Foreign Aid and Remittance: Crash Course Economics #34 

How does one get to the assumption that 26% of the budget goes to foreign aid? How misinformed does one have to be?

"... Corrupt leaders" shows picture of mugabe 😂😂😂😂 brilliant

This episode, more than any other in the series so far, reminded me of a joke my high school economics teacher liked to tell. "You put 5 economists in a room with a problem, they'll leave the room with 6 solutions."

Foreign aid is often not intended to "help" but to create dependencies. If the western countries would want to help, they would abolish the old (mostly colonial) debts of the developing countries, the protectionism and the subsidies. But they don't. They want to keep the developing countries depended on them. Developing countries have nearly no power in the so highly praised international organizations like the IMF, the World bank, the World Trade Organization or the UN. I'm not saying that foreign aid is bad over all. Trying to improve the medical situation is noble and works. Trying to improve the education is noble and works. Saying that countries have to enforce human rights but then have the dead penalty and lock up people in prison without a proper lawsuit is hypocritical and bigoted. Forcing other countries to adept democracy without democrats is not working, take a look at Germany after 1918.

"Countries with corrupt leaders" shows picture of Robert Mugabe. Nailed that one right in the head

I think people need to realize this is about the economics of foreign aid , not the politics behind it .!

26 percent? yall need to play democracy 3

Less than 10 % of foreign aid actually reaches its destination. And some times that destination is the company itself, and their effort to "help" the country in question comes secondary to making money and financial growth. Always be wary when international organisations hire PR agencies and former politicians to act as advisors.

great video!!! I wish there was a little more on what's broken in the aid system. what I mean is that charities are disincentivized to acknowledge failure, both to the public and themselves. They are always hunting donations and that can cause problems, like where an aid worker in Africa is measured on how quickly they deliver a donor soccer ball to the intended child and get a photo to send back to the sponsors in the states. A lot of charities focus on how many cents per dollar donated are spent "on the ground", when in reality, a charity spending $0.45/$1 effectively is a lot more useful than a charity spending $0.95/$1 ineffectively. Charities tend to focus on technological fixes, which are sexy to donors here, but are not all that great when they arrive in the intended country. An example I saw while living in Zambia: a wonderful solar stove was being promoted in villages to save the trees and time for women collecting firewood. It sounded like a great idea! It was a black pot in a large clear bag with a solar reflector. The problem was that the staple food, and by that I mean the food eaten at literally every meal of the week except breakfast, is a thick porridge that requires constant stirring. You can't stir the pot if it's tied up in a solar bag and the solar bag doesn't work if it's open. Complete and total failure, that will never be reported on because that would get the charity less donations. A broken system.

This video could've talked about so much more. For example the fact that most of the 'aid' is in the form of interest bearing loans that trap poor nations in an endless cycle of debt. Or the fact that there's many restrictions on the aid. For example the US gave africa some aid to buy planes I think it was but they had to buy them from a US company so really it was a giveaway to American corporations.

1949 George Marshall Plan for foreign aid programs Remittances: money sent back to their families, positive effect in receiving country Nonprofit organizations: provide humanitarian aid - private foundations

I agree on the Remittances thing, in our country a significant portion of the GDP comes from Remittances, so a large number of people here study so they can work abroad. When a large number of skilled people leave, it takes toll on the infrastructure of the country.

Speaking of corruption and Foreign Aid, I did heard it from my dad. Not only that even lack of basic common sense or technical knowledge even hurt them. Like one town received a UN Road to alleviate traffic jams by making alternate route via Highway. The town decided to have an idiotic decision by moving their entire town to that road and got another traffic jams.

Great video. Just one error that I would like to point out. Both the IOK and the whole of north east India were omitted from the map of India. The north-east isn't even disputed. Please do take a look. Also, could the econ lessons get a more international perspective.

There's a thin line between helping and encouraging dependency. For example, as she said, you wouldn't want to send food to a country where the food market is starting to grow, nor would you want to send sneakers, clothes and so on. It's seems tough and radical, but in the end you're doing them -and this will sound ultra cynical- a favor. On the other hand, healthcare and education aid can help foster the country's IDH to an amazing extent. This is really a case by case isssue.

