Perspectives on Development Aid…

There are two, large conflicting opinions on the effectiveness of aid. Many of the aid agencies and some economists claim that aid that is focused and purposeful can be a strategy to lift people out of poverty. Other economists claim that development aid throughout African has been wasted over the past 50 years, and has only served to fuel corruption and a culture of dependency.

What is aid…

Foreign aid consists of financial flows from the developed world to less developed countries. It can be bilateral (between two countries) or multilateral (between multiple countries, through aid agencies) Some of these flows are soft loans, which receive more favorable interest rates and terms; others are grants which don’t need to be repaid. They can be further classified as tied aid when the money flow needs to be spent purchasing goods from the donor nation.

What are the motives for providing aid?

Nations can offer aid for a variety of reasons. Many developed countries grouped together at the Earth Summit in the 1992 and pledged to donate 0.7% of thier nations total Gross National Income (GNI) as foreign aid. The graph below shows how successful northern Europe has been in reaching these targets and how far the rest of the world still has to go.

Source: OECD

  • Political and Strategic Motives: Historical links have provided the key motive for bilateral aid between many countries. Some of the colonial links between France and parts of Africa have informed thier aid strategies. In parts of Asia the spread of communism promoted USA to support countries as the USSR supported the pro-communist regimes.
  • Economic Motives: Aid is used by many developed countries to support the development of closer economic ties. China’s investment into the Democratic Republic of Congo is a good example of this as explained in this article Africa, Business and Development – Times.
  • Humanitarian Aid: In the days after any natural disaster such as the Haiti Earthquake or Japanese Tsunami, countries have pledged grants to support the redevelopment of countries. Developed nations have also supported the drive towards the Millennium Development Goals to alleviation of poverty in parts of Africa by granting vast sums of money in an altruistic fashion.

How is aid helping?

For many countries, aid is the key tool to breaking the poverty cycle. Increased foreign grants can be used for loans, therefore breaking the savings/investment constraint that low income societies face. Small loans allow families to invest in capital, fertilizer or education. In many countries aid makes up a large percentage of social spending, such as in Tanzania up to third of total social spending comes from aid. Local government do not have the tax revenues to replace aid and therefore need it to supply basic services such as education and healthcare. The two videos below help explain how targeted aid can be effective tool in the development of countries.

What are the problems with foreign aid?

There are numerous critics of foreign development aid, who claim that trade is a more sustainable path to prosperity. The following video is perhaps the best intellectual critique of the issue. The main argument against aid are as follows.

  • Aid is a breeding ground for corruption: There are numerous cases of governments using funds for personal gain or to fund armies. The government of Haiti was once considered the most corrupt in the world and after the earthquake in 2009 lead many government to be skeptical about the effectiveness of their donations given the politician historical record.
  • Aid substitutes for rather than complements domestic government revenues: Many governments need to develop the tax system so that they can collect sufficient revenue to provide essential services. Too often aid is used in the place of tax revenue which is a short term solution and breeds a culture of dependency.
  • Aid does not reach those in need: Sometimes aid is tied to projects that do little to support development. Cases of countries developing miles of fiber-optic broadband internet connections when people starve is a prime example. Sometime corruption by local official prevents all of the money reaching those in need.

Questions – borrowed from the original blog post below.

Worksheet with Questions

Part 1:

  1. What factors does Paul Collier point to that contribute to the “poverty traps” many African nations find themselves in? [3:07]
  2. What have the two main goals of foreign aid policy been over the last 50 years, according to Dambisa Moyo? [4:45]
  3. What are the “four horsemen of the African apocalypse?” How does Moyo think these four obstacles to development can best be overcome? [5:14]
  4. What is Paul Collier’s opinion of the role of free trade in promoting human and economic development in Africa? What does he think about Africa’s traditional dependence on primary products and commodities? [7:45]
  5. Before economic growth and development can occur, security must be achieved. Why is security, according to Collier, the number one obstacle to achieving meaningful development in Africa? [8:30]
  6. In a dissenting view, Dr. Jeffery Sachs argues for more aid to Africa. What types of aid does Sachs believe is absolutely crucial for Africa to continue to receive? [10:39]

This is an excellent post by Jason Welker, that goes into the evaluation of aid and trade in more depth. The Bottom Billion: Aid and strategies for achieving economic development It also contains the second part of the above video.

