Rather, aid has significantly impaired LDC progress by expanding the role of the public sector in the recipient nations. Development aid is based on the premise that Third World nations don't grow because they lack financial resources. But financial resources have relatively little impact on growth rates when compared to other factors. Even if financial resources were vital to growth, the Third World does not lack the means of obtaining international credit. As with food aid, development assistance politicizes Third World economic life.
Aid helps incumbents expand their power through political patronage.
According to economist Doug Bandow, ''The tendency of ruling groups, particularly in societies where political power is so important, is to use aid, or funds released by aid, to strengthen their own position, reward their supporters, and buy off or crush opposition movements. By limiting political competition, foreign aid inhibits the implementation of badly needed market-oriented reforms. Even aid that is not used for overt political repression leads to the growth of large, unproductive bureaucracies. 16 Through these large bureaucracies, development aid. There are many examples of Third World governments using aid to enrich the ruling elite at the expense of the masses.