Yes! Norway got noticed. Second most foreign as % of GDP.

Anyone interested in the general point she was making at the end should look up the Effective Altruism movement. It's probably not everyone's cup of tea, but it's certainly very interesting stuff.

Only 0.5% of the budget goes to fund NASA. I think we need to spend more on scientific research.

Remember: poor countries are not just composed of kids (unlike the marketing of some NGO may let you think). Those countries are led by *adults*, so patronizing them will *not* work. You can only bring the help they are willing to receive, but only them can change their country.

In my country few years ago we had devestating floods. A farmer from south, which was not affected by flood could not sell his harvested crops and other food for profit, so he wanted to donate it to red cross, to redistribute it to those who were affected. He called them and they said - ok, we would take it, just organise and pay for transport of those good (which he had several tens of tonnes) to our central, which was about 300km form place he lived. All that food eneded up rotting away by the road. Huge pile of food.

Couldn't you attribute the GNP growth to the fact that there was no more war. Rather than our foreign aid.

Thank you for posting the hard questions! It's difficult to talk about these things without trying to take a hard position on it. These are truly grey areas of economics that don't get enough attention.

I would have guessed that foreign aid was closer to 0.2%, but still think that is too much. This is mostly because our foreign aid is not truly aimed at improving life for the common people throughout the world, but consists of bribes intended to keep the power elites in strategic regions loyal to our government. Much of the foreign aid is actually corporate welfare given to the military industrial complex. That would be bad even if it was just a direct subsidy, but giving US companies money to supply arms to tyrants is much worse. Even the well intended aid often has bad unintended consequences. It often favors the sort of economic development that empowers landlords to evict their poorer tenants, making life better for a few but worse for far more. This sort of geo-gentrification leads to the growth of the kinds of slums that give rise to terrorists. Often US aid is in the form of matching funds, which require the local government to also tax its own people in order to fund certain services. The forms of taxation they choose often has deadweight losses that exceeds the benefits of the programs, especially when you consider the corruption common among administrators. Some foreign aid is in the form of loan guarantees, which are a subsidy to our financial industry which enables foreign governments to go deeper in to debt than they would otherwise.

If only this video came out 3 weeks ago when I was doing my essay on the effectiveness on aid

1% is not small at all. at least when you consider that education & healthcare are 6% each. so it's 1/6 of of whats spend on say education... it's also 1/54 of what is spend on military though. compared to that it's small. tough education spending is also just 1/9 of military spending.

I have a question. It might be better to ask in the gaming videos, but I feel that it's related to economics more. What do you call the in-game currency of games like MMO's? Fiat, Commodity, or Representative?

Foreign Aid problems? Now I am thinking of the Anthony Bourdain No Reservations episode in Haiti

That John Clifford picture at the back though

I don't like it when charities and non-profits keep sending you junk mail and "gifts" (address labels, calendars, etc) along with requests for money. It makes me feel like they're spending more on the mail than the charity's mission. I stopped contributing to the ASPCA for that reason some years ago (and I STILL get mail from them). When it doubt, go local. I think my money is better used by my local animal rescue than a national one.

1% of the budget going to foreign aid isn't that small at all when you have a 4 trillion dollar budget

Adrian Hill was on Marketplace, filling in for Ky Rizdol!

Can you talk about repair payments? And economy right AFTER a war?

4:47 Funny! “For peace”

Nepal has been remittance dependent since last 15 year. The results are good for people but. export deficit is stupendous.Food independence has been decreasing.Private Education has grown.

Isn't there a publication "gift giver's guide" which details how much money actually gets through to the folks who need it?

I do question the 1% figure. That is what the government claims is spent on foreign aid, but I remember a Politico article that showed, just in the military budget, hidden aid to foreign countries that amounted to something like 2-3% of the total budget on its own.

Thank you for another great unbiased video.

Compare the percentages of the u.s and Sweden, and then compare the actual number of what is given. A larger economy applying lower percentages is still giving a massive amount because well it's a larger economy.

