Can Foreign Aid Solve Worldwide Poverty?

Subject: Politics & Government
Pages: 16
Words: 4455
Reading time:
16 min
Study level: Undergraduate


Over three billion people worldwide live below the poverty line, that is, they live on less than a dollar a day. Thousands of children perish daily due to conditions that relate to poverty. Some of these conditions include diarrhea and malaria. Millions do not have access to immunizations and drugs that help to reduce occurrences of diseases and death. Moreover, many people worldwide do not have access to clean water and sanitation facilities and services. These also relate directly to poverty. The importance of poverty reduction has taken a central stage in the international arena in the last decade. Foreign aid serves as a strategy that enables the creation of economic growth in developed and third-world countries.

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The United Nations Development Programme (UNDP), the International Monetary Fund (IMF), and the World Bank are the key institutions that promote economic growth and development. Poverty reduction in the world is the end goal of these organizations. The United States developed foreign aid policies to assist in poverty reduction. President J. F. Kennedy helped in the development of the United States Agency for International Development (USAID). The agency provides poverty reduction assistance to third-world countries. It is believed that foreign aid enables economic assistance that in return produces an increase in income levels. An increase in income levels stimulates economic growth hence poverty reduction. Economic growth, development, and poverty reduction go hand in hand. Empirical studies have shown that progressive and sustained economic growth is a key factor in poverty reduction.

However, the contentious issue has been whether foreign aid is effective in worldwide poverty reduction (Easterly 1). Development agencies and developed nations have spent over 2.3 trillion dollars on foreign aid. However, widespread poverty persists in third-world countries. Africa, Asia, and South America are the most affected regions. This paper will negate such beliefs, and show the effectiveness of foreign aid in poverty reduction. The goal of this paper is to show the effectiveness of foreign aid in the reduction of worldwide poverty. It will define poverty and foreign aid. Secondly, it will define the millennium development goals and show the role of growth assistance in poverty reduction. Thirdly, it will provide some success scenarios and make recommendations on the use of aid in poverty reduction. Finally, it will provide conclusions that touch on the main points made in the paper.


Third-world countries experience widespread and deep poverty. Despite the progress made in poverty reduction since the 1980s, the percentage of people in lack is still high. Above three-quarters of people in poverty are children. Approximately 11 million children die yearly due to malnutrition. In addition, many children die before they reach five years old. The causes of their death are, however, preventable. Moreover, approximately five hundred thousand women die at childbirth. They die due to inadequate medical care, disease, and malnourishment.

The traditional definition of poverty is narrow and based on the deprivation of basic needs. Hence, it defines poverty as the consumption of goods and services that are substandard. This definition is widely used as it also considers income levels. Thus, people who live in less than a dollar a day are said to be in poverty. However, deprivation of basic needs alone does not make poor people be in poverty. Other factors like illiteracy, high exposure to health risks, and poor living conditions and environment contribute to poverty (Jerker, Gloria and de 12). Therefore, a broader definition of poverty includes non-income characteristics. The broader definition defines poverty in terms of education, gender disparity, accessibility to sanitation, the prevalence of preventable infections, and so on. This definition provides the foundation of the millennium development goals. They are included in the report prepared by the World Bank in 2000. The World Bank defines poverty as widespread deprivation in the welfare of individuals in the report.

The capability approach provides another view of poverty. The capability approach is a broader perspective as it includes susceptibility to risks, subjection, and lack of rights of expression in society. Amartya Sen provided the capability approach definition. Sen argued that the ability to function in a community is vital to the well-being of individuals. Hence, key factors that promote well-being not only include basic human necessities but also accessibility to education, health services, security and political participation, and rights. The lack of these capabilities results in poverty. The lack of these vital components diminishes people’s abilities to function in their environment.

