Types of Aid

Aid is the popular term for one form of capital flow to developing countries. This is technically called “offical development assistance”.

Aid must meet two criteria. Firstly it must be non commerical from the donors point of view. They should not give with the aim of making a profit. Secondly it should be characterised by concessional terms. The interest rate on the loan should be lower than the ruling mkt rate.

Donors agreed in principle many years ago that their aid programmes would constitute a sum equilvalent of 0.7% of GNP (Gross National Product). However the US is giving 0.1% of its GNP whereas the UK is giving 0.27% of its GNP.

Types of Aid

Grants

This is where a sum of money is given for a specific development project such as building  a new road, network or hospital. Grants are the most generous form of aid.

Loans

Loans are given at a lower rate of interest than in the capital market (known as soft loans). Conditions may be laid down by the donor country as to how the money should be used.

Tied Aid

This is where the recipient country must buy goods and services from the donor country with the money Also the donor country specifies what the aid should be spent on e.g. a specific project such as road building.

Multilateral aid

Is where a donor country gives the money to an international agency which distubutes the aid. Most multilateral aid is given through the world bank and IMF.

Food Aid

This is the direct export of food to developing nations. THe EU and US are major participants in these schemes. Often the food is surplus to donor countries.

Preferential tariffs

Thirs world manufactures can sell their products in the donor country with no or lower tariffs e.g. banana wars

MP’s expenses

There has been a lot of fuss about MP expenses recently due to the Telegraph publcising them. The number of MP’s who will not stand at the next general election is in double figures. I feel that some of the expenses are being taken out of context by the Telegraph ! Most of the MP’s have claimed within the rules therefore they are not at fault. The rules are !! and they need to be changed. I do think that a lot of them who have claimed within the rules have exploited them in the sense that they are trying to get as much money as they can but who can blame them. For example if you had a job where you could claim a company car and expenses for a second home (most of) you would take them. This is exactly what a lot of the MP’s have done except from the fact its public money !!!!!!!!

Obviously the rules need to change as loop holes are being exploited but most are paying for it now with their jobs and their reputation.

Human Development Index

The hum development index is a summary index that measures three basic aspects of human development:

1) longevity – life expectancy at birth

2)knowledge – adult literacy rates at birth

3) A decent standard of living – real GDP in US dollars per capita at PPP

The HDI attempts to give a more rounded indicatior of standard of living than GDP alone. For example a country may have a lower income than another but it might have greater equality in access to healthcare and education leading to a higher value for the HDI.

The highest value for the HDI is 1. However if a country is given a value of 1 it does not mean that the country has reached its full development it means that on the current measurement it is fully developed.

Development economics revision – indicators

Development does not simply mean economic growth it refers to an expansion of choices for an average person in a country.

Indicators:

GDP/GNP per capita (real)

GDP is the measure of output produced within a countries boundaries whereas our GNP is the value of UK owned output anywhere in the world.Per capita means per head of population.Real terms adjusted for inflation.

PPP

We have to compare economies in the same currency usually US dollars or euros. The exchange rate used matters and it should reflect purchasing power parity. If current exchange rates are used it can distort figures e.g. if the £ is relatively strong against the euro when our GDP is converted into euros it may seem that our economy is bigger.

Disturbution of income

Real GDP/GNP at PPP  is only a crude average the disturbution in most economies is highly uneven. Real GDP etc is only valid if the Lorenz curve sits on the 45 degree line. The further away the lorenz curve is away from the 45 degree line the less valid real GDP per capita is a statistic.

We can measure the GINI coefficient from this data = AREA A / AREA A + B

The higher the figure the greate the inequality. An answer of O implies no inequality and an answer of 1 (theoretical extreme) implies that one person earns all the income.

Swine flu 3

The number of cases of swine flu is 15 ! which two people have from not going to mexico, I still feel that there is a lot of fuss about this in the news etc.

yes i do think that there can be serious consequences but currently the virus seems mild, so dont worry and carry on as normal.

Taylor Swift

Is it me or is Taylor Swift a real talent, she is really pretty. Also her voice is amazing. I am addicted to listening to the Love Story on youtube its very catchy !!!!!!

Let me know your thoughts

Swine flu 2

So it appears that swine flu is currently only producing mild symptoms and therefore even if it does spread it is unlikely that a lot of people will die. You should take precautions such as washing your hands frequently after touching things such as doors etc and make sure you sneeze etc into tissues and do not touch tissues that have been used by others.

Swine flu

A lot of fuss is being made about swine flu currently. I think that there is a lot of panic about nothing only 5 people have it in our country and all those have recently returned from Mexico and there symptoms are mild. You have to start worrying when/if people who have not been to Mexico begin to contract it. Until then there has been too much about this in the news and it is probably scarring people. It has certainly been a distarction from the government. Tell me your thoughts about this.

Economic gloom and doom

So today we learnt that the economy contracted by 1.9% in the first quarter of 2009. Therefore the governments predictions are already wrong because this is more severe than predicted. The level of national debt predictions for future years is based on growth therefore they now are likely to be wrong. Therefore I feel that this recession will probably continue for longer. I do not think that the economy will begin to grow again at the start of next year.

The government are likely to be in trouble with debt I feel. I think that taxes will in the end go up substantially for everyone whatever your income (unless you have no or very little income) and that public services will be cut and therefore more jobs will be lost because a lot of the population work in the public sector.

Oh dear

Todays budget:

They have decided to borrow a record amount £175Bn but will this really see the end of the recession personally I don’t think it will although I hope that it does. There goes Mr Browns golden rule of borrowing 40% of GDP because this year it is expected that debt will rise to 59% of GDP and will reach a high of 79% before it starts to fall in 2016!

It is quite obvious that they will be big tax increases in the future to bring this down from a high of 79%! He has annouced the 50% tax rise for those earning over 150K which will be brought in next year but obviously more will follow. This I feel could cause more  people to move abroad as this may be beyond the tolerable level of tax and will act as a disincentive to some to move up the career ladder if they are just below this benchmark.

I do think he should have abolished the VAT cut that currently finishes in december because it does not appear to be having an impact and this money could probably be used in a better place.

To sum up labour is not going to get a chance to do the changes outlined for 2011 etc because an election has to be called next year and therefore they will no longer be in office and the Conservaties will come in and clear up the mess Does this feel like a similar position when Conservatives took over after the winter of discontent in 1979.  Labour need to admit their failings but I think every politician needs to learn something  from what has happened that there needs to be some regulation in some markets such as banking.

On the positive side Tesco annouced record profits !!!! so they are coping with the recession well and also they are going to expand their financial services part of the business – are going to offer a current account so maybe Tesco will become the next big bank.

Also the amount of people being sewing machines has increased as people are probably mending clothes/ making some to save money and I think that is very positive as before this mess all of us were becoming too materialistic. It’s good to see us going back to basics.

One last point, I think increasing the limit of individual savings to £10200 of which £5100 is cash. I think this will encourage more people to save more if they can and I welcome this move because I think saving is a habit which people need to pick up especially the next generation.