Fostering Economic Power in Third World Countries

Economic Development in Developing Nations

The content of the 14th chapter in Todard and Smith's Economic Development details the effects of foreign aid on the economies and overall development of developing economies. The author's consider the results of such aid at both a macro and micro level by outlining general principles and identifying how they subsequently play out for individual countries (particularly those in Africa). The chapter begins with the authors (2012) denoting the various forms of foreign aid and the ways in which they flow in and out of developing countries. The most prominent of these is that associated with the presence of multinational companies (MNCs), although other forms of foreign aid involve public funds from other governments, a variety of stock options (portfolio investment), and even a contribution of the portion of earnings of individuals in a developing nation that have travelled abroad to earn money (p. 684-685).

The authors spend a fair amount of time denoting the way that multinational investment works. Typically, these countries are large ones with a global presence that are looking to maximize their investments (and global presence) in developing countries by establishing a subsidiary and there in exchange for certain benefits. The nature of those benefits is best detailed in the section of the chapter in which the authors examine the pros and cons of the presence of MNCs in developing nations. The pros are that they provide a source of revenue to the country in the form of taxation and that the country can benefit from the MNCs technological and global sophistication (such as its contacts, and skills, etc.). The detriments are that the MNCs can malign a country's own economy by making the latte dependent on the former, and by stifling the development of its own domestic business and economic opportunities.

The authors take the same approach with private portfolio investment. The benefits of this approach are that it enables countries to have monetary investments to stabilize their countries, yet the wide range of diversity can also destabilize their economies as well. The authors take a similar approach to discussing the value and detriments of external funding from patriots outside of their native countries. The authors make it clear that the principle reason why they are exploring these various means of foreign economic aid to developing countries is to determine the best method for doing so. Additionally, the authors realize that such aid has not infrequently resulted in partisan forces within a developing nation, which has the proclivity for erupting in violence as controlling factions -- backed by different powers, some of which are foreign in nature -- compete for the resources of a country. Those resources may be both economic and otherwise.

Critique

This particular chapter of this manuscript was extremely well written. The authors demonstrated a repeated propensity to take abstract economic concepts and to make them lucid for a broad audience. Moreover, they were able to explain several key facets of foreign aid, both public and private. They emphasized that such aid is rarely altruistic in nature, and is usually simply a means of some foreign entity extending its own power and economic development. Of particular note in this chapter is the fact that the authors elucidated both the positive and negative aspects of the varying forms of social aid. The underlying value in this approach is that the authors evinced a sincerity in explicating the numerous reasons as to why developing countries frequently prove to be volatile situations. There are competing interests in those countries from the outset, and oftentimes they result in situations in which the influx of foreign aid directly contradicts the ability of the developing country to become economically independent or politically stable.

Concepts, Facts, Knowledge and Application