Closely associated with poverty is the disparity between people. There exists a gap between wealthy people and the poor. Inequity influences the spread of income and capital in an economy. Inequality also affects consumption and all the other dimensions included in the definitions provided above. A report prepared by the World Bank in 2006 noted that disparity in opportunities influenced development and equity. Inequality and equity are different. Equity mainly relates to the spread of opportunities that people access. The accessibility of all the above dimensions of well-being, including equity, results in poverty reduction. The goal of foreign aid in third-world countries is to increase the accessibility to these dimensions of well-being. Accessibility to these needs and capabilities due to foreign aid will show the effectiveness of assistance in the alleviation of worldwide poverty. The vital issue is, therefore, to determine what foreign aid is.

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What is foreign aid?

Foreign aid is a term used to denote the provision of humanitarian, financial, military, or developmental assistance by a distant nation to an underdeveloped country. The use of foreign aid in contemporary society began in the 18th century in Prussia. It began in the form of military assistance. Humanitarian assistance refers to logistical support for purposes like natural disasters and famine. Humanitarian assistance may have negative impacts. However, the moral objective and ethical reasons for such assistance are sound. The aim is to assist disaster-stricken areas with a supply of foodstuffs, drugs, healthcare, and shelter. These improve the well-being of persons in such areas.

Non-governmental organizations work impartially to provide humanitarian help in third-world countries. Impartiality plays a pivotal role in the provision of foreign or humanitarian aid. Foreign aid providers must ensure that impartiality is attained to ensure success in the alleviation of poverty (Masud and Boriana 45). Impartiality in the provision of aid ensures that focus is on the poor or the afflicted. Impartiality ensures that the focus is not on the aid provider or the local political administration. Humanitarian aid is unique in that it is applied to enable immediate alleviation of deprivation of basic needs. Humanitarian aid does not consider the reconstruction of physical infrastructure. In addition, its objectives are not to reduce widespread poverty. Hence, this paper does not focus on humanitarian aid since its long-term objectives are not poverty alleviation.

Development aid differs from humanitarian assistance. It has numerous economical, political, and sociological roots. Developmental aid aims to assist third-world countries to achieve long-term economic and social growth. Many institutions that provide developmental aid to third-world countries were established after the end of the Second World War. The United States signed bilateral trade agreements with many third-world countries in the fight against the spread of communism. The use of developmental aid in third-world countries assists in the reduction of poverty since it promotes economic and social growth (Herbert 480). The achievement of growth results in increased accessibility to conditions that promote the well-being of people. Overall, both humanitarian aid and developmental aid improve the well-being of people in third-world countries either in the short or long term.

Millennium Development Goals

The United Nations developed Millennium Development Goals (MDGs) to assist in the elimination of widespread poverty. The United Nations developed the goals at a seminar in 2000. The goals are to be reached by the year 2015. The main objective for the establishment of the goals is poverty reduction. The increase of aid is a vital component that the UN identified as crucial in the alleviation of poverty. The UN proposed that wealthy nations should increase aid to 0.7% of their incomes (Amin 1). The United States makes the greatest contribution of foreign aid to third-world countries. Many wealthy nations, including the United States, have not reached the UN’s target of 0.7% of national income. Currently, only Sweden, Luxembourg, Denmark, Netherlands, and Norway have reached the UN’s target (Leo and Barmeier 1).

Politics and the need for support in developed nations may motivate the provision of some foreign aid. Such foreign assistance does not consider the impact that aid provides in the reduction of poverty in developing countries. For example, foreign aid in terms of food assistance in the form of subsidies in wealthy nations is usually a political strategy used to promote farmers in rich countries. From the definition of poverty, foreign aid, and the millennium development goals, it is clear that the motives for the provision of foreign aid play a prominent role in the alleviation of poverty (Lahiri 17). More importantly, the discussions show that different people hold different views in the effectiveness of foreign assistance in the alleviation of worldwide poverty.

