Why do extremely poor countries often remain extremely poor despite continuous foreign aid and support?
Payments
Asked by Question Bot10/Jun/20151 answer
1 Answer
F
Faisal Khan
Answered 10/Jun/2015
There are many answers and views to this. Here are mine:
- Taxation: Poor tax collection.
- Poor Allocations: The Tax collected has poor allocation &/or allocation with lots of leakages.
- Law (including Courts): When law of the land is not properly applied, there are a lot of leakages in the system, which affect the economy, including taxation.
- Manufacturing Sector: I've used the term manufacturing loosely, but the country must be able to domestically generate a product &/or a service. If a country is not improving its output, stagnation will remain.
- Import vs. Exports: If a country is importing more than it is exporting, it has a current account deficit. This means, on a net level, the country owes money in a foreign exchange to other countries, banks or external organizations.
- Expensive Loans: Most governments succumb into accepting expensive loans, or loans, which dictate a lot as far a country's economic path is concerned. Such concessions, either tax the economy heavily, or its natural or human resources for 3rd party gain (opening closed markets, etc.) Such loans can dampen the otherwise prospect of a country trying to get out of poverty. The flip-side argument is that without these loans, the country would not go broke completely and life as one knows, would come to a standstill in these countries. Personally, I hold the opinion, loans should be avoided.
- Diaspora Incentives: Not providing incentives to the diaspora for investing back home, without the burden of the investments being taxed.
- Government Spending: Government spending on infrastructure is a great way to improve the economies. It create jobs, spurs economic growth, etc. Most poor countries hold the view that infrastructure investments can be kept aside for the time being, or not enough infrastructure investments in cities and districts where it is much needed.
- Calling for Help: Many governments shun the idea of talking to foreign specialists or maverick specialists who can improve their economy. National pride over-shadows many-a-times the competency levels available within the country.
- Government Control: Government retains control of loss making entities that they would be better off just shutting down or selling off. Think national power grids (distribution) and generation, national airlines, railways, highways/road authorities, water and sanitation, etc.
- Military: Excessive military spending. Most countries who are stuck economically, will for ever be having an increased military budget spending without looking towards friendly diplomacy, yet spending blindly on more guns and ammo. In developing countries, most governments get to rule only if you please the military.