The economic concepts and definitions in this post are borrowed from the detailed textbook – Economics for the IB Diploma by Ellie Tragakes


Googling Better – how to search the internet

In IB Diploma Economics, students have to write four commentaries about economic events that are published in the news. Therefore students are always searching the internet for good sources of articles. Google has always been a pretty reliable tool to search for articles but students seldom use the advanced features to refine their search and to find good articles. Becoming more efficient in using Google is great way to become a more productive student. I will explain three new innovations – Side bars, Timelines and the Wonderwheel.

Posters illustrating many of these ideas are available from Google here: Google Posters

Hint 1: Using the side bar

The side bar is a new Google invention which allows you to filter the search for different types of media. You can search just sites which produce news articles, or only images. This is a first good step to refine your search. I often select my location as the country I am researching . This is useful if I am trying to find and electronic version of something from yesterdays news or to research news from a particular nation.

Hint 2: Using Timeline functions

This is a new tool which allows you analyze how an event evolves overtime. The Timeline button is located towards the bottom of the sidebar. When you search for a specific thing and use the Timeline function, Google will show dates mentioned in the article.

As one simple example, it is nice to look at “Barack Obama” You can see how there were very few pieces of information about Barack Obama in the 2000’s, but by early 2008 and his election in November 2008 there was a huge upsurge in information available.

Another example is below for the the term “currency crisis.” You can see that the term currency crisis can be found in lots of articles. if you want to look at more examples in the years 1990’s you can click on this period to get a more detailed look. This would be a good tool for students doing extended essays to identify previous examples of currency crisis. With some clicking you can identify the blip in 1997 relating to the Asian Financial Crisis. This could be a good parallel to the current economic events.

Hint 3: Using Google Wonderwheel

This third and final hint is perhaps the nicest way to filter and search for articles using Google. If you type in a simple concept such as unemployment, inflation or free trade and then click on WonderWheel from the SideBar you will see a clickable search tool like the image below.

The WonderWheel is like an evolving mindmap. When you click on a new node, it will expand into a new set of subtopics and filter the pages to your selection. If you keep clicking on further nodes you will see the number of available results drop. Eventually you can click on the news button at the left and find a small selection or articles that fit you criteria.

By scrolling to the very bottom of the page, and clicking on alert, you can then easily create a weekly email alert so Google will send you a message when new articles that fit this criteria are published. You can also set up a live feed using this function to your RSS reader.

Why are these tools useful for students?

These types of tools support student’s digital literacy skills. This is education concept where students become more capable of using the internet to synthesize information and to analyze text to develop an understanding. In a digital-age these skills are radically different than a traditional textbook focused classroom. Using search tools to filter the internet for information, is an important skill-set for a 21st century student.

What can be achieved in 45 mins… Google Docs

I am still an avid fan of using Google Doc’s to spice up some otherwise boring subject matter in Economics. Today students were thinking about the tools available to governments to correct a budget deficit. The cool part about this part of the course is that students are applying ideas from other parts of the course to solve a new problem. Therefore it was a good chance for them to apply their ideas and work independently and yet collaboratively at the same time.

Google Docs – Methods to Correct a Current Account Deficit


I structured a class discussion first about how governments could boost exports and reduce dependency on imports. Once we had a few points we added these to a public google doc (saves stressing over inviting students and signing in). Then each student picked one idea and expanded on it, whilst trying to apply a model they have previously used. Once they finished the short lesson, I tidied up the formatting and added a few extra things from my PowerPoint presentations to reinforce the main ideas. Tomorrow at the beginning of class, I will get them to read through the finished piece of work and identify two improvements. Once we have finished they can save this to their notes (download as PDF) and we can move on to the dreaded J Curves and the Marshall Lerner Condition.

Extended Response Writing using Google Docs

The writing of extended responses is an important skill that Economics students need to acquire and develop throughout the two year course. I always try to use collaborative approaches and scaffolds to assist students writing skills. My favourite digital approach for developing these writing skills is to use a collaborative google doc.

