China spends $38 billion in development aid; the United States $31.08 billion; and the entire OECD’s Development Assistance Committee members’ total budget for development aid reached 142 billion in 2017. At first glance, foreign aid seems constructive and helpful, a sign of goodwill by more developed countries towards developing ones, as part of a world trying to move towards equality. However, foreign aid has also been criticised for not helping to solve long-term problems. Ultimately, while the resources from foreign aid are undeniably valuable, there are many other factors which have led to its failure to do so, including the way they are utilised and managed by countries of destination as well as the intent and pattern of giving from the countries of origin.
For a start, it must be acknowledged that foreign aid has solved long-term problems before, even those such cases are not always the default. They are usually able to solve long term problems related to health. The eradication of smallpox (the last death from the disease was in 1978) was partly thanks to foreign aid. Calculations estimate that between 60 and 120 million premature deaths were averted due to its eradication. Today, foreign aid continues to work to eradicate diseases like malaria, saving up to 10 million lives a year. With the end goal being eradication of these diseases which are infectious and often caused by poor living environments and sanitation, they are tackling long-term problems which affect the people’s quality of life and ability to be productive. It has also directly worked to develop countries’ economies, such as Taiwan’s and South Korea’s which took off thanks to foreign aid from the US. Between 1946 and 1975, economic and military aid to South Korea and Taiwan were $69 billion and $42 billion respectively and today, the two countries join the ranks of the other Asian Tigers, with highly developed economies.
Unfortunately, the above examples have not necessarily replicated themselves in places like other developing countries which continue to struggle despite the massive amounts of aid that continues to pour into them. For example, the US also gave aid to Vietnam. In fact, Vietnam received $115 billion between 1954 and 1975, more than what was given to both South Korea and Taiwan combined. Yet, its economy is nowhere near as successful. Similarly, the disproportionate amount of aid received by countries in Africa has not seemed to produce the same effects. As economist William Easterly showed, percentage growth actually fell from the 70s even as aid as percentage of GDP increased.
Some have even argued that foreign aid not only fails to solve problems, but often causes more problems to development. It has been cited to prop up dictators such as Congo’s Mobutu Sese Seko or Ethipia’s Meles Zenawi. In the latter case, Human Rights Watch documented how the dictator selectively withheld aid-financed famine relief from everyone except those within his party. Another example is how a World Bank financed forestry project in Uganda ended up with a forest fire and over 20,000 farmers losing their homes, and soldiers threatening those who retaliated with violence. Such examples make it hard to agree that aid can solve long term problems. On the whole, whether foreign aid works thus lies in whether they are funding a country with strong institutions with potential for growth, or feeding one that is corrupted. David Cameron said that it is not really about the quantity of aid but rather what he terms as the “golden thread”, which is whether the country has stable government, lack of corruption, human rights, the rule of law and transparent information. It is when these institutions are in place, that the dollars can make sense.
Nonetheless, donor countries also have the responsibility to consider carefully how they disburse their aid. Unfortunately, the pattern of giving has been one of fragmentation. Donor countries want to seem as generous as possible, so they give to many countries, but in small amounts. This leads to aid coming from more directions but in smaller amounts. In 2013, the average project funded by aid was worth $1.9 million in 2013, down from $5.3 million in 2000. In Mozambique, it has 27 donors in the field of health alone, but some countries each give less than $1 million. This kind of fragmentation reduces the efficiency of aid, because they require civil servants to manage and oversee, increasing the amount of bureaucracy while having less economies of scale in terms of impact.
Another problem with foreign aid is also how donor countries decide to give. Long term problems require long term aid, but countries often fluctuate in their level of support, withdrawing support just when developing countries begin to gain traction. Researchers have found that donors tend to prefer short term projects with measurable results, a demand which aid agencies are thus inclined to meet. Thus, aid has been largely successful in building schools, infrastructure, which are tangible with straightforward benefits and timeline. However, they are not able to build strong institutions, which as discussed previously are more important.
Lastly, aid is often conditional, with donor countries threatening to withdraw them if their demands are not met. Aid is after all, not as altruistic and humanitarian as it is made out to be. Developed countries use aid to promote their interests and ideologies. For example, the UK gives more aid to Pakistan, Syria, Ethiopia, Nigeria and Afghanistan, countries which are not the poorest, but rather where the UK wishes to influence politically whether because they have a dictator or where radical Islam is taking root. Other than political ideology, developed countries also use aid to benefit themselves economically, in the form of tied aid, where aid is used to purchase items from the giving country itself. For example, close to 80% of the US Agency for International Development’s contracts and grants go directly to American firms. Sometimes, aid is given as loans, which only leads to debt accumulation. Thus, aid can reproduce existing inequalities between countries instead of helping them solve long-term problems.
To sum up, there are many barriers in the real world which have led to foreign aid not being able to solve long term problems. This is primarily because they are not the key to solving them, but rather a possible resource to do so. In order to solve long term problems, there is indeed, no single panacea or silver bullet.