Development Assistance and Poverty Alleviation

International efforts to promote economic development have been successful in the past half-decade. However, sub-Sahara Africa has remained stuck in widespread poverty. Asia has experienced rapid growth in economic development compared to other regions in which poverty is widespread. It is essential to note that more than half of the world’s population resides in Asia. Economic growth and development in countries like China, Korea, and India accompanied by increased investments in health, infrastructure, and education sectors have resulted in improvement in the well-being of individuals in those countries. Foreign aid had a significant impact on the attainment of these major gains in these countries. Currently, Asia can feed its large population due to the Green Revolution (Hossain 129). The Green Revolution began in the 1960s. The United States government and private sector supported it. The decrease in disease burden, in the world, also resulted due to international success in smallpox eradication, massive immunization, and increased accessibility to clean and healthy water for consumption. The regular and progressive decline in population growth rate is due to family planning programs supported by aid. Countries like Malaysia and Korea have managed to grow into industrial powerhouses due to assistance from the United States and Japan (Herbert 485). These examples show the effectiveness of aid in the alleviation of worldwide poverty.

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Sixty years have elapsed since the introduction of development assistance as a way of poverty reduction in third-world countries. Development aid is composed of governmental and private assistance. Aid from a foreign government is termed Official Development Assistance (ODA). ODA and personal development support have promoted economic growth and progress. The combination of private and public assistance has proved to be effective. Hence, many donor countries encourage the formation of public-private partnerships (PPPs) in the provision of foreign aid (Herbert 486). In PPPs, ODA and the private sector, and philanthropists link to improve the effectiveness of foreign aid. In India, the Green Revolution succeeded due to PPP formation. In addition, the movement that aimed to eradicate polio was successful due to the formation of public-private partnerships in the provision of foreign aid to third-world countries. The campaign against polio involved public and private health facilities of various countries and donor organizations like the World Health Organization (WHO).

It is pertinent to note that economic forces have played a pivotal role in of provision of aid since the adoption of developmental aid as a strategy towards poverty eradication. Foreign aid works in association with international trade and investment activities. Globalization has enabled the spread of the gains made due to improved technology in all parts of the world. Aid does not substitute market-propelled development of poor nations. Conversely, aid complements market forces of poor countries and governments’ efforts to reduce poverty. Aid complements these components due to inadequate infrastructural development and lack of creditworthiness necessary to promote improvement in living conditions.

The Monterrey Consensus of 2002 provided the role of ODA in the fight against widespread poverty. The United States supports the roles provided by the Monterrey Consensus. The consensus recognized the interconnections between private assistance, globalization, international trade, and official development aid from governments of wealthy countries. The consensus noted that the interconnections between these factors are relevant to the economic development of poor nations. Hence, foreign aid does not clash with trade. Rather, people should view the complimentary association that exists between foreign aid and international trade. Consequently, official developmental assistance should assist third-world countries to enhance their competitiveness in international trade. Therefore, official development assistance should assist third-world countries to improve physical infrastructure. This results in the improvement of international trade and economic development. The result is to improve the well-being of people in poor countries since they access basic human needs. This shows the effectiveness of aid in the alleviation of poverty.

Success Cases

Many people in the world misunderstand the issue of the success of foreign aid in poverty reduction. Numerous studies on the subject seek to find the correlation that exists between foreign aid and poverty reduction. Failure to establish a significant positive correlation makes such studies conclude that foreign aid has failed to promote poverty reduction in poor countries (Ranaweera 637). Nonetheless, the absence of a positive correlation between aid and poverty reduction does not necessarily mean that foreign assistance has failed to reduce the problem. Notably, foreign aid should not be classified as a failure since assistance usually targets countries that are in crises like war or violence, famine, natural disasters, and negative economic situations. Contrary to these studies, foreign aid has resulted in numerous positive outcomes. It has enabled increases in life expectancy, incomes, literacy, and access to education, improvement in school completion numbers, and reduction of child mortality in various parts of the world including Sub Sahara Africa. Official developmental assistance is significantly effective in the promotion of physical growth.

