Thursday 26 Nov 2020 | 01:26 | SYDNEY
Thursday 26 Nov 2020 | 01:26 | SYDNEY

More aid isn't the answer

29 February 2008 13:26

Guest blogger: Tim Wilson, Director, IP and Free Trade Unit at the Institute of Public Affairs, enters the aid debate that was kicked-off here yesterday by Stephanie Lusby, of Jubilee Australia, and Kate Wheen of AID/Watch.

Sitting in a region that includes some of the world’s poorest, Australians understandably feel they should give more to the less fortunate.  But we should not be blinded by superficial compassion. Simply giving more foreign aid is not going to solve, or build the foundations for, the solution to poverty alleviation.  

Following events like the December 2004 Tsunami, foreign aid can be very effective. Significant resources need to be mobilised quickly in countries with limited supply systems, poor infrastructure and depleted resources.

But much of foreign aid is not spent on immediate relief. Australia already has a significant aid and development program delivered by AusAID with the support of contractors. Much of the work completed by AusAID is designed to promote capacity building, rather than immediate relief. And it should be used for that purpose.

Too often profligate spending by foreign aid projects rarely reaches its intended target. Instead bumper aid budgets and loose approaches to project delivery simply creates the opportunities for corrupt foreign government officials to intercept money before it reaches its destination and use it to line their pockets.

Hence capacity building managed by Australian project managers minimises opportunities for losing control (and account) of foreign aid dollars. Australian aid is directed toward strengthening governance that allows corruption to occur in the first place. Abandoning this approach is akin to handing over the keys to the bank vault.

But Australians should not get bogged down in believing that more aid is the solution to development. Foreign aid is not the best way to promote development that will meet the social, environmental and economic needs of the world’s poor.

Economic growth provides the pathway for developing countries to take care of their environmental, social and economic needs. Only economically developed societies can afford to address environmental degradation and social challenges.

The best way to promote development is the spread of capitalism and the structures to support a free market economy. The world over, whenever people have access to a capitalist system they thrive. In many developing countries basic concepts of property rights do not exist, nor does a fair and predictable judicial system to enforce contracts.

If the structures of a free market economy are established the system necessary for the world’s poor to catch fish will become available. Such an option is a significant improvement from them being given a fish out of foreign aid dollars.