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Helping Hand
March 27, 2002

In the United States, a series of long-distance telephone commercials joke, "What can you get for a buck?" -- but according to the United Nations, it is no laughing matter to a billion people around the globe who need to live off a dollar a day, if not less.

Imagine trying to feed and dress your entire family on only $30 a month. The first things to disappear would be the phone and TV - chances are high your family could not afford such luxuries.

To stop the extreme poverty many people face, the United Nations and 52 world leaders gathered in Mexico this month to work out a plan. They concluded the most effective action against global poverty, illiteracy and disease is to give poor countries more money in loans.

Have and Have Not

In 1999, according to the World Bank, the average world income per person was $7,000. Wealthy countries, representing about 900 million people, had average incomes of $26,000. The developing world represents about 5.1 billion people but has an average income of $3,500.

To help narrow the huge disparities between rich and poor nations, wealthy countries like the U.S. and Japan give money directly to poor countries and organizations like the World Bank and International Monetary Fund.

Poor nations needing assistance apply for loans by submitting proposals to the IMF and World Bank. Experts from the borrowing nation and the lending organization review the proposal, and discuss how best it can work. Once an agreement is reached and loans approved, the money is released. In many cases the loans are concessional with little, if any, interest.

Ironically, many poor nations end up worse off financially after receiving foreign aid loans. Hit with corruption or a natural disaster, many poor nations often must take out more loans, increasing debt already owed. Many of the loans are never repaid. Fifty-two of the world's poorest countries owe $350 billion in loans to the IMF and World Bank.

In 1999, the World Bank gave out $29 billion in economic development aid. Due to the ongoing economic crisis in Japan, the largest donor of foreign aid, the organization has cut back in recent years. Last year, the World Bank loaned out $17.3 billion.

Even with an increase in aid contributions, the U.N. estimates an additional $50 billion is needed to reduce by half the number of people living off a dollar a day.

Money and Conditions

In response to the U.N. plan, the U.S. will contribute an additional $10 billion to foreign aid over three years. Collectively the world's richest nations give about $50 billion dollars in foreign aid yearly.

The new push to help poor nations relates to the destruction of September 11. Many world leaders believe that bad poverty converts poor countries into breeding grounds for corruption and terrorism.

"Poverty doesn't cause terrorism," said President Bush in Mexico. "Yet persistent poverty and oppression can lead to hopelessness and despair. And when governments fail to meet the most basic needs of their people, these failed states can become havens for terror."

While rich nations are stepping up to help poor nations, they're also demanding poor nations clean up their governments.

They want poor nations to demonstrate better self-governance, meaning they must create good economic policies and corrupt-free elections. World leaders are working on a set of standards to measure a country's progress that will help determine additional aid requests.

Help or Hindrance?

Despite new guidelines for rich and poor countries on foreign aid, there are many people who say foreign aid simply doesn't work.

Critics of foreign aid, like Treasury Secretary Paul O'Neill, have argued new guidelines won't work and that often the money falls into the hands of corrupt government officials.

They add that there are dozens of poor countries receiving foreign aid that are in worse shape than before. Sierra Leone, for example, has received foreign aid for years and continues to deal with widespread poverty and corruption.

Even more vocal critics argue foreign aid establishes a global welfare state and doesn't encourage poor nations to develop industries of their own.

Still, there is a great push to help developing nations out of poverty. From Pope John Paul II to U2 rock star Bono, many are expressing the idea of debt forgiveness.

Freeing poor nations of their aid loans, humanitarians say, will change the structure of poverty. They can then spend more money on helping themselves and their people.

-- By Carl Ballard, NewsHour Extra