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Development Aid

“Izandla ziyagezana” - “Hands Wash Each Other”

Why Give Aid ?

“ The motives of donor nations for providing foreign aid have evolved over time.

For example, prior to World War I, U.S. government-sponsored foreign aid was almost
non-existent. The United States did not financially intervene until World War II, when it

began to provide aid abroad, largely through wartime aid and reconstruction efforts. This
aid, which focused on "creating markets for the United States by reducing poverty and
increasing production in developing countries," also concentrated on "diminishing the

threat of communism by helping countries prosper under capitalism" (United States
Agency for International Development USAID.

Geopolitical dynamics have evolved overtime and, in turn, have affected the decision-
making processes of donor nations
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As many poorer nations started on their path of development in the post-colonial period,

former colonial powers tried to facilitate this process through provision of resources in
the form of foreign aid. This motive was central in foreign aid flows throughout the 1960s

and still remains one of the multiple objectives that determine aid. In addition to pure
altruism, strategic interests have always been relevant. In the Cold War era, aid was as an
instrument to buy allegiance.

More recently, aid has focused substantially on security concerns, marked especially by
the watershed event of September 2001."

"Donor Motives for Foreign Aid." Review 95, no. 4 (2013). 439
Bandyopadhyay, Subhayu, and E. Katarina Vermann.

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“ Chief among these models is that of Leonard M. Dudley and Claude Montmarquette ("A
model of the supply of bilateral foreign aid," American Economic Review, March 1976),

which, apparently, serves as an archetype upon which the other models expand.
According to that model, three donor motives play the leading role in decisions involving
foreign aid: expectations of gratitude, in the form of support for the donor's interests;

furtherance of the donor's economic interests, via the vehicle of more trade; and altruistic
motives, the desire to raise the standard of living in recipient countries. Dudley and

Montmarquette express their model in three equations which together imply that per-
capita aid to a nation rises when
(1) the value to the donor of giving foreign aid to that nation is high enough

(2) the recipient nation's per-capita income is low enough, and