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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