How developed countries can help underveloped countries?

Answer 1

There are three common strategies by which developed countries attempt to help lesser-developed countries (LDCs): aid, trade, and assistance.

Aid can be in the form of a direct gift of money, loan guarantees, loans, gifts of food, or even military aid. The benefits of aid are that it can be delivered more quickly than other types of help. Aid can also be targeted to a specific purpose, such as relief from natural disasters, operating capital for business development, or military protection from hostile governments or internal threats.

One drawback of aid is that it often does not address the root problems in lesser developed countries, but is intended to help with an immediate crisis. When the crisis subsides, the impetus to solve the underlying problem is gone. Also, direct aid can increase inflation in an LDC, where inflation is often a severe problem to begin with. This happens when an increase in the money supply from outside donors is introduced, but the goods and services available to buy with the donations is not increased, therefore prices rise. Another problem with direct aid is that LDCs often have inefficient or corrupt governments and institutions that either don't have the capacity to use the aid effectively, or divert the aid to uses that benefit the powerful and not the needy.

Trade is another way that developed countries can help LDCs. By increasing and promoting trade with LDCs, wealthy countries help less robust economies grow. Increased trade can take a long time, and it can be difficult for LDCs to produce goods and services that are in demand in the global market. However, trade can help LDCs build more diverse, robust economies and provide higher wage jobs for the residents of LDCs. Managed correctly, trade can be a path to drastic improvementes in developing countries, as seen in India and China over the past several years.

Unfortunately, trade has its drawbacks, too. Exports from LDCs tend to be commodities, such as agricultural goods, or oil. Prices for agricultural goods are volatile, and more developed countries often have access to technologies that allow them to produce agricultural products at lower costs than LDCs. Natural resource comodities are subject to similar price volatility. Also, natural resource goods in LDCs are sometimes controlled by the government. Revenues from the sale of oil by some governments, for example, are used to placate the population with government assistance, suppressing the demand for governmental reforms, and displacing more broad-based economic development. This concentrates the wealth generated by Natural Resources in the LDC government or a local business oligarchy, leading to inefficiency and corruption.

Foreign assistance can come in many flavors. Wealthy countries may help developing countries use technologies that allow them to produce food more efficiently, or build better sources of drinking water, fuel supplies, or telecommunications. Technical assistance can have a broad and lasting impact on the LDC, but only if the organizations and money exist in the long term to allow the LDC to maintain these improved systems. Foreign assistance with education, immunizations, and direct humanitarian intervention during civil unrest or natural disasters can also be very beneficial.

Developed countries cannot "save" underdeveloped countries, but they can help. In fact, it is in wealthy countries' best interest to do everything they can to help poorer countries.

Ultimately, any country's success will depend on its own unique circumstances. Geopolitics, natural resources, effective government, civil liberties, agricultural capacity, and the "choices" countries make through cultural and political systems are the greatest determiners of a country's success. But foreign aid, trade, and direct assistance can be helpful if done with care, wisdom and diligent oversight.