Foreign Aid: The Crossroads of Intention and Reality

The average American family uses 552 gallons every day. The average African family uses only five (African Wildlife Foundation). Africa’s population is twice as large as that of the United States, yet its total income barely surpasses that of Belgium (Hanke). According to the World Bank, nearly half of its citizens live in extreme poverty. With this huge deficiency in the economic development and quality of life in third world nations in Africa and beyond, the need for humanitarian and economic aid from Western nations is extremely apparent. Since the end of World War II, various types of foreign aid have been hallmarks of the United States’ foreign policy, many of which aimed to address the aforementioned disparities. Unfortunately, there is significant doubt about the effectiveness of these programs. Sebastian Edwards from the University of California, Los Angeles, acknowledged that “Overall, the results from this large body of research [on the effectiveness of aid] have been fragile and inconclusive.” While there is significant disagreement on the exact impact, it’s fair to conclude that the current programs on average are not as successful as we would hope. This inevitably has led significant debate over the continuation of these programs. I wholeheartedly believe that the current conditions in developing nations cannot be ignored by the United States and other Western nations, but that significant improvements need to be made in current aid programs and in the political and economic institutions of recipient nations in order for the aid to be effective.

Fixing aid programs cannot be accomplished overnight, but the first step in doing so is understanding why the current programs are having relatively little impact. A major issue is the lack of accountability for both the programs themselves and for recipient nations in order to ensure that the program actually meets its objectives. William Easterly, a professor of economics at New York University, noted that current foreign aid programs “are seemingly oblivious to the much documented weak link between spending and results, such as the 30 percent to 70 percent of government-provided medicines that disappeared before reaching patients in surveys of low-income aid recipients.” Losing even 30% of medical supplies is a staggering statistic, and it represents a clear disconnect between the money spent and the actual results. Easterly attributes much of this failure to the nature of government bureaucracy, in which “nobody is individually responsible for any one result.”

Lack of accountability is not an issue unique to foreign aid programs, but combining it with often irresponsible and corrupt recipient nations can lead to terrible implementation of decent plans. One extreme example that led to disastrous consequences was a United Nations clean-air program in which 20,000 people were evicted from their homes in Uganda to make room for a tree plantation (Kron). An investigation was promised but never came to fruition (Palacios). To address this, there must be independent evaluations of aid agencies in order to hold them accountable for their implementation. Furthermore, aid agencies must have significantly more contact with those that they are aiding; the disconnect in communication between those giving the aid and those receiving it exacerbates these issues. Many current programs follow a “top down” model in which planners in Western nations try to allocate resources without the requisite knowledge (Coyne). As evidenced by many of the previously mentioned failures of aid programs, it’s quite clear that those running this programs are not gathering enough knowledge to understand their effect on the recipients. The more information and input from the intended targets of the aid, the more effective the aid can be at improving the lives of those recipients.

Unfortunately, all of the issues with foreign aid cannot be blamed on the programs themselves; the issues in recipient nations are extremely detrimental and are much more difficult to rectify. The state of the economic and political structures in many of developing nations are not conducive to economic growth and lifting people out of poverty. According to Steve H. Hanke, a professor of applied economics at The John Hopkins University in Baltimore, “if Africans can’t be assured of owning land or goods, they can’t have functioning economies. With brigands able to grab anything in sight, there’s no incentive to produce material goods or to build a future.” In many African nations, property rights are not secured, largely due to political instability and conflict. Property rights are a fundamental requirement for economic development, which is key to lifting people out of poverty. No person will start a business or try to sell a product if their wares and their earnings are not protected. Additionally, the lack of protection of property rights has been shown to exacerbate conflict, further hampering any potential growth. The Development Research Group at the World Bank studied 47 civil wars occurring between 1960 and 1999 and found that nations with natural resources and poorly protected property rights are more frequently subject to looting by rebel groups. This deficiency results in capital flight, which denies these nations the savings necessary for economic investments. Without property rights, no one with capital will keep it in the region, which makes investment in physical capital infeasible.

It is critical for these countries to have some sort of industrial development in order to employ their citizens and support their economy, and that will never occur unless the governments enforce property rights. The issue for the United States, in this instance, is that the barrier to the effectiveness of our foreign aid is largely out of our hands. While we can pressure recipient nations to promote policies that grow their economy and work with them to implement those policies, we are still dependent on the decisions of that recipient. Without those changes, though, spending increasing amounts of money in the form of aid in that nation will do little good. Unfortunately, it appears that the best option is to only provide aid to those nations that are willing to implement a sound policy to protect property rights. An additional issue is extractive economic institutions, which “sap the incentives and opportunities of the vast mass of the population and thereby keep a society poor” . The system of apartheid in South Africa is the most well known example of this, in which blacks, who made up 70% of the population, was given 7% of the South African economy by the government. The rest was the “white economy,” in which blacks could not own property or start a business. While not necessarily along the lines of color, similar economic systems pervade poor countries today. Those in poverty have very few opportunities due to the organization of their economies. The cause of this is generally corrupt governments in which the elite have monopolized political power (Acemoglu and Robinson). Again, throwing more foreign aid at these economies will not change their basic structure. Western nations can’t dictate how these countries run their economies, but we can incentivize change by providing increased aid to the nations that attempt reform.

It is important to remember the very real struggles that foreign aid hopes to address, which makes abandoning the notion an imprudent action. Between increasing accountability and encouraging tailored programs based on communication with recipients, there is much we can do on our end to improve the effectiveness of our programs. There must be change in the economic institutions in developing nations, but those nations must do so of their own accord. The West can provide strong incentives, but we cannot expect those structures to change overnight. In the absence of that change, it is still vital that we do what we can for those suffering from the effects of poverty and disease across the world.