Sage, I wouldn't get too carried away quoting David Osterfeld, he sees Adam Smith's invisible hand everywhere. Check out his article on slumlords, http://www.libertyhaven.com/theoreticalorphilosophicalissues/austrianeconomics/govmarket.shtml , it is classic Smith all the way (ie the slumlord despite being a greedy capitalist pig is serving the interests of the poor while lining his pocket).

Much aid delivered since the early 1980s has been contingent on macroeconomic reform in donor recipient economies. In general terms this meant slashing spending on health, education etc. while making their economies more efficient. Then, it was set sail for free-market heaven. The result, as all can see, has been a more-or-less complete debacle. That doesn't stop free-marketeer academics like Osterfield arguing for more of the same medicine.

Does Australia have an obligation to provide overseas aid? As the largest economy in our region, with the richest population, it would seem to be in our interest to spread a bit of economic goodwill. For those arguing against aid, I certainly hope you're also opposed to business welfare.

JJ, I have no doubt that Osterfeld's politics make him a player for Team Right. He is a product of that machine that churns out Left and Right players in equal numbers. The mob from the Left can only hold out Cuba and North Korea as exemplars of the 'each according to his abilities, to each according to his needs'.

It's Osterfeld's maths that sound a tocsin. Institutionalised aid only creates lazy and corrupt regimes.

And I'm certainly against corporate welfare.

Sage, I'd be interested to see some analysis of long-term cash flows between the first and third worlds. I have seen it suggested that debt repayments and profit flows from resource exploitation in the third world more than equal any aid funding. This suggests to me that in fact the first world is probably pulling more out of the third world than they're putting in. This is exacerbated by powerful elements in the third world ripping off much of what is left, and sending it overseas. Thus the poor get poorer, while the rich get richer. The first world has not impoverished itself through giving aid, as it has more than got the money back.

I don't know whether aid is part of the answer, but I feel it could be. I am suspicious of Osterfield and his ideological baggage. We have had the best part of 30 years of monetarist-guided aid, with dismal results. Adam Smith's invisible hand has been nowhere to be seen. I don't see that cutting off aid is a recipe for helping the third world, however I could be wrong.

The current Indonesian situation shows how aid and help can be dangerous. We've helped that country a great deal, yet they are becoming more and more belligerent towards us. Aid should only be in the form of technicality and application, not of providing money. Of course in the case of major disasters aid is essential to help recovery.

Africa receives huge amounts of aid, yet its a total basket case. Supporting people rather than educating them is always fraught with danger for all concerned. Economic aspects only cloud things more. Poverty above subsistence is also an economic viewpoint, being able to provide for an ever increasing world population without end is ridiculous in the extreme. There'll always be people that live in huts and nature, we should be providing them with the knowledge to enable them to live their lives in better health according to their lifestyle. Not giving them food that is designed for cities and a different way of life.

A change to how we view help, is the first step. Just throwing money and resources at ever deepening economic holes, shows our methods of aiding others, are flawed

JJ, I'd be interested in long-term cash flows too. I'd also want to know why a once insignificant nation, devasted by war, has been able to build its powerful position in the world by copying and then perfecting various products like cars and watches to name just two yet other mendicant nations don't wish to replicate such a story and are happy to cling to a cargo-cult mentality.

To our north we have members of a camorra more concerned about driving the current model Mercedes Benz than with governing their people. The Mercedes Benz vehicles and other goodies are provided by the Australian taxpayer.

Sage, do you mean Japan when you talk about a "once insignificant nation, devasted by war, has been able to build its powerful position in the world by copying and then perfecting various products like cars and watches"? If so, of course Japan was one of the world's leading industrial powers by the 1930s and post-war was reconstructed, rather than built from scratch. Additionally the allies (lead by the US) lead a process of reform including disarmament, liberalisation, democratisation, unionisation, education reform and purging of wartime leaders. Thus a feudal autocracy was transformed into a modern democracy. The aid money helped the process, as did the economic boost provided by up to 350,000 occupying troops.

The nation to our north, are we talking about PNG? I don't know where to begin there. Corruption is obviously the main issue, but so entrenched as to seem insoluble. No amount of aid money will help if it is simply siphoned off by the powerful.

On a positive note, Transparency International notes that Indonesia is heading in the right direction "Indonesians being the most optimistic [in the world] (63% expecting corruption to decrease a lot) ". http://www.transparency.org/policy_research/surveys_indices/gcb