The first example that shows the effectiveness of foreign aid in poverty reduction is the Asian green revolution in India, China, Pakistan, and southwest Asia. The Rockefeller Foundation and some institutions introduced the use of high-quality seeds and farming strategies in India after 1950. USAID financed the use of these skills and seed varieties in these countries. The project included the introduction of high yield seeds, the use of fertilizer, and new irrigation and farming methods. The project succeeded in that it enabled an increase in food production. The success of the project has enabled Asia to provide adequate food for its large population. Hence, aid assisted in poverty reduction in the region.

Smallpox eradication in the world is another example that shows the success of developmental aid in poverty reduction. W.H.O formed the Small Pox Eradication Unit in 1967. It then established a campaign supported by donors. The campaign aimed to eradicate the disease in the world. The campaign targeted mainly third-world countries due to high poverty levels. The use of foreign aid in the campaign enabled the achievements of the goals that WHO hoped to meet. In 1980, smallpox was eradicated. This example also shows the effectiveness of foreign aid in the reduction of widespread poverty.

Additionally, the achievement of an increase in family planning in the world shows the effectiveness of foreign aid in the reduction of poverty. The United States and other donor institutions aimed to improve the awareness of the need for contraception in the 1960s (Dacy 122). The education that these donors provided was based on voluntary participation. The donors succeeded as numerous people adopted the use of contraceptives. The decline in child mortality, increase in literacy levels, and decline in population growth rates resulted from the use of contraceptives. This resulted in improvement in the well-being of many individuals. The program was supported by foreign aid and targeted third-world countries.

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The campaign for increased child survival rates in third-world countries also provides a perfect example of the effectiveness of aid in poverty reduction. UNICEF launched a movement that aimed to increase the possibility of child survival in poor countries. The movement was launched in 1982 and was popularly known as GOBI. GOBI is an acronym for growth, oral rehydration, therapy, breastfeeding for nutrition, and immunity from communicable diseases. GOBI was backed by foreign aid and enabled many countries to reach 80% immunization levels.

The other example that shows the effectiveness of foreign aid in the reduction of poverty is the gains made in the treatment of malaria and TB and control of AIDS. Malaria, TB, and AIDS are widespread in third-world countries, especially in Africa (Riddell 312). However, many countries and organizations ignored the spread of these diseases and infections. In the 1970s and 1980s, many institutions and wealthy nations opted to increase the fight against these diseases. Later, the United Nations established the Global Fund to assist in the fight against these diseases. Donors back the strategies formulated by the Global Fund. Within five years since its establishment, the Global Fund enabled millions of people to access antiretroviral drugs. It has also enabled many people to acquire mosquito nets. Finally, it has enabled the treatment of several TB patients.

The above success cases in the use of foreign aid to reduce poverty provide numerous lessons. Intervention strategies used to attain poverty reduction involve the use of low-cost technologies. The goal of assistance is the achievement of economic development. On the other hand, economic development in poor countries is promoted by effective technologies. Hence, aid providers introduce high yield seeds, immunizations, contemporary contraception practices, and the use of information technology. These intervention strategies enable easy reduction of poverty. Furthermore, the intervention strategies that foreign aid providers introduce are simple and sustainable. They follow specific patterns, and involve the input of local leaders and change providers. The sustainability of projects introduced by foreign aid providers enables a sustained and gradual reduction in poverty levels. This improves the long-term effectiveness of foreign aid in poverty reduction. Moreover, foreign aid providers implement intervention strategies on a massive scale. These allow the intervention approaches to deal with the problems that cause the growth of poverty. The strategies that they use involve encouragement of the adoption of the intervention ideas. The involvement of local administrations also enhances the elimination of underlying problems that cause poverty (Riddell 310). This enables the success of intervention strategies, hence the effectiveness of foreign aid in poverty reduction.

