Foreign Aid and Remittance: Crash Course Economics #34
TLDRThis economics video examines foreign aid - the transfer of money, goods, or services from one country to another for assistance. It notes that Americans greatly overestimate how much the U.S. spends on foreign aid, which is only around 1% of the budget. The video traces the history of modern foreign aid to post-WWII relief efforts like the Marshall Plan. Today, donor countries use aid for varied reasons - humanitarian, political, economic. While economists debate its effectiveness for growth, health aid has produced successes fighting diseases globally. The video also examines alternative aid sources like remittances and charities, stressing the need to research groups before donating to ensure funds are used properly.
Takeaways
- 😲 Americans greatly overestimate how much of the federal budget is spent on foreign aid. The actual amount is around 1%.
- 😃 The Marshall Plan after WW2 was very successful in helping rebuild European economies and preventing spread of communism.
- 👍 Public health aid has made great strides in eradicating diseases like guinea worm and malaria in developing countries.
- 💰 Remittances from immigrants to families back home total over $500 billion, dwarfing official foreign aid flows.
- ☹ Economists disagree on whether foreign aid encourages economic growth in poor countries.
- 💡 Foreign aid outcomes can be undermined by lack of coordination, not involving recipients, and corruption.
- 😠 Food aid can potentially hurt local farmers by lowering prices if not managed carefully.
- 💪 There's evidence foreign aid reduces poverty and improves health and education in poor countries.
- 🔎 It's important to research charities before donating to make sure donations are used effectively.
- 🙂 Despite problems, aid programs and organizations do save lives and help people in need globally.
Q & A
What percentage of the US federal budget actually goes toward foreign aid?
-Around 1% of the US federal budget goes toward foreign aid. However, a survey found that on average, Americans guessed 26% of the budget goes toward helping other countries.
When did the modern era of foreign aid begin and why?
-The modern era of foreign aid began after World War II, when several significant international institutions like the World Bank, United Nations, and IMF were established to help with postwar reconstruction and development.
What was the Marshall Plan and what impact did it have?
-The Marshall Plan was a $13 billion aid package from the US to Western European countries after WWII to help rebuild their economies. It was very successful and the recipient countries saw their GDPs increase substantially.
How and why has the focus of foreign aid changed over time?
-During the Cold War, foreign aid was used more as a political tool for allegiance. After the Cold War ended, aid became more focused on humanitarian and economic goals like reducing poverty.
What are some of the issues and criticisms surrounding foreign aid programs?
-Issues include lack of coordination between donor countries, not involving recipients in allocation decisions, corruption reducing aid effectiveness, and concerns that aid encourages dependency.
What are remittances, how significant are they globally, and what effects do they have?
-Remittances refer to money sent home by migrant workers. In 2013, $542 billion in remittances were sent globally, mostly to developing countries. Remittances can significantly reduce poverty but some argue they encourage economic dependency.
How can individuals help people in developing countries through charitable donations?
-Individuals can donate to charitable organizations like UNICEF, Red Cross, Doctors Without Borders etc. But it's important to research the organizations first to ensure donations are used effectively.
What's the difference between public charities and private foundations?
-Public charities get more support from the general public while private foundations are controlled by a small group and funded by few large donors. Private foundations are less accountable to the public.
How has health-focused foreign aid made an impact in developing countries?
-Public health aid has helped drastically reduce cases of diseases like Guinea worm and malaria in sub-Saharan Africa, and saved millions of lives.
What resources are available to research and evaluate charitable organizations?
-Websites like Charity Navigator and GuideStar provide information to help evaluate different charities on metrics like financial transparency, effectiveness, etc.
Outlines
⛅ U.S. Foreign Aid & The Marshall Plan
The paragraph discusses foreign aid provided by the U.S. government, domestic perceptions about aid spending, the goals of aid programs, the Marshall Plan for post-war Europe, and how aid efforts have evolved over time.
🚀 Motivations & Issues with Foreign Aid
The paragraph covers donor motivations for aid spending like trade benefits and geopolitics rather than pure altruism, plus issues with aid effectiveness due to misaligned interests, corruption, etc.
💵 Other Forms of International Assistance
The paragraph discusses alternative aid flows like remittances from migrants to home countries, spending by non-profits and NGOs, plus advice for properly vetting charitable organizations.
Mindmap
Keywords
💡foreign aid
💡Marshall Plan
💡remittances
💡GDP
💡corruption
💡Guinea worm
💡malaria
💡HIV/AIDS
💡non-profits
💡cynicism
Highlights
Foreign aid is basically the transfer of money, stuff or services from a country or international organization that's intended to help out another country and its people.
The Marshall Plan helped legitimize and lay the groundwork for U.S. foreign aid programs that have come since.
Once the Cold War ended, foreign aid transitioned from geopolitical carrot and stick, toward more actual humanitarian and economic aims.
Some research has found donor countries are more likely to send aid to former colonies or strategic partners.
There are quite a few ways that foreign aid programs go wrong, including when countries don't coordinate their aid, when they don't involve the recipient country in figuring out how to allocate the money, and when the recipient country is run by corrupt leaders.
Remittances are basically the money that migrants and immigrants send to their home country.
In Tajikistan, remittances are equal to more than 40% of the country's GDP.
There are economists who warn that remittances can foster a dependency on outside money. That they dis-incentivize growth in the home economy. And make it overly susceptible to the global economy.
You've likely heard of some of these: UNICEF, Red Cross, Red Crescent, the World Food Programme, Doctors Without Borders, Oxfam. The list is much, much longer.
There are plenty of fraudulent or just poorly managed charitable organizations out there.
But try not to let that make you too cynical about helping out, both as a taxpayer and as a philanthropist.
There are programs and organizations that do good and save lives.
There are ways to actually help people who need help around the world.
Public health aid has nearly eradicated the parasitic Guinea Worm in sub-Saharan Africa.
Between 2000 and 2015, new HIV infections are down 35%. AIDS related deaths have fallen by nearly a quarter.
Transcripts
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