Overall, most foreign aid undermines the countries that it’s supposed to help. Many stories on these pages illustrate that point.
If wealthier countries truly do want to help the others – whether as reparations for harm done by colonialism and neo-colonialism, or simply as good neighbors – we’re all in favor. But they need to stop the self-serving policies in use now, and offer genuine help. Here are five suggestions.
Just give aid money directly to the people.
If foreign aid is intended to benefit the people of a country, then give it directly to those individual people. Not to the government, which probably does not truly represent them. (If it did, there typically would be no need for outside help.)
Most aid arrives with an attitude that “we’ll decide how this must be spent, because we know best.” You can call this arrogance, you can call it paternalism, you can call it racism, but you can’t call it evidence-based. As the U.N. and outside aid agencies have taken a bigger role in setting education policy for the global South, schools have gotten worse. A leading aid critic in the early 2000s, former World Bank economist William Easterly, published this dramatic graph to show how economies got worse as aid got bigger:
To the extent that wealthier countries want to provide aid, giving money directly to the poor is more effective. Small monthly payments do reduce hunger and poverty. They allow recipients to set their own priorities, rather than an interntional agency deciding what they need. They increase accountability and encourage small-scale entrepreneurs who are motivated to meet local needs, rather than to take photos that will please a foreign donor. Dozens of countries, including Mexico, Brazil, Sri Lanka, and Zimbabwe, already run cash transfer programs of this sort. In general, the amounts involved are small and they don’t make a dramatic difference, but they do help.
Federal law prohibits American companies from bribing foreign officials. But charities, NGOs, and U.N. agencies can and regularly do bribe government officials to get permission to carry out their programs. It is never called a bribe, of course. It’s called a consulting fee, a mobile phone “to help you stay in touch with us,” a vehicle “so you can do your job,” per-diem expenses to accompany the foreign staff on a trip, and so on.
Everyone understands that these are nothing but bribes; no one will say it. These bribes ensure that officials are more eager to please the aid agency, than to serve their population. And they’ve entirely lost interest in actually solving problems – that would make the bribes dry up.
Stop propping up dictators.
Over the decades, foreign aid has kept many a dictator and autocrat in power. The two steps above would address this.
But aid isn’t their only source of income; much also comes from selling natural resources. Properly, such resources should be seen as belonging to the population as a whole. They should not be sold, unless the population benefits. The reality is different. An army corporal can stage a coup this month, and next month sell the country’s oil to foreign corporations that have no compunction about buying what are, in effect, stolen goods.
Ending this sytem would be an enormous and difficult step. Big money will fight to keep it in place. But ending slavery once must have once seemed nearly impossible, too.
Stop doing harm.
While claiming to dispense aid with one hand, the West does great harm with the other. Here’s just one example of what needs to change: Close tax havens.
Tax havens allow multinational companies to conduct business – mining, manufacturing, agriculture – in the South, then use complex accounting techniques to claim that the profits were earned in a different location, such as the U.K.’s Cayman Island, with an extremely low tax rate. Estimates of lost income vary greatly; those who have accurate information want to keep it secret. The best estimates are that the losses which developing countries face from tax havens are three to five times as much as they receive in aid.
Get serious about fighting climate change.
A great many experts have concluded that climate change represents the greatest threat to people in the global South. Rising seas, hotter weather, new patterns of rain and drought, will all take a toll. It is absurd, insulting, and dangerous that U.N. agencies so often prefer to micromanage the affairs of the developing world, while never quite getting around to the hard action that is urgently needed.
Notes and Sources
Cash transfers have been extensively studied. The Overseas Development Institute in the U.K. analyzed 165 studies of such programs in 30 countries. In Cash transfers: What does the evidence say? it found broadly positive outcomes and no evidence that transfer programs made adults less likely to work. In general, they reduced child labor and sometimes increased adult productivity.
Bribery by the aid industry gets far too little attention. One exception is an editorial in Tropical Medicine and International Health, “Per diems undermine health interventions, systems and research in Africa: burying our heads in the sand,” in which Valery Riddle attempts “to bring to light this phenomenon, known to all but seldom mentioned and little studied,” which the per-diems paid by aid agencies to local civil servants has warped the entire concept of government service.
Propping up dictators. In Blood Oil: Tyrants, Violence, and the Rules That Run the World (Oxford University Press, 2016), Leif Wenar outlines a practical way to end the might-makes-right approach to natural resource sales.
Tax havens. Health Poverty Action’s report Honest Accounts? offers more details not only about tax havens, but other ways that the West extracts money from countries in Africa.