In addition, intervention methods introduced by foreign aid providers in third-world countries are adequately funded. Success stories provided above involved the use of vast amounts of capital outlays. The projects that are introduced by donors in third-world countries take long periods. The combination of long periods and large capital outlays for intervention strategies ensure the sustainability of the projects implemented to reduce poverty in the world. Countries that participate in the implementation of intervention strategies that aim to reduce poverty are usually confident that the projects will succeed. This is because well-funded intervention strategies that take long periods of implementation require the establishment of institutional frameworks. In addition, such intervention projects involve capacity building. The intervention strategies used to involve the development of community and individuals’ capacities to improve their well-being. Community members are trained on ways through which they can increase their incomes, health conditions, and literacy. Hence, the mix of adequate funds, long intervention periods, the establishment of institutional frameworks, and capacity building makes foreign aid succeed in the reduction of poverty levels.

Another lesson learned in the use of foreign aid is the effectiveness of multilateral associations in the fight against poverty. The provision of foreign aid to third-world countries normally draws support from numerous organizations and governments. third-world countries are normally unable to deal with the roots of poverty alone. Developmental problems like disease and hunger, poor infrastructure, extreme poverty, and economic situations like super inflation cannot be handled by governments of third-world countries without the support of wealthy nations. However, a united effort in the fight against these challenges is effective. A united effort improves the effectiveness of intervention strategies and efficiency in the use of available resources. Moreover, a united effort allows the implementation of intervention strategies on large scales. The implementation of the intervention projects on large scales is effective when compared to the execution of undersized strategies.

Finally, the use of aid in the reduction of poverty involves the determination of contributions, targeted objectives, and strategies. The determination of these factors before the implementation of intervention projects and provision of funds provides ways through which success is estimated (Muzinich and Eric 20). The success stories described above involved the use of predetermined strategies. The green revolution involved the determination of the required hectares of land. Smallpox eradication involved the timed separation of outbreaks while widespread immunization involved the establishment of coverage rates. The primary goals of the intervention projects introduced by aid providers do not include broad objectives like increased democracy. Objectives like increased democratic participation and economic growth are secondary goals that are achieved as indirect products of intervention strategies. They are also achieved in the long term after the implementation of the projects has taken place. Hence, intervention projects target specific objectives. They target objectives that can be quantified, audited, assessed, and reevaluated. This strategy has enabled foreign aid to succeed in the reduction of widespread poverty in the world.


The millennium development goals identified certain areas that must be targeted to attain growth and improved living standards in the world. The MDGs noted that the adoption of low-cost technologies is a strategy that improves intervention methods. Foreign aid providers have adopted the recommendations made by the United Nations. Donors hope to improve the incomes of poor people through microfinance, off-grid electricity generation, internet connectivity, and provision of all-weather roads. They also promote the green revolution and the elimination of malnourishment. Some of the projects funded by foreign aid hope to increase universal school completion rates. Donors fund school constructions, train educators, and provide computers in schools. The United Nations also recommended that foreign aid should target improvement in gender equality awareness, reduction of maternal and child mortality rates, control of HIV and AIDS, TB, and Malaria (Muzinich and Eric 20). Hence, projects introduced by aid providers involve programs like integrated management of childhood illnesses. These projects recommended by the United Nations have succeeded in the reduction of poverty levels.

Another recommendation that the United Nations made is that delivery systems of foreign aid must be monitored. Critics of the use of foreign aid in the reduction of poverty base their arguments on the possibility of mismanagement, corruption, and failure of delivery methods (Monkam 1). Hence, the United Nations recommended that evaluation of the intervention strategies, auditing, and inclusion of community residents in programs is necessary. Several donors have adopted the use of these recommendations. This has led to success in the use of foreign aid in the reduction of worldwide poverty. The use of these recommendations has enabled success in the allocation of anti-malaria drugs and nets, passive immunization, and treatment of worm-infected children. Thus, the inclusion of accountability, transparency, and auditing improves the effectiveness of foreign aid in the reduction of poverty in the world.