Traditional Approach – posters, paper, group writing, refill

Digital Approach – google doc, group planning, chat functions, projector

Google Docs have an impressive ability to record changes in real time. The document will track the cursor of other contributors in different colours, show contributors names and allow you to chat to other users in the side bar. This is a big “step-up” from wiki options. I have explained the wiki options in a previous post. Wikis are still relevant and useful, but in slightly different ways.

Today I wanted students to deepen their understanding of exchange rates as this is something that we have been covering for the last few weeks. For SL students the focus was on effects of an appreciation of an exchange rate and for HL students evaluating the effectiveness of Fixed versus Floating exchange rates.

You do need to prepare these types of lessons in advanced. I have created two google docs from my gmail account. Each has the same instructions, but different questions. (once you have created one document, chose the copy function from with the file menu, and just change the file name) When the students arrived to class they had to type their email addresses into my computer, so I could share the doc with them. You can make the document completely public, therefore allowing you to share the link with students and doesn’t require them to sign in. I prefer the sign in option, which does take slightly longer. This allows you to track students names on the doc rather than numerous unknown contributors. But viewing the documents in real-time whilst the students are editing allows you to see who is struggling and who is able to write more.

Today I used the google docs with a small class of ten students. After lunch I will trial it with 24. Should be fun.

A sample of the HL work is here

One of the best ways a Google Doc can transform the teaching process is through the use of the data projector. When the class were brainstorming their ideas for the essay, I could facilitate this discussion in real time through seeing how the students were typing on the whiteboard. It was a quick tool to help students arrange ideas and then think about prioritizing arguments. The instant gratification for students, offered lots of encouragement and engagement for an otherwise lackluster Friday morning.

An Economics Teacher – using simple IT for lesson planning

Since I have been teaching I have always had a laptop on my desk. I am therefore perhaps one of a rare breed to teachers that are digital natives to teaching. My dad took the first Computer Engineering course available in University in New Zealand so perhaps it is in my blood.

I use a variety of tools that make the lesson planning aspect of  my life easier.

Electronic Unit Plans (see sample below)

I have never been the most organised of teachers, but I enjoy having everything accessible and close. I there always create unit plans using a pretty similar format. Since I became a teacher in a rich 1 to 1 environment, I find my unit plans very useful.

I set out each lesson in a row of a table. Some units such as teaching Elasticities have about 10 distinct lessons, which obviously meld into each other. These lesson plans are just a few bullet points but contain hyperlinks to remind me what I used in previous years. It is good to remember that you can hyperlink documents that reside on your computer as well as external websites, blogs or videos. Here is a little sample below.

The important part of these lesson plans are that they evolve and change constantly. After teaching a lesson that went well, I will go back and add these ideas. I always find the funniest thing about a teacher is that your greatest inpiration and best ideas come in the last five minutes before a lesson, or even during a lesson. A good practise is to therefore document these ideas to improve the teaching process, and to act as a self reminder.

I keep each topic plan, in the same document as the larger section of the curriculum. My plans for Micro Economics are therefore a very large document. This means that I use only five documents across a two year course.

As a sole teacher, this process is obviously pretty easier. I also wonder how teachers in very large department share ideas and documentation. It would be very easy to put these topic plans into a Google Doc and for teachers to collaborate, but I guess most teachers also like a degree of independence. Our school uses a tool called Atlas Rubicon for documenting the curriculum electronically. I dump my unit plans into the system at the end of each year. I struggle to use Atlas in real-time, like a word document as it always seems like a thousand clicks away in cyberspace.

Topic Overview – I pillaged some of the learning objectives from textbook and Jason Welker’s amazing wiki

Lesson Planning – generally some brief ideas and then links to activities

Lessons and Assessments – some specific ideas about formative and summative assessment

Teaching ideas – the World Trade Organisation

I usually find teaching students about the World Trade Organization rather tedious, but have recently discovered a few new resources. The learning objectives or pointers from the DP Economics Syllabus are rather simple.

  1. What are the aims of the WTO?
  2. Explain the successes and failures of the WTO viewed from different perspectives.

The aims of the WTO are relatively easy to understand and I find it is hard to teach these in a dynamic, exciting fashion. In the last month the WTO has created a few good and yet concise videos about the purpose of the organization. (warning: the video seems to stop at 4.48 not sure what is shown beyond this point)

Here are some discussion questions you could use with students.

