DO STATES EMLPOY AID AS A TOOL OF FOREIGN POLICY DRAW UPON TWO Essay

DO STATES EMLPOY AID AS A TOOL OF FOREIGN POLICY DRAW UPON TWO EXAMPLES - Essay Example First, it must set its foreign agendas, which are the issues and challenges core to a government and its citizens’ well being (Kahler, 1998). Second, the appropriate policies have to be formulated, debated, voted and legalized/enacted. Third, the policies are adopted then implemented. Finally, the implementation and completion of these policies are evaluated and recommendations made for any practicable changes (Kahler, 1998). Foreign policies are quite unlike domestic policies that involve a lot of people and agencies. Normally, the head of states/governments (presidents and prime ministers) serve as the senior most diplomats for countries. Among the tools employed in foreign policy are diplomacy, foreign aid and military force. Diplomacy entails dealing with nations via discussions, negotiations, diplomatic messages and public statements on a variety of issues. On the other hand, foreign aid involves states assisting one another monetarily and materially so that they achieve their goals, in the process helping in improving their relations. The three common types of foreign aid used as foreign policy tools are military, economic development and humanitarian aid (Kahler, 1998). While military aid involves donating or trading in military equipment and technology to improve the military power of a given state or region of interest to the donor country, economic development aid is in the form of money or equipment loans, grants and donations to boost other states’ economy (Sogge, 2002). This paper explores the idea that foreign aid is a tool for foreign policy, citing two cases in which a state uses aid to promote its interests. Foreign Aid in US Foreign Policy The United States is one of the industrial, political and economic superpowers to whom foreign aid is an essential and integral part of foreign policy. There are several types of foreign aid that the United States regularly disburses to other countries. These categories of aid are disaster and humanitarian aid, military and security aid, and economic development aid. Among these types of foreign aid, the economic development aid accounts for approximately 60% of the total aid while the military and security assistance and the disaster and humanitarian relief account for 25% and 15% respectively. There are several reasons for which the United States extends foreign aid to its developing and strategic partners. For instance, U.S. foreign aid is given for development purposes and for humanitarian assistance in cases of emergencies/disasters. Having started giving foreign aid to developing nations in 1946, just after World War I, the United States’ foreign aid now runs into billions of dollars, making it one of the most controversial and debated tool of US foreign policy. The US and other Western nations learned about and started practicing foreign aid after the World War I after most of the destroyed countries such as Germany failed to effectively reconstruct their ec onomy and government. These devastated countries sought and received help from other states. After the First World War, the United Sates donated a whooping $12 billion dollars to Europe for government and economic reconstruction after which the US Congress then passed the European Recovery Plan (ERP), also referred to as the Marshall Plan after the Secretary of State George C. Marshall. This plan proposed the disbursement of another $13 billion in the five years following the $12

INTERNATIONAL FINANCIAL MARKETS Essay Example | Topics and Well Written Essays - 500 words

INTERNATIONAL FINANCIAL MARKETS - Essay Example In a simpler terminology it measures the movement in value of any security with the movement in price of the market as a whole. This factor can be important in establishing a portfolio. There are many types of companies, some operate very closely with the financial institutions and markets while others have different operations e.g. manufacturing. All types of companies make investments. These investments play a huge role in assessing the cost of capital(Intermediate Financial Management). The cost of capital is basically the interest they pay on debt and dividends on stocks. This cost basically depends as explained above on the amount of risk associated. If the risk is low, that is beta for a company is low, its cost of capital will automatically be low. Investors will be willing to invest in it for lower returns and banks will lend on a lower rate. (Similar example can be found in intermediate financial management)We can better comprehend this with an example. Let us assume that Company X makes investments in Gold mines. Each Gold mine has equal probability of giving no gold at all and gold worth ten times its extraction cost. The extraction expenditure for a gold mine; irrespective that it results in gold or not, is $100 for small size mine and $1000 for a large size mine. In the first scenario Company X who is short of money and has just $ 1000 to invest, invests in a large gold mine. Now risk of a loss of the $1000 investment is 50%, which is very high. This will associate a high risk with the company’s future cash flows and investors will require a high return; thus driving its cost of capital up. In the second scenario however Company X decides to invest in ten small gold mines. Although the return is the same but the risk has gone down considerably, because most of the risk has been diversified away. (Intermediate Financial