Aid

Aid, from the French verb to help, is assistance usually from MEDCs (who can afford it) to LEDCs (who need it), or, as the Economist web site says, "a helping hand for poor countries from rich countries".  Aid is needed for the following reasons : emergency relief for disasters (i.e. 2010 Haitian earthquake), war relief for non-combatants (i.e. DR Congo), assist in development, provide more technology and R&D, fund specific projects (i.e. infrastructure), feed savings which leads to investment, etc.  Aid is given by nation-states (i.e. the United States, the biggest gross donor of international aid), intergovernmental organizations (i.e. United Nations), and non-governmental organizations (i.e. Oxfam).  If between two entities, the aid is bilateral.  If between more than two entities, the aid is multilateral.

There are two subcategories of aid, humanitarian and development.  Humanitarian aid is designed to help people in the short-run survive disasters (i.e. drought, floods) or war.  We see this through food aid, medical aid, and emergency (i.e. disaster ) aid.  The first two are self-explanatory.  Emergency aid includes emergency supplies like medication, clothing, gasoline, etc. to help people survive any sort of calamity.  In Haiti, we saw all three types of aid being donated and used (albeit not as efficiently as it should have : food, medical and emergency.
Important video of the disaster from Frontline (must watch, but very graphic).

Development aid, with longer assistance goals, is designed to lift people out of poverty through bigger and deeper changes within the country.  The technical term for development aid is Official Development Aid (ODA - from the OECD).  Click here for further information including the full definition for ODAs.

The following are different types of development aid (Blink & Dorton, 2007) : long-term loans (low interest for many years to provide a source of savings for LEDCs), tied (aid connected to macroeconomic goals to help the economy grow and develop), project (for specific projects like a new dam or railway system), technical assistance (via better, new technology and better human capital), and commodity (raw materials to help production of g/s).

Aid makes intuitive sense.  The more money given to LEDCs, the better able they are to overcome disaster and achieve economic growth and development.  Unfortunately, the results and evaluation of aid are not so clear.

The Economist web site reads :
"In practice, in many cases aid has done little good for its intended recipients (improved health care is a notable exception) and has sometimes made matters worse. Poor countries that receive lots of aid grow no faster, on average, than those that receive very little...
Why has aid achieved so little? Donations have often ended up in the offshore bank accounts of corrupt politicians and officials in poor countries. Money has often been given with strings attached, so that much of this “tied” aid is spent on com­panies and corrupt politicians and officials in the donor country. War has ravaged many potentially beneficial aid projects. Moreover, some aid has been motivated by political goals – for example, shoring up anti-communist governments – rather than economic ones.
The lesson of history is that aid will often be wasted unless it is carefully aimed at countries with a genuine commitment to sound economic management. Analysis by the World Bank sorted 56 aid-receiving countries by the quality of their economic management. Those with good policies (low inflation, a budget surplus and openness to trade) and good institutions (little corruption, strong rule of law, effective bureaucracy) benefited from the aid they received. Those with poor policies and institutions did not. This accounts for the growing popularity of conditionality in aid."  Authors like William Easterly in his great Elusive Quest for Growth make the same argument.