8:16 that's the most inaccurate map of India I've ever seen.

The following two organizations recommend charities based on how much good they do per dollar: www.givewell.org/charities/top-charities www.givingwhatwecan.org/top-charities/

Considering Macroeconomics concepts, can a large amount of remittances cause inflation in a small country ?

Anybody know where Clifford went?

I am from Nepal and not really happy about quarter of our GDP being from the remittance 😭

I don't think this video has done enough to show what a failure foreign aid has been in the last 70 years. For one thing, helping the recipient country is often not even the primary intention of foreign aid. For example, looking at historical trends with food aid, you will find that Food Aid often goes up when cost of food drops and aid will go down when food costs goes up. This is opposite from what would seem reasonable. Why would you decrease food aid when cost of food is up and people are having trouble buying food? It is because food aid is most often used as a method of economic regulation. When food costs are high, it is worth more to sell food on the market. While when food costs are low, giving food aid will lower supply for food and help bring back up cost. Similarly, much of foreign aid is not money but in-kind services. The US doesn't give money for computers as foreign aid; it buys computers from Microsoft to donate. While this type of aid helps in building up infrastructure, it is vastly inferior to actually injecting money into developing economies. In fact, some humanitarian groups have started using a new measure of efficiency for their work: "Is the money used for our programs more effective in our programs, or would it be more effective being thrown out a plane window?" No it's not facetious. Direct cash injections have been shown to be far superior to most other forms of aid, but its use is almost non-existent. Instead we get steady streams of Structural Adjustment Loans from the World Back and IMF, designed to change the recipient's domestic economy to get it ready for the international free market. They do this by making this development aid contingent on removing tariffs, deregulating industries, privatizing public goods and services But these plans have failed. In almost every single case, structural adjustment plans have failed with the exception of Singapore. There is very little statistical evidence that this form of aid has led to any significant economic growth above what would have happened regardless. And those studies that do show benefit usually crumbles under further scrutiny. These plans have failed because they make the mistake of assuming recipient countries are the same as the experience of those countries doing the giving. Each country has its own set of cultural and political realities that must all be satisfied in the transition to the open market system. But our current model of foreign aid for promotion of economic growth assumes the same prescription of top down approaches will yield market results and they DO NOT. Don't get me wrong, there have been some fantastic developments that have occurred because of international aid work: The eradication of TB and small pox, or the success of the Grameen Bank are great examples. But speaking as someone who has worked in foreign aid for many years, the vast majority of foreign aid does very little to help development. And much of the good that DOES happen, happens because of aid workers at the bottom of the totem pole ignoring orders from above and doing just what needs to be done. I'll give one final example. I once met a Tanzanian nurse working in a Maasai community. She ran a maternal health clinic in the rural community funded by the national government. She was only in the community to provide maternity health services. But the Maasai did not come to her for maternal health. The Maasai have very private cultural rituals around birth and pregnancy, none of which can be satisfied by giving birth in a clinic. So for 3 years this clinic ran without a single client. And so what did the nurse do? She started offering other services, unsanctioned by the funders. She fixed broken bones, dealt with alcohol poisonings, and whatever other issues arose. And she forged reports outlining the maternal health cases she definitely was seeing to explain her use of supplies. In so many cases I see front-line workers making up stories to cover up the work they were actually doing. Lying about how many cases of Malaria was being seen to make sure flow of money and medications did not stop.

The US spends about 0.3% on foreign aid. The UN goal is 0.7% only a handful of countries meet that. The only country that goes beyond 1% is Norway.

Was there a discussion of loan repayments? In particular the interest? How much money are poor countries (what percent of their GDP) are they spending on loan repayments?

yes we are overspending on foreign ade... we should spend it on space

Adrian you are both Smart and a good teacher

This is the only non-linear Crash Course.

I dont think that survey is reputable, military intervention could also be seen as foreign aid.

