Most people concede that no one should be worse off because of no fault of their own. The current global political economy is such that there is
a large economic divide between a representative person in North America and
the same in Sub-Saharan Africa in so much that the latter may be conditioned to
depravity and suffering. In parallel to
the argument for the welfare state within the state, many emphasize the moral obligation of the rich countries to help the poorer countries in the form of
foreign aid. In the first part of the article, I will detail the history and the rationale for foreign aid. In the latter part of the article, I will also focus on examining the validity of the arguments in favor of foreign aid. The following discussion will show that foreign aid undermines democratic values and local institutions, consolidates roots of corruption, slows the economic growth of the country and prevents people from searching their own solutions while creating a self-perpetuating lobby of aid agencies.
History of Foreign Aid
The idea of foreign aid
started after the end of the Second World War to influence the countries
receiving aid. Foreign aid was then used as a tool of diplomacy in the Cold
War; however, the purpose of foreign aid has also evolved to developmental,
humanitarian relief or commercial motivation in recent times. It was agreed by
members of the Development Aid Committee (DAC) in 1970 that they would contribute
0.7 percent of their GNI towards foreign aid; however, the intended target is
not fulfilled by all the countries of the committee (Deaton, 2013, pp. 268-307)
The interest of the donor country into the aid receipt country is an important attribute in analyzing the different dimensions of foreign aid which include
recipient countries, the purpose of the aid (intentions) and amount of foreign
aid.
Preface for Aid:
The primary reason for
economic discrepancy across the globe is linked with lack of proper
technological advancement and industrialization, political instability, divided
economies and exploitation of natural resources by colonial power in what we
call as developing countries. While present day rich countries continue on
economic prosperity through industrialization, the poor countries are forced to
depend largely on the influx of capital from other sources to run their
national economy (Preece, 2009). The influx of capital comes in the form of
foreign aid for most of the developing countries of which many are concentrated
in the south. Jeffrey Sachs, an adviser to the United Nations, claims that the
reason some countries are poor is because of their characteristics which make
it harder for them to be as productive as other countries. He believes that “an
initial large investment” can help them to fight endemic problems and start a
virtuous cycle of economic growth (Banjaree & Esther , 2011, p. 3). He furthermore
claims that poverty will be eliminated if rich countries of the world commit
195 billion dollars every year between 2005 and 2025 (Sachs, 2005).
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Why did Aid go wrong? Intentions and Incentives
However, empirical evidence
has not shown positive results as Jeffery Sachs would have anticipated, and
other experts rightfully assert that foreign aid does more bad than good. In
books such as The Elusive quest for Growth, The White Man’s Burden and Dead
Aid, scholars such as William Easterly and Dambisa Moyo argued “that foreign
aid prevents people from searching for their own solutions while corrupting and
undermining local institutions and creating a self-perpetuating lobby of aid
agencies” (Banjaree & Esther , 2011, pp. 3-4). Economist William Easterly also
acknowledged the failure of more than 2.3 trillion of development assistance
over five decades to make any significant developmental progress (Reinert,
2009, p. 206). According to him, foreign aid has been inefficient because all
the players of economic growth did not have the right intentions and incentives
(Easterly, The Elusive Quest for Growth, 2001, p. 21), and because economic
growth can happen only when donors face incentives that nudges them to give aid
to countries where it will be efficient, but not only to justify the aid for
next year (Ibid, pp. 289-291).
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The poor people do not have
the means- money or political power- to attract attention such that their
demands are met, while the rich have every means to address their needs
(Easterly, The White Man's Burden, 2006, p. 167), and this fact speaks the
truth relating to foreign aid as well.
It is often the case of he who pays the piper calls the tune in case of
foreign aid which keeps the locals away from the policy making sector and makes
investment and policies vulnerable to ineffectiveness. A good hard look reveals
a shocking story that the World Bank, the IMF and other foreign donors are
exploiting the poor countries under the guise of eliminating poverty. (Mwenda,
2007)in his TED talk says “Rather than sitting with Ugandan entrepreneurs,
Ghanaian businessmen, South African enterprising leaders, our governments
[Ugandan] find it more productive to talk to the IMF and the World Bank.”
Other times, the foreign
donors use their aid to press for political and economic concessions in façade
of helping the poor. In 1965-66, when drought threatened millions of peasants,
the USA used food as a weapon to acquiesce India to be flexible for its
fertilizer markets to American export and to soften its hostile stand against
American involvement in the issue (Sharma, 2002). Similarly, the United States
made a condition that Bangladesh ends its jute exports to Cuba to receive food
aid, in September of 1974. Following severe flooding which had disrupted normal
rice production cycle in the northern region of the country, the Bangladeshi
government could not find other alternatives but to acquiesce United States’
proposition to save country’s face in such time (Bird, 1977).
Corruption, Diversion of fund and Reliance on Aid
One of the most pressing
problems in foreign aid is the diversion of a fund from the intended recipients
by corrupt institutions. Aid can
consolidate roots of corruption for it “establishes dependency, destroys self-reliance
and enervates government and society” (Hazlewood, 1976, pp. 254-255). Aid can
also undermine the democratic values, civil participation and can slow the
economic growth of a country (Deaton, 2013, p. 294). The following instances
only verify such claim.
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The leaders of countries
receiving foreign aid are more concerned about their bank accounts than the
concern of reducing poverty which is in their hand. In a case of Uganda, local
officials tapped 87% of the money from public education grants over a four-year
period (Reinikka, pp. 679-705).Similarly, the U.S. Agency for International
Development (USAID) has estimated themselves that 80% of their funds go
directly to American firms (Jamieson, 2005, p. 159), while another research
suggests that seventy percent of the aid from the United States never reached
the recipient country in cash (Deaton, 2013, p. 278). Even exacerbate, of all
the world's development aid, "only 19% . . . goes to the 43 least
developed countries" (Jamieson, 2005). Only ten to twenty percent of aid
ever reaches its target, quotes the book Why Nations Fails by giving an example
of Afghanistan. When Afghanistan was looking to rebuild under a democratic
regime of Hamid Karzai, foreign aid was seen as a tool for rebuilding the
country. Billions of dollars were outpoured in the name of Afghanistan, but
only twenty percent of the aid reached to Afghanistan with remaining eighty
percent being dissipated among various political parties and the UN offices
(Ibid).
Similarly, poor countries
that have received more aid than other countries per capita do not have the
economic development greater than that of countries receiving little foreign
aid. For example, China and India have made a better economic progress than
Sub-Saharan African countries which received a higher amount of aid per capita
than those countries (Deaton, 2013, pp. 281-282). In a few countries ,including
that in Sub-Saharan Africa, foreign aid is so significant that it comes in the
way of long-term prosperity and of the effectiveness of local institutions
(Ibid, p. 313)in so much that decrease in economic growth and increase in
foreign aid had a positive co-relation(Ibid, p. 285).
Mixture of Purpose
On the other hand, Carol
Lancaster (2007) in his book Foreign Aid claims that mixture of purposes
especially that of USA, Japan or France has led to the ineffectiveness of
foreign aid. US aid has the mixture of diplomatic and developmental purposes,
and for these motives, it was at times held accountable for failures in
programs that were driven by diplomatic purposes (Ibid, p. 106). Similarly, Carrol mentions that Japanese aid
lacked a major developmental focus because it was motivated by commercial and
diplomatic purposes and that French aid was primarily driven by the interest of
maintaining a sphere of predominant influence, primarily in sub-Saharan Africa
(Lancaster, 2007, pp. 215-218).
References
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