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CIAO DATE: 03/02
Volume 1, Number 11, August 1996
Preface
Why have some developing countries moved forward to become part of the international trade and financial systems while others have stagnated?
In the past 15 years, many of the developing countries in Asia, Africa, Latin America, and elsewhere have made great advances. Some have become major exporters of manufactured goods and important recipients of — even sources for — private investment capital, and significant portions of their populations are achieving ever higher standards of living.
Other developing countries have built internationally competitive sectors that are attracting private capital even though large parts of their economies and their populations have made much less progress. Yet others seem caught in underdevelopment. Saddled with debts accumulated during the 1980s, the foreign assistance they receive seems to help only at the margins. Private capital shows no interest.
Developing countries are said to be making progress — achieving "development" — when certain economic trends are established. Among these are increasing per capita incomes, rising education levels, improving health conditions, more efficient government administration, and the establishment of industries that reduce dependence on the export of raw commodities.
During the past 40 years, the United States and other industrial countries have sought to assist this development — and, since the revolutions of 1989, to aid the former Soviet bloc's transition to free markets.
The industrial countries have provided thousands of millions of dollars in foreign assistance through bilateral programs, multilateral initiatives, and the multilateral development banks; extended tariff preferences for large categories of products; and, more recently, sponsored debt-relief initiatives for the poorer countries.
How effective has this foreign assistance been in promoting development?
A significant portion of the assistance, of course, was given for political reasons. But much of it was — and continues to be — provided specifically to help countries improve the education, health, and productivity of their citizens and to develop their economies.
Which kinds of aid work and which do not? What must the developing and transitional countries themselves do to advance the development of their economies? And how should protection of the environment and natural resources figure into their development plans?
Determining what is required for successful development has become even more important with the demise of the alternative state-centered economic model, as witnessed in the near disappearance of centrally planned economies and in the efforts of governments around the world to divest themselves of state-owned enterprises.
This issue of Economic Perspectives examines development and foreign assistance, presenting the views of U.S. policy-makers and others on the requirements for development and the present and future of assistance to developing and transitional economies.