Is Global Poverty Better Reduced Through Free Trade or International Aid?

Abstract

Aid versus free trade remains an intensely debated topic in the fight against global poverty. Aid proponents argue that it can reduce poverty in poor countries by funding development projects, infrastructure, education, healthcare, and social programs. On the other hand, aid critics believe that it perpetuates the cycle of poverty by creating aid dependency, increasing corruption, and disincentivizing sustainable economic development. Free trade proponents argue that it can help developing countries reduce poverty by increasing employment, technology transfer, and competitiveness. However, critics argue that trade disproportionally benefits richer countries and does not increase income in poor countries due to their lack of an economic structure capable to benefit from trade. This paper suggests that elements from both aid and trade are necessary for reducing global poverty, supporting the “aid for trade” initiative: stimulating global fair trade while allocating foreign aid to poor countries to create the capacities for facilitating successful trade.