  1. What is the purpose of common trade rules?
  2. How are trade rules created and by whom?
  3. What was the purpose of the Doha Trade Round in 2001?
  4. How does a trade dispute system work and why would countries take a dispute to the WTO?
  5. Two thirds of WTO members are considered developing nations. Do all groups within the WTO have equal representation and voting rights?

Explaining the successes and failures from different perspectives?

Firstly students can brainstorm the successes and failures of the WTO by researching available media sources eg Google News. The different perspectives part is more difficult. A potential strategy is to break the class into groups representing the various perspectives and conduct a role play or impromptu meeting. Some of the obvious perspectives could include

  • Developed Exporting Nations – Germany
  • Developing countries which are export dependent (Chile for Copper, Ethiopia for Coffee)
  • Developing countries who attempt to export value-added products to developed nations. (Raw materials face relatively lower tariffs, compared to value added products which face substantially higher tariffs)

This video produced from the WTO’s perspective advertises the benefits of aid for trade.

This independent video explains the failures of the WTO

The textbook “Economics for the IB Diploma – Economics” by Ellie Tragakes evaluates the outcomes of the Uruguay Round of WTO negotiations. This round produced a significant reduction in global tariffs of approximately 33%. Ellie explains how experts are critical of how these negotiations failed to create the opportunities for all countries to equally share the benefits of free trade. This would be a good extension reading for students. (Pg 355-357)

This aspect of economics seems to be assessed in the Data Response section of the exams. The only extended response questions I could find relating to the WTO is below.

Evaluate the extent to which the international trading system has contributed to economic growth in developed countries? (November 2002 Q4 HL)

Teaching Trade Blocs and Economic Integration

I find the the topic of economic integration an interesting part of the syllabus. As the world becomes more and more globalised, economies are becoming more integrated. According to the World Trade Organisation, International Trade has grown nearly every year since 1991 with a few exceptions. The most recent data suggests international trade will likely surge by 13.5% in 2010.

An important factor driving the growth has been the liberalization of trade barriers, and the development of trade agreements. In class this week we have been learning about Trade Blocs. The students are completing small research projects about different blocs and agreements around the world.

Last year I did something similar to Jason Welker as he posted on his site. see here

This year I tried to developed focused tasks for each group. Therefore I have made up questions for each of the groups, which they will research and then present back to class. The descriptions of the trade blocs are relatively similar but the analysis questions at the end are each a little different. Feel free to borrow or adapt.

Unemployment and flexicurity in Denmark

The Danish people are a notably generous and happy group of people and for many years they have had the most extensive welfare system in the world. Danish citizens pay nearly 50% income tax, which allows its citizens to enjoy a high quality of life, free education, healthcare and lavish unemployment benefits.

Since the Global Financial Crisis in late 2008 unemployment in Denmark has more than doubled from 1.7% to 4.2% now. This is still far below levels in other parts of Europe, such as Spain with 19% unemployment. The Danish government is however evaluating the level the unemployment benefits, as the government budget tightens. An unemployed worker in Denmark is entitled to an unemployment benefit which is between 70-90% of their prior salary. Currently they can receive this compensation for up to four years.

High unemployment puts two specific strains on the governments budget during a recession. There are decreased tax receipts as workers are forced out of work, but at the same time expenditure on transfer payments to the unemployed workers will simultaneously increase. Therefore a swift rise in unemployment in the recent recession, lead to some governments such as the United Kingdom falling into a deep budget deficit very quickly. The opposite effect occurs in an economic boom where transfer payments fall and tax revenue increase, leading to a swelling of the budget surplus.

Policy makers in Denmark are therefore planning to trim the generous safety net provided to its workers,

Having found that recipients either get work right away or take any job as their checks run out, officials are also redoubling longstanding efforts to move Danes more quickly out of the safety net.

“The cold fact is that the longer you are out of a job, the more difficult it is to get a job,” Claus Hjort Frederiksen, the Danish finance minister, said during an interview. “Four years of unemployment is a luxury we can no longer allow ourselves.”

New York Times – Liz Alderman – 16th August 2010

Statistics from Denmark show that in the Global Financial Crisis of late 2008, 100,000 Danish people were registered as unemployed. Approximately 62% of these people found another job within two months, and only 6% of these people had been unemployed for longer than two years. This highlights the fact that Denmark has a very flexible labour market. Meaning in simple terms, that workers can freely move between jobs, and can be hired and fired more easily than in comparable European nations such as Germany or Sweden. The flexibility and security of the Danish system is nicknamed “flexicurity”. The following comments highlight the elements of the flexicurity culture.