Some of the American foreign aid is even destructive. Giving away an agricultural surplus away for free might sound like a great idea - but... Leading the receiver pay for shipment and destroying the local agricultural production by this unfair competition is not. And it get really worse, when the local agricultural production is whipped out and the US does not have a surplus.

*insert statement that offends 99.999% of internet users*

Not only is it less than 1% but the Aid that the US gives is not for free there are certain political and economic concessions in return for those.

TIED AID At 5:20 you state that there is a positive correlation between the levels of aid and levels of trade between two countries. There is also an insinuation that this is a positive thing--which would come close to arguing for tied aid (the administering of aids with stipulations such as that money must be spent on companies from the donor country or on ventures that the donor country has an interest in). Studies have repeatedly shown that tied aid forces capital to be used in a way that disregards how the actual recipient believes money would be best spent. * [Scenario 1] Donor wants an iconic creation. Eg, bridge, airport, etc. Recipient says there are other infrastructure projects (eg, roads, water) that are a higher-priority but, since they are beholden to the donor, the less-useful iconic project is what gets built. * [Scenario 2] Donor wants materials or equipment to be purchased from company XYZ (which is based in the donor country). Recipient says that they can buy that good (or a substitute) for half the price but, since they are beholden to the donor, they are forced to give half of their 'aid' to company XYZ for an over-priced product. Great series and I'd love to see a further exploration of the economics of aid/development :)

The percentage of the national budget is a problematic description of how much foreign aid a country gives. The most common yardstick, used by both countries, international organizations, NGO's etc. is the percentage of the country's Gross National Income, GNI. All the member states of the OECD has promised to give at least 0.7% of GNI to foreign aid. As you showed at 1:20 the US only gives about 0.2% of GNI in foreign aid, far below what they have promised. If all developed countries gave at least 0.7% the amount of foreign aid would be enough to save millions more lives.

When we studied charities in my health econ classes I believe I hit maximum jadedness

please talk about rescource-base economie!!! TZM

For every $1 given in aid $7 is taken back by conglomerates and political lobbyists through immoral means. 😑

I can see why you would choose who to help. helping others can be a dangerous thing.

Here's what I would say if I was doing an interview about foreign aid: Me: We should give more to foreign aid, but we should make sure it isn't stolen by corrupt dictators. Interviewer: Why should we give more? To be nice? Me: Not really. Because we should make the world a better place. Interviewer: Why should we make the world a better place? Me: Because it's a goal worth having, and if you don't have a goal worth having then why are you even alive? Half your motivation for getting out of bed in the morning is gone.

People think our army is foreign aid lol

I think there is also some point. Poor people with no food and no ability to earn some money to feed themself and their children will not just wait their depth. This people are pefect material for any radical movement which can give them some food any money and explain who is their enemy. Point is - poor, devastated people are dangerous in long term. They are a perfect ground for dictatorships, radical movements, civil wars, wars, etc, etc, etc.

I'm a simple man. I see you exclude Taiwan from China, I press like.

I have a Question Since you said the financial aid is given more to countries where the donor can make less restrictions for trade which will be done mostly on the natural resources of the recipient ( for which the recipient will lack money to make use of those resources) Isn't the foreign aid is a type of bribe ( since most of it is been used up the corrupt leaders of the recipient state) and also in turn gives the donor state to stay more economical better than recipient while using there natural resources.

I sent some of those remittances!

1:23 I don't believe she said it with a straight face.

I thought maybe part of it was to keep people stable in their countries and to help avoid too many people crashing other countries. At least it makes sense to do so.

!% seems kinda big when you see that the total science budget is 3% that NASA, NIH,etc. Investing another 1% in science could be better than 1% in foreign aid.

part of the confusion is foreign aid numbers that you provided didn't take into account other money given to other countries to be our friends. example. $5B proposed to Israel this year And the countless billions more. that is the foreign aid that people are complaining about

Why should it be more than 0% ? Also, 1% is a whole freaking lot of money, people underestimate how many things you can do with 1% of the budget. They want American money, but hate the "American way", when the "American way" is what gave it it's money.

