Massachusetts Daily Collegian

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A free and responsible press serving the UMass community since 1890

Massachusetts Daily Collegian

A free and responsible press serving the UMass community since 1890

Massachusetts Daily Collegian

Foreign aid needs to be transformed

Why throwing money does not equal economic growth and prosperity
Maya Geer / Daily Collegian

By now, it’s a classic news headline. The United States gives Pakistan $200 million in economic aid, the World Bank provides a $500 million dollar loan to the Democratic Republic of the Congo. The world order works this way: we have developed countries and developing countries. To mitigate the prevailing economic disparity between the developed and developing world, the developed countries provide poorer countries with significant economic aid in return for a vested interest in said poorer countries. At first glance, this doesn’t seem to be a bad deal. After all, these poorer countries are receiving substantial capital to invest in their economy and thus boost economic growth.

This is exactly where the problem lies. Indeed, monetary investment is a key driver of economic growth, as money is effectively the only globally accepted medium of exchange for a good or service. But us humans, we’re far more complex than that. Normative macroeconomic theory reduces us to agents with axiomatic needs and desires to help simplify economic analysis. What we have to do here, instead, is to recognize the complex social fabric that is distinct in each and every society.

Let’s first examine the power structures in developing countries. Effectively all developing countries are products of a post-colonialist world; the transfer of power from the colonizer to the colonized was far from distributive and just. Rather, these power structures were formed by a select bureaucracy, resulting in corruption at all levels of the government. History has shown that the “aid” received by developing nations has primarily lined the pockets of corrupt politicians and bureaucrats as opposed to being evenly distributed to all members of society. One would think that the resulting inequity would force the developed world to question their methods, yet it merely creates a sunk cost fallacy.

So, what can be done about this? The fact of the matter is that humans are complex, therefore, the means to alleviate human problems must be complex. Each society has a different set of norms, cultural expectations and methods of interaction, so it is of essential importance that we study what exactly each society values to provide effective solutions. Naturally, going about such an endeavor requires manpower and significant due diligence, but if we are to truly transform and bring up people, this is the only way to do so.

The truth is, things like social capital, childhood education, activism and strategic economic aid are the primary drivers of economic growth. Telling a man to do things is not going to be productive; instead, you have to give him a foundation to make his own decisions, because once you provide people with useful resources, they’ll take that and create a greater net effect on society. The old adage holds true: you teach a man to fish, you feed him for a lifetime. Us humans don’t like being told what to do and given an exact end goal; we are more efficient and productive when we’re given good opportunities and resources. The moment you provide a young, impoverished child with good nutrition and a good education is the moment you kindle the fire inside him.

There are several non-governmental organizations who’ve seen this flaw in development economics. One noted example is from Grameen Bank, a microfinance organization started by the Nobel Peace Prize winner Muhammad Yunus. This is a great example of monetary aid blended with social and cultural awareness. Using empirical economic analysis, Yunus found out that women in Bangladeshi villages had a more astute understanding and management of household finance than men. Using this information, Grameen Bank provided these women with low-interest loans to help advance their lives. A lot of these women, using their ingenuity and value systems, started home businesses and invested money in their children’s education. This proves my point: instead of saying, “we’re going to give you this money which you must use for these things,” Grameen Bank nudged them to being socially responsible and productive.

Creating and implementing programs like Grameen Bank will definitely be a long and arduous process, but if we truly want to lift up each and every human, we must consider the scope and diversity of human society. For us students and Gen Z-ers, making the world a more inclusive and productive place will help us all in the long run; even being cognizant of these flaws is a great start.

Anay Contractor can be reached at [email protected].

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    Elijah VegaFeb 6, 2022 at 5:28 pm

    Man, I really don’t know what this is about, but I don’t like what I just read here.