Suchergebnisse

The main point of this paper is that foreign aid fails because the structure of its incentives resembles that of central planning. Aid is not only ineffective, it is arguably counterproductive. Contrary to business firms that are paid by those they are supposed to serve (customers), aid agencies are paid by tax payers of developed countries and not by those they serve. This inverse structure of incentives breaks the stream of pressure that exists on the commercial market. It also creates larger loopholes in the principle-agent relationship on each point along the chain of aid delivery. Both factors enhance corruption, moral hazard and negative selection. Instead of promoting development, aid extends the life of bad institutions and those in power. Proposals to reform foreign aid ? like aid privatization and aid conditionality ? do not change the existing structure of the incentives in aid delivery, and their implementation may just slightly improve aid efficacy. Larger improvement is not possible. For that reason, foreign aid will continue to be a waste of resources, probably serving some objectives different to those that are usually mentioned, like recipient?s development poverty reduction and pain relief.

"Foreign aid has a great future—behind it," observed a United States congressman in the late 1960s. The words were prophetic. Since then the aid program has encountered growing opposition; it has steadily dwindled in size, especially in real terms; and worst of all, it has become more than ever an odd amalgam of contradictory objectives. Meanwhile, what had been its sole purpose—to help build the nascent economies of the poor nations on sound foundations—has receded into the background. Today that purpose is almost foreign to foreign aid.This, at least in hindsight, is not too surprising. Foreign aid was born of mixed parents, a hybrid; and as time went by it was further hybridized as it was impregnated by ever more extraneous elements.

In order to break out of its diplomatic isolation, Taiwan has employed its economic strength to gain friendship. One way it has beated up this effort has been through the use of foreign aid. The author takes a look at Taiwan's foreign aid policy since the late 1980s by examining the extent of its success and failure and investigating its scope, durability and implications.(DÜI-Sen)