Monday, January 12, 2009

Is foreign aid a waste?

I've been hearing talk lately in AM radio world about how the US shouldn't increase its foreign aid (which is still far short of our agreed upon developmental aid target) since the money only goes to fuel conflict and dictators or that it's simply not effective and what not. There is some merit to this, as aid has been misappropriated and put to poor use in the past, and there are deficiencies. But many critics of foreign aid manage to miss entirely some of the great success stories. Developmental economist Jeffrey Sach addresses just this point in Common Wealth: Economics for a Crowded Planet, noting that:

  • Foreign aid has contributed to the economic development of Asia and Latin America through the Green Revolution of increased agricultural productivity; the control of infectious diseases, such as smallpox; the vast rise of literacy and school attendance; and much more.
  • Foreign aid and global agreements have facilitated the dramatic, indeed revolutionary, dissemination of modern methods of contraception and family planning, leading to a crucial voluntary drop of fertility rates in most of the world.
  • Global cooperation has produced major advances in global environmental control, most successfully in heading off the destruction of the layer of atmospheric ozone, and has established frameworks for dealing with climate change, biodiversity, and desertification.
  • Global cooperation has dramatically slowed the proliferation of nuclear weapons and encouraged several dozen countries to abandon their quest for such weapons
These are global achievements of historic proportions. Yet the roots of these successes are almost forgotten today by unilateralist or free-market ideologues in the United States, obscured by a heavy dose of reactionary ideology and rhetoric that claim, against the facts, that such progress was ordained by market forces alone and was not the result of the massive collective actions and financial backing that went into these efforts.
Sachs then goes on to address specifically the argument of economist William Easterly who has argued that 2.3 trillion dollars of aid money has been wasted over the last 50 years. Easterly's work has been widely cited as a reason for the United States to not bother meeting the Millenium Development Goal of .7% of GNP to Official Development Assistance. Sachs points out that even in Easterly's book The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good he admits that there have been successes. Quoting Easterly

[F]oreign aid likely contributed to some notable successes on a global scale, such as dramatic improvement in health and education indicators in poor countries. Life expectancy in the typical poor country has risen from forty-eight years to sixty-eight years over the past four decades. Forty years ago, 131 out of every 1,000 babies born in poor countries died before reaching their first birthday. Today, 36 out of every 1,000 babies die before their first birthday.
In addition, Easterly overlooks that aid has come from nations other than America. Sachs mentions that Japan helped build infrastructure in Southeast Asia which allowed it to grow to become an industrial exporter and that today's emerging markets in Korea, Taiwan, China, and India “have all been the beneficiaries of external assistance.”

What’s more, $2.3 trillion is portrayed as a massive expenditure, but “it signifies all aid to all countries from all donors over a fifty year period!” This amount averages to about 30 cents per 100 dollars income from developed nations and 17 cents from the U.S.; it's also about 15 dollars per recipient. Sachs observes that in the proper perspective this doesn't seem like such a great expenditure after all

Put $2.3 trillion in comparison with U.S. military spending during the same period, which totaled $17 trillion, nearly eight times the aid levels. And we can note that the Iraq War cost $500 billion in direct outlays by the middle of 2007 and about the same amount in indirect costs (for example, the costs of medical and long-lasting disability care of veterans). The Vietnam War cost at least $500 billion in today’s dollars. Suddenly $2.3 trillion over a fifty-year period for the entire world of development – health, water, disease, literacy, family planning, roads, power, courts, democracy, famine, and other emergency relief – is not so self-evidently extravagant.
Sachs does agree with Easterly that aid has been wasted in the past and agrees with Easterly's conclusion that we need to refocus on getting poor people the essential infrastructure they need to escape poverty.* But his ultimate point is that we also need to start paying attention to the fact that foreign aid can achieve life-altering improvements for the world's poor, as he noted in his comment to the New York Review of Books

When we overlook the success that is possible, we become our own worst enemies. We stand by as millions die each year because they are too poor to stay alive. The inattention and neglect of our policy leaders lull us to believe casually that nothing more can be done. Meanwhile we spend hundreds of billions of dollars per year on military interventions doomed to fail, overlooking the fact that a small fraction of that money, if it were directed at development approaches, could save millions of lives and set entire regions on a path of economic growth. It is no wonder that global attitudes toward America have reached the lowest ebb in history. It is time for a new approach.
*A subject discussed at book length by Sachs in Common Wealth.

1 comment:

Lirone said...

There's aid and aid... US aid is often driven by selfish political or economic motivations, deliberately designed to benefit US companies, and often designed without much reference to the national strategies of the governments involved. Oh, and a high proportion of US aid spending goes to middle rather than lower income countries. So it's hardly surprising that it often fails to reach development outcomes.

Thankfully other countries do it differently - and I'm proud to say the UK is one of the leaders in this area. Still far from perfect, but a step in the right direction....