Foreign Funds Aid FDI and Remittances, Article Review Example

Although poverty exists in developed countries, the kind of poverty that exists here is not extreme (Sachs, 2005). In his lecture, Sachs argues that there are many possibilities for economic development in our time. He goes ahead to mention three important possibilities thus: meeting all millennium development goals before 2015, ending extreme poverty and ensuring reliable progress up the ladder of development by 2025 and finally, to afford to do all these things with only modest assistance from developed countries and international organizations.

Jeffrey Sach goes on to advocate for what he calls “The Big Push”, whereby massive aid is given in order to finance many simultaneous complementary investments in order to bring to an abrupt end extreme poverty. These recommendations sound very similar to those that economists of the 1950’s and 1960 were advocating for. This proposal overlooks the structural weaknesses that institutions charged with the responsibility of planning in these countries are facing. Therefore, without capacity building, it seems that incentives by aid agents might not take these countries far in terms of development. After all, it is also noted that the existing development investments costs are already extremely high compared to the level of poverty that the most impoverished populations in developing countries are going through.

According to a study by Kosack and Tobin, FDI and aid affect the pace of development in different ways.  Aid contributes more to those countries with more human capital. They also argue that FDI is not a good agent of economic growth and economic development; that in fact, it hurts economic progress.