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Critically examine the view that removing trade barriers is a more effective way of promoting economic development in Less Developed Countries LDCs than extensive foreign...

Critically examine the view that removing trade barriers is a more effective way of promoting economic development in Less Developed Countries LDCs than extensive foreign aid programmes.

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The trade versus aid debate has become more intense in recent years. Free market economists argue that reducing import barriers would do far more to promote development in LDCs than any amount of foreign aid. This view is challenged by a number of development economists who argue that the terms of trade are so biased against LDCs that free trade would be of little benefit. It would seem that free trade though important would not be sufficient to promote significant economic development in LDCs and that foreign aid programmes, however flawed, should remain in place. Issues for analysis and evaluation include:
• The potential benefits from trade liberalisation far exceed the aid programmes of the donor states
• Theory of comparative advantage
• Some aid, especially that channelled through non-governmental organisations, funds beneficial projects
• Possibility that trade would not benefit the poorest African countries who might lack a comparative advantage in agriculture
• Infant industry considerations
• Ineffectiveness of aid. Africa has received over $500 billion dollars of aid but many nations remain mired in poverty.
• Much aid is siphoned off by corrupt governments and officials. Much of this money finds its way back to Western bank accounts or is spent on exported luxury goods from the west.
• Aid gives power to the donor countries who use it to promote economic policies which may not be appropriate for each country. It supports paternalistic attitudes.
• Much aid ends up in the pockets of highly paid “development consultants” from the donor states.
• Much aid is wasted on ill-researched projects which were dreamt up by the donor states and which often gave lucrative contracts to engineering companies from these states.
• Aid played little or no part in the development of countries like China, Thailand and India.
• Much aid is tied to security considerations

lydiajane74 answered the question on July 4, 2018 at 15:28

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Critically examine the view that removing trade barriers is a more effective way of promoting economic development in Less Developed Countries LDCs than extensive foreign...

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