“It’s no surprise the government is saying that programs that are highly expensive and give a Rolls-Royce treatment to citizens have to be trimmed,” said Iain Begg, a professor at the London School of Economics. “So the search will now be on for labor market policies that deliver more people in work with less money, which has an inevitable air of the holy grail about it.”

In Denmark, employers have carte blanche to hire and fire, and in most cases laid-off people are guaranteed about 80 percent of their wages in benefits, a figure capped for high earners. In turn, they must participate in retraining and job placement programs tailored to get them back to work, which the government has intensified.

Each year, a remarkable 30 percent of Danes change jobs, knowing the system will allow them to pay rent and buy food so they can focus on landing a new position. About 80 percent belong to unions, which manage the workplace, help run the unemployment insurance program and press the laid-off into retraining.

New York Times – Liz Alderman – 16th August 2010

If 30% of workers are willing to change jobs each year, this would have a positive effect on the economy. This proportion is high because workers are not scared into becoming unemployed and poor. Some like myself, would consider the opportunity cost of receiving 80% of my previous wage and an unemployed holiday a great trade off. Of course, workers also consider issues such as social dislocation, loss of skills in the decision making process and are therefore keen to get back into work as quickly as possible.

Within Denmark and the flexicurity system; it would suggest that workers are prepared to accept new challenges and develop skills that are required in new jobs. This also opens up jobs to younger graduates each year. During a recession the same system allows firms to reduce thier demand for labour quickly and to restructure the business to the new economic climate. The supporting welfare structures in Denmark which help unemployed people with training and job applications is an important spoke in the system. These elements are considered labour market supply side policies.

CC Commons - darkb4dawn - Flickr

Discussion Questions:

  1. Describe the concept of “social safety nets”
  2. If the Danish government continued to allow up to four years unemployment benefit, what could be the potential impacts on the Supply of Labour within Denmark?
  3. Describe why Denmark has the one of the lowest Gini Coefficient scores in the world (0.29, CIA Factbook 2007)
  4. How does labour flexibility or the Danish system of flexicurity, improve economic growth?
  5. Evaluate the relative merits of Denmark having one of the highest income tax rates in the world.

Free trade, fair trade and a Friday DVD

Our school runs a timetable where we see our senior classes three times per week. One 45 minute class, plus two double 45 minute periods. I always check two things in my timetable in the beginning of the year. My Monday morning slot and the Friday afternoon slot. I have had some great Friday afternoon classes in recent years, but you also have to pull the tricks out of the tool box to keep them on task and productive. I have double Economics scheduled each Friday this academic year.

This Friday I have given in to watching my favourite Economics DVD of all time. A little snippet of the movie Black Gold is shown below.

Black Gold: A film about Coffee and Trade, is a wonderfully insightful documentary about the plight of Ethiopian farmers who grow the sidamo coffee beans. The film begins by explaining the price farmers receive for a kilogram of coffee beans. The documentary follows the trade of coffee from the farmer, through the commodity markets to the multinational companies. The narrator explains his drive to improve the livelihoods of the rural coffee growers by promoting fair trade.  I purchased the DVD from the films website.  It arrived in my mailbox a few weeks later. The website also provides some good resources and a coffee calculator, which explains the travesty and oppression created by free trade.

Fair Trade and Free Trade

The movie or even the preview is a good opportunity to contrast the concepts of fair trade and free trade. There is a clear distinction between these two concepts, but sometimes the media and even students use these terms interchangeably. Simply, free trade is trade without barriers, facilitating the free movement of goods and services between countries. Fair trade is the concept where the gains from free trade trickle down to people in less developed parts of the world, eg rural coffee farmers in Ethopia.

Some potential resources

  • An interview with economist Paul Rice provides a nice overview of these two concepts – link
  • The Economist magazine conducted a debate on their website about these concepts – link
  • Jason Welker posted a good article a while back which critiqued the benefits of Fair Trade – link
  • A handout I also found could be useful – How-is-Fair-Trade-Different