The United Nations also recommended that clear funding principles should be adopted in the provision of foreign aid to poor countries. Consequently, foreign aid should be steered towards countries or communities that are not able to achieve development on their own. Hence, aid is directed towards Africa and some parts of Asia and South America. Secondly, foreign aid should promote programs that seek to enhance the conditions of poor people. The projects should assist the poor access vital services like education and medical care. In addition, foreign aid has to include bilateral and multilateral agreements. That is why countries like the United States form partnerships with other nations and organizations in the provision of aid to poor economies. These funding principles improve the effectiveness of foreign aid in the reduction of poverty.

Finally, the United Nations recommended that foreign aid providers should target health, education, agriculture, and infrastructure. Thus, many intervention projects implemented by foreign aid providers have targeted these sectors. The implementation of such projects has assisted in the improvement of health and education standards, agricultural productivity, and the development of infrastructure. These have resulted in the improvement of the well-being of poor people in some regions. The Global Fund that targeted the reduction and elimination of AIDS, TB, and Malaria is an example. Global Fund has assisted in the reduction of the spread of these diseases. This has resulted in the improvement of the living conditions of people in poor countries. Education for All (EFA) initiative is another example. The initiative hopes to increase the literacy levels in third-world and poor countries. It is a joint venture between the United States and the United Kingdom. Foreign aid has also targeted the agricultural sector. Increased foreign aid that targets the agricultural sector in poor countries increases farm productivity and assist in the reduction of hunger. Rockefeller and the Gates Foundation formed Alliance for a Green Revolution in Africa (AGRA). On the other hand, The World Bank and the International Fund for African Development (IFAD) formed an association that seeks to promote small-scale farming in poor countries in Africa. Emphasis on health, education, and agriculture has enabled foreign aid to succeed in the reduction of poverty in the world. This further shows that foreign aid is effective in the reduction of poverty in the world.


Billions of people in the world live in abject poverty. Several children die daily due to preventable conditions while maternal mortality rates are high in poor countries. All these negative occurrences take place due to extreme poverty levels. Wealthy nations and several international institutions like the United Nations adopted the use of foreign aid in the fights against widespread poverty levels. However, some critics have argued that the use of foreign aid in the fight against poverty is ineffective. However, this paper hoped to show that the use of foreign aid in the fight against poverty is effective. Consequently, it began with the provision of the definition of poverty and foreign aid. It then provided an overview of the millennium development goals. The achievement of these goals will improve the well-being of people in the world.

Thirdly, it showed the relationship that exists between developmental aid and poverty reduction. Fourthly, it provided cases that show the effectiveness of foreign aid in the reduction of poverty. These cases included the Green Revolution and GOBI. Finally, it provided recommendations made by the United Nations. These recommendations improve the effectiveness of foreign aid in poverty reduction. The consistency of the paper has shown that foreign aid is effective in poverty reduction.

Works Cited

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Easterly, William 2008, How the Millennium Development Goals are Unfair to Africa. Web.

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Hossain, Mahabub. Nature and Impact of the Green Revolution in Bangladesh, Washington: International Food Policy Research Institute, 1988. Print.

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Lahiri, Sajal. Theory and Practice of Foreign Aid, Oxford: Elsevier, 2007. Print.

Leo, Benjamin and Barmeier, Julia 2010, Who Are the MDG Trailblazers? A New MDG Progress Index. Web.

Masud, Nadia, and Boriana Yontcheva. Does Foreign Aid Reduce Poverty?: Empirical Evidence from Nongovernmental and Bilateral Aid, Washington: IMF, 2005. Print.

Monkam, Nara 2008, The “Money-Moving Syndrome” and the Effectiveness of Foreign Aid. Web.

Muzinich, Justin, and Eric Werker. “A Better Approach to Foreign Aid.” Policy Review, 149. 2 (2008): 19-28. Print.

Ranaweera, Thilak. “Ghost of the Financing Gap: An Overlooked Aspect of the Aid Debate.” Journal of International Development, 16. 4 (2004): 637. Print.

Riddell, Rodger. “The End of Foreign Aid to Africa? Concerns about Donor Policies.” African Affairs, 98. 1 (1999): 309-335. Print.