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Impact of foreign aid on rwanda's socio-economic development as guided by Millennium Development Goal (MDG) 1 “Eradication of extreme poverty and hunger”:case of Gasabo District

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par Claire Marie Michele MUKARUTESI
Women's university in Africa - Master of science in development studies degree (MDS) 2011
  

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CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.0 Introduction

This chapter offers a detailed review of related literature. It will further trace the history of the problem against a background of theoretical underpinnings. Ringrose (1986:78) notes that literature review discusses published information in a particular subject area, and sometimes information in a particular subject area within a certain time period. A literature review can be just a simple summary of the sources, but it is usually has an organizational pattern and combines both summary and synthesis. The flow of foreign aid to Rwanda has been a subject of discussion especially following the notorious genocide and its aftermath. To assess the impact of foreign aid on the socio-economic development of Rwanda, there is need to review some related literature.

This chapter deals with the conceptual framework of the study, the theoretical framework, understanding poverty in the context of Millennium Development Goal number one, impact of foreign aid on poverty alleviation (global trends and trends in Africa in general and Rwanda in particular). Finally, the chapter shall further offer implications of the reviewed literature.

2.1 Theoretical Frameworks

Now that foreign aid, development and poverty have been explained in broad terms, there is need to analyze some of the contending theories on the nature of foreign aid. Four theories are hereby selected for some detailed analysis. To this end, this study is principally informed by four major theoretical frameworks namely the Modernization Theory, the Dependency Theory, the

Interactionist Theory and the Feminist Theory. These contending theories on aid provide various windows by which the impact of foreign aid on poverty alleviation and economic development can be objectively assessed.

2.1.1 The Modernization Theory and Foreign Aid

One of the first models used to understand how states and regions started on the path to economic growth was Rostow?s Modernization Theory. Analyses of European growth after World War II indicated a fairly rapid and linear trajectory of economic growth that was built on a simplistic model of saving and investment. According to Rostow?s analysis, modernization takes place in a series of five stages characterized as follows:

The traditional society.

Preconditions for take-off into self-sustaining growth such as increased education, manufacturing, and other forms of capital development.

Take-off stage occurs when the economic norms become established at micro, mezzo and macro levels, which lead to

A drive to maturity characterized by economic diversification and increased standards of living.

The final stage is characterized by mass consumption, which drives continued production, technological development, and job growth. (Todaro: 2006: 104)

These stages imply that the rate of growth of GDP is determined jointly by the national savings
ratio and the national capital ratio. More specifically, it says that in the absence of government
control, the growth rate of national income will be directly related to the savings ratio (ibid). The

economic logic of this paradigm is simple: in order to grow, economies must religiously follow the stages; and to achieve the imperatives of each stage, they must concentrate on savings and local and direct foreign investment. Rostow assumed the validity of the primary economic model of growth at the time, the Harrod-Domar growth model (ibid), which was the basis for the savings + investment = growth formula. While intuitively attractive (to the capitalist worldview) and empirically supported at the time, it assumed a linear growth based on the two isolated variables of savings and investment. While such a trend seemed to be the case in Europe after the world wars, Europe?s advantage over other regions (such as Southeast Asia and Africa), is that it already had a pre-existing infrastructure, and a population already educated in the skills and norms necessary for technologized life. Among other factors, it ignores hegemonic consequences of having military, political and economic power at a state/region?s disposal to procure capital external to itself.

This theory assumes that the «Third World» needs Western donation in order to advance. Indeed, one may observe that the discourse of foreign aid is rooted in the Modernization Theory. Modernization theory understands the «underdeveloped» nations of the world as traditional societies. At some point in history all societies were «traditional.» These societies were able to progress to modern social organization through innovation and technological growth, particularly within a capitalist system where capital is privately owned. Capitalism encourages the individual to constantly strive toward improving her product. Growth is promoted by this push for out-performance, while costs are minimized and efficiency promoted. Therefore, just as modernization and capitalism push a nation to modernity, the poverty of the developing nations can be attributed to their failure to innovate, resulting in technological and therefore economic

deficit, and a consequent inability to modernize. Foreign aid, understood as a means to improve the conditions of life in underdeveloped nations, is couched within modernist thought. It is the practical expression of the theoretical premise that modernized nations are morally obligated to assist other nations to transition to modernization Todaro (1981). To this effect, the modernisation theorists would support the idea that third world nations should always look west in order to develop through coping western models of development. Foreign aid may thus be perceived as a rescue package for an affected nation to be freed from hunger and poverty.

This brings us to the major criticisms levelled against the Modernization Theory mainly by Dependency theorists who include Marxists.

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