The argument that foreign aid is only 1% of the budget ignores the fact that that's just the part of the budget actually called " foreign aid ". For example at least half our military spending is actually foreign aid. We certainly don't benefit from it.

The problem here is there are people starving in the United States this is why foreign aid needs to go and use to take care of people in the United States instead of other countries.

Well the amount could be considered a bit higher if one includes military bases and training in allied nations. But regardless of what the percentage is, even 1% is a significant amount of money given the sheer amount of money passing through the government. This is money that could be spend on aiding the people paying into it. The government shouldn't send it's taxpayers' money abroad when citizens themselves face tremendous issues. This money should go towards the citizens first.

Sweden yes

This is a pretty debated topic in the comment section, but did anyone else get massive amounts of goosebumps when they showed the footage of the parasites being pulled out of the child's leg?

where is the guy that looks like mark cuban????

the fees for sending remittances back home shouldn't go to private bankers. governments should do agreements for such transactions and senders should pay a tax instead of the fee for sending local money out of the country's circulatory system.

and sweden is so hapy with non residents right now

Is it possible for "Baltimore" to apply for foreign aid? How about Detroit? Homelessness is rampant, schools are in shambles. Many more once proud American Cities and Towns are facing third world living conditions. Charity needs to be directed where it is most needed.

You didn't talk about how in the European Union money is transferred from richer countries like the UK and Germany to poorer countries, could that not be considered a form of foreign aid?

Good idea

1% of the entire US Budget which is the largest in the world is not small in fact 1% is probably more than the GDP of several countries

"Foreign aid transitioned from geopolitical... to sending aid to strategic partners like Israel" Yeah that's not geostrategic at all...

where do u get your data ?

They over estimate the % because they underestimate the total budget. The numbers are not within the most peoples frame of reference.

My question is why fund people who goes against your interest? China doesn't do that nor Russia.

Can crash course do an African history series and a series on soviet style socialist countries during the cold war (including non aligned Yugoslavia) because no one ever talks about those topics in other history classes.

lol my relatives in ethiopia always ask for iphones and money whenever I talk to them.

Adriene missed her calling; she should have auditioned as the teacher in the movie Serenity.

This was great, Thanks!

I don't care what the percent is $48.4 billion is a lot of money. We could do a lot with that money to help the American people.

I think of military action as aid in several cases... Granted I'm uninformed, but I think some of it counts.

Compare India to China. India has gotten tens of billions of dollars in foreign aid from Western nations over the last 50 years. China on the other hand was Communist and thus received far less foreign aid than India. However, today we see that China is far ahead of India in economic development, in education, and in infrastructure. What happened? After Mao died Deng Xiaoping introduced massive market reforms and the Chinese Communist party has done a remarkable job at modernizing China. Love em or hate em the Chinese Communist party has had a tremendously good record at taking China out of poverty. India on the other hand has turned into a dysfunctional Democracy. India's government is far more corrupt and Nepotist than China. India is a mess. Both countries are growing and have a bright future, but this shows that foreign aid doesn't contribute as much to development as people would think. Political and economic reform is the true driver of development.

Did Hank Green become a girl?

Ahh Marshall Aid , "Hey Finland need free money?" "No , soviets union said i don't need it."

Poverty Inc on Netflix tells a lot about what foreign aid does to a developing country's economy.

Yeah, notice remittances are three times government foreign aid and actually go to people who need it. If government foreign aid were rated by one of those charity rating sites it would be among the worst. That money goes to foreign governments not to the people, like with our billion dollars a year going to prop up dictators in Egypt. Also much of that money is earmarked as in 80% of the money we send to Israel must be used to purchase U.S. weapons so really it is just a subsidy to our military industrial complex and not foreign aid at all. Though yes, it can theoretically be used to help foreign countries, however when we pay taxes it is to our government to help our country. Government should stay out of the business of foreign aid because they are terrible at it, they do it for the wrong reasons and it is not their job. As we can see private individuals do far more already and that is where it should stay.

Early in crash course econ tended to make me sad - it's getting easier.

Nice video as always. Are remittances good or bad for the country where the money is from?

do Trade Deficits