading

* Direct Aid
* Casting doubts

The giving of international aid has been taking place for decades. Historically, government
to government direct aid dominated the foreign aid landscape. However, due to a number
of negative impacts created by direct aid, countries such as the United States and the
United Kingdom have increased their contributions to NGOs or non-governmental
organizations that provide help with a variety of different needs in recipient countries.
Key Ideas
* Int. aid Govt to Govt aid
- negative impacts
- NGO

1
Direct aid undermines local markets. Many economists believe that economic growth needs
to occur at a local level, with private industry driving growth forward. Government aid
frequently results in the growth of large, state-owned corporations which undercut the
creation of local markets, preventing the development of private enterprise.
Main Point 1
* Direct aid undermines local market
- economic growth local level
- Govt aid large, state-owned / undercut local markets / prevent private businesses

2
Direct Aid creates an incentive problem by making it in recipient governments interest to
keep their population poor in order to keep receiving aid. This is made worse by the fact
that one of the primary measures of poverty is income below $1 or $2 a day; thus,
governments have an incentive to channel aid to the elites whilst leaving the very poorest
members of their population below this poverty line. Even if no corruption already existed,
the nature of Direct Aid means that it acts as a corrupting influence.
Main Point 2
* Direct aid incentive problem
- keep some popul. poor to obtain aid
- channel elites
- corruption ^

3
Much direct aid is simply recycled as debt servicing. Over 60 percent of aid flowing into the
poorest nations flows straight back out again to service interest, not even capital
repayments, on debts incurred, often by dictatorial governments, during the 1970s and 80s.
Main Point 3
* Direct aid recycled paying off debt
- + 60% aid back to pay interest

1
 5 . Direct Aid - Listening

* !
* Lecture(Listening) Reading , Reading
!

Today, we will take the issue of aid out of a government-government sphere of dialogue.
Well. the major economic powerhousesmostly former colonial powers and the United
Statesprovide the bulk of foreign aid. Because aid is often tied to loans, critics have
argued that aid has merely led to the dependence of developing countries on the
developed world. So, some economists and politicians insist on changing the way money
is given likeuh instead of long-term government-to-government aid, World Bank aid and
loans should be supplied to Non-government organizations such as Christian Aid and
CARE without borders to provide practical help in underdeveloped nations. Hmmm sounds
reasonable in a way but central spending growth is still very important.
Key Ideas
* Govt govt aid
- central spending growth - important

Whilst we can recognize the importance of local markets in development, they provide only
half of the picture. NGOs serve a different purpose to governments, developing local
projects such as schools and wells. However, economic growth also requires central
spending to develop infrastructure. For instance, Indian well-drilling efficacy has increased
by 70% since the use of the national space program to find water pockets. Another
example is that Brazils hydroelectric power scheme could never be achieved by NGOs
working together. To reduce government aid would be to remove the backbone of central
spending needed for national development.
Main Point 1
* Local market half the picture
- NGO different purpose (schools & wells)
- eco growth central spending
- India well drilling:70% ^ + nat space program
- Brazil hydro NGO (X)
- reduce govt aid remove backbone no nat dev.

Yes, there might be some incentive problems in those governments. There is a possibility
of recipient governments interest to be on maintaining their population in certain levels of
poverty to be entitled to be continuously aided. Yes. To do so, they may channel aid to the
elites with power. However, no one can be sure that this will improve if we give money to
NGOs to help them. In fact, NGOs are, as a general rule undemocratic, unaccountable
interest groups. We would be unfairly taking control over development out of the hands of
the people and giving it to NGOs who may have worse records than the government.
Main Point 2
* No one can be sure Ngo improved situation
- NGO: undemocratic / unaccountable corruption records^

Reducing government aid would have immediate damaging effects on those countries that
currently are paying off their loans. Debtor countries would be left with the immediate

2
choice of defaulting on their loans as Mexico did in 1982 and Thailand did in 1997,
resulting in a massive loss of international confidence, or borrowing to repay their loans,
increasing dependency and poverty.
Main Point 3
* Damaging effects on countries with debts
- defaulting on loans lose credits (Mexi / Thai)
- increasing dependency / poverty

3
 5 . Direct Aid Summary Writing

* 150~225 !
* !
* Reading Listening core residue !

[Note-taking Point]
Reading Lecture
* Int. aid Govt to Govt aid * Govt govt aid
Key Ideas - negative impacts - central spending growth -
- NGO important
* Direct aid undermines local * Local market half the picture
market -NGO different purpose (schools &
- economic growth local level wells)
- Govt aid large, state-owned / - eco growth central spending
Main Point 1 undercut local market / prevent - India well drilling:70% ^ + nat
private businesses space program
- Brazil hydro NGO (X)
- reduce govt aid remove
backbone no nat dev.
* Direct aid incentive problem * No one can be sure Ngo
- keep some popul. poor to obtain aid improved situation
Main Point 2
- channel elites - NGO: undemocratic /
- corruption ^ unaccountable corruption records^
* Direct aid recycled paying off debt * Damaging effects on countries with
- + 60% aid back to pay interest debts
Main Point 3 - defaulting on loans lose credits
(Mexi / Thai)
- increasing dependency / poverty

[Model Writing]
* iBT TOEFL Integrated Writing . .

The lecturer describes some of the reasons why direct aid is a visual option today. The
lecturers arguments cast doubt on the reading passages negative portrayal of government
to government aid.

First of all, the point is made in the lecture that economic growth requires central spending
to develop infrastructure and this can be carried out more effectively as examples of India
and Brazil illustrate. The lecturer also points out that cutting down on government aid is
detrimental for the recipient nations since some activities cannot be supported by NGOs.
This directly refutes the claim made in the reading that direct aid weakens local market,
eventually acting as a barrier to the development of local business.

Secondly, the lecturer indicates that even though there is a possibility of corruption due to
the distribution of the directly aided capital, the shift of the distributing channel to NGOs is
less likely to improve this concern. The lecturer argues that the control is taken away from

4
the people and is directed to NGOs whose records on the issue are sometimes not any
better than corrupt governments.

Finally, according to the lecture, reducing government aid would exert detrimental impact
on countries in the process of paying off their loans. The lecturer points out that as history
shows such as what happened in Mexico and Thailand, those countries took out another
loan to pay their previous loans, creating more serious poverty. The lecturers view is
certainly in opposition to the reading passages assertion that giving out direct aid is simply
recycled to pay interest, causing bigger debts.

5
[Reading /]

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