Aid to developing countries can work

Far from creating dependency, strategic assistance from the West can help developing countries to help themselves

By Larry Elliott  /  The Guardian

Fri, Jan 18, 2013 - Page 9

A lot of water has passed under the bridge since Britain hosted the G8 summit at Gleneagles in Scotland in July 2005. Life was sweet when the leaders of the world’s most powerful Western economies pledged themselves to debt relief and aid to help poor countries. Growth was strong, asset prices were rising and the financial crisis was two years away.

This year it will, once again, be Britain’s turn to chair the G8, but the mood will be quite different when leaders meet at Lough Erne in Northern Ireland this summer. The talk will be of “fiscal cliffs,” the euro’s struggle for survival, high energy prices and the struggle to ensure financial solvency. One thing is certain: There will be no repeat of the commitment to double aid within five years. Money is tight.

Back in 2005, the pressure on then British prime minister Tony Blair came from only one source: the Make Poverty History (MPH) coalition that saw Gleneagles as an opportunity to cajole the G8 into making binding pledges on development. British Prime Minister David Cameron has a more difficult task this year — for in addition to the lobbying by MPH2, he is coming under fire from aid skeptics who challenge the logic of a government that is cutting public spending at home and massively increasing public spending abroad.

The thrust of the argument from the anti-aid lobby is as follows: Aid does not work because it traps countries in a culture of dependency. Much of it is either wasted or siphoned off by corrupt regimes, so the taxes of poor people in rich countries ends up bankrolling the lavish lifestyles of rich people in poor countries.

In Britain, lobbying by powerful and arrogant charities has led to an increase in the aid budget so big that the Department for International Development (DFID) does not know what to do with its embarrassment of riches. Aid has become a gigantic racket and should be pared back to genuine humanitarian relief. That will leave space for the private sector to power development, the only sure way for countries to escape poverty.

The anti-aid lobby is livid that Cameron, British Chancellor of the Exchequer George Osborne and Secretary of State for International Development Justine Greening are making good on the promise made by the last Labour government to this year raise the aid budget to 0.7 percent of national income. Given the precarious state of the UK’s public finances, the assumption was that the prime minister and his cabinet colleagues would eventually renege on the pledge. They deserve credit for not doing so.

Here is why. First, the anti-aid brigade mounts what is largely a straw man argument. Nobody at the DFID, Oxfam, the World Bank or any other body involved in development would ever say that aid alone is the answer to tackling poverty. It has always been seen as part of the solution, along with the right macroeconomic policies, private sector investment, boosting trade and, in Africa, encouraging regional integration.

Second, both sides of the aid debate would agree on the need to tackle waste and corruption. Conservative ministers here have been acutely aware of the need to maintain public support for a rising aid budget during a period of austerity, which was why Greening’s predecessor, Andrew Mitchell, undertook reviews of bilateral and multilateral spending and insisted on better value for money.

Whereas Labour favored general budget support for poor countries — giving governments more control over their own spending — the coalition has preferred to finance specific projects.

Greening has insisted that a minister must sign off spending on any development project costing more than £5 million (US$8 million) rather than the previous limit of £40 million. She has announced the end of UK aid to India; stopped money for Rwanda amid evidence that it has been used to finance rebel forces in the Democratic Republic of the Congo; and has suspended all direct aid to Uganda after reports of misuse. This would appear to be the zero-tolerance approach the aid skeptics are urging. Certainly, it is hardly consistent with the lurid stories of the DFID sitting idly by while taxpayers’ money is being siphoned off into numerous Swiss bank accounts.

However, corruption is not going to be tackled simply by turning off the flow of official Western assistance. It will also require action against tax havens, against the arms trade and against multinational companies guilty of bribery