Wednesday 25 Nov 2020 | 16:05 | SYDNEY
Wednesday 25 Nov 2020 | 16:05 | SYDNEY

Aid: One zany scheme after another

6 March 2008 09:37

Guest blogger: Gaurav Sodhi, a researcher at The Centre for Independent Studies, sneaks in with this post on our aid thread:

Aid campaigners always cite the hallowed figure of 0.7% of GDP as a firm target for foreign aid as if it has been sanctified by the economic gods. Now the Rudd Government has chimed in with its own ethereal figure of 0.5% which will serve as the latest benchmark.  This preoccupation with how much aid Australia gives relative to its GDP is symptomatic of the problems with the development industry.

A key mistake is to believe that the success of aid is measured by its inputs, not by its outputs. Organisations and countries typically boast of how much aid they have given rather than what they have accomplished with it. In a memorable line from his latest book, White Man’s Burden, William Easterly quips that such logic is akin to declaring that the movie 'Catwoman' wasn’t really so bad because it cost $200 million to make. 

As Peter Bauer recognised years ago, aid is, for the most part, a transfer from one government to another.  Top-down aid shares the same problems of Soviet era planning and has been equally unsuccessful.  Schemes that require a ‘grand plan’ approach to development, in which a handful of experts direct where resources are allocated, lack the mechanisms for feedback and accountability that are key for establishing what works, what doesn’t, and letting aid providers know about it.

We need to remove the utopian crusading that accompanies any debate on aid. Development is not about ideology: it is about improving the lives of the poor. Aid, therefore, should reflect pragmatism, not philosophy. Over the last forty years about $3 trillion has been spent on aid worldwide — much of it in Africa. Yet most African countries with few exceptions are poorer today than at independence.

In our own region about $70 billion has been spent in the South Pacific, by far the largest per capita aid recipients in the world. With the exception of Samoa, the Pacific has stagnated at best. Papua New Guinea and the Solomon Islands have become poorer despite the spending. The insistence of the aid lobby to increase aid, despite its demonstrable failures, could have been penned by Homer Simpson, who once remarked that ‘the only antidote to a zany scheme is an even zanier scheme!’ 

In contrast, a number of countries, mainly in Asia but including Botswana, Mauritius and others, have all contributed to a massive exodus from poverty that is being replicated by India and China today. They have done so without dependence on aid. Economic growth has been the best alleviator of poverty.   

This is not to say there is no case for aid. Aid is necessary and useful in disaster recovery and the prevention of disease. After a period of war or drought or some other scourge, aid can help minimize suffering and provide emergency relief. But it cannot solve the puzzle of poverty. No society in history has ever escaped poverty by aid and there is no institutional black box into which well-intentioned aid funds fed in from one end will spew out poverty relief from the other.

If aid is to be effective, aid groups must abandon trendy but meaningless objectives that cannot be measured, such as ‘improving governance’, ‘building capacity’ and ‘empowering women’. They must favour outcomes that can be measured and judged such as the provision of roads, electrification, water and policy reforms. Aid groups typically promise to deliver broad and thunderous aims without being held accountable for failure because no one can measure success. Mostly, they interact with governments, not the poor themselves.  

Those that say, like the Millennium Challenge Corporation, the latest US-backed aid agency, that aid should only be offered to countries with balanced budgets, low debt and sound and competent management, should pause for a moment to ask whether such a country would need any aid. The targets for aid assistance are mostly those that have suffered long under incompetent, brutal and sometimes predatory governments. Giving aid to those same governments is not a solution to poverty. Poverty is alleviated by focusing on outputs — by focusing on growth. Bickering about which randomly selected percentage of GDP is the optimum level of aid does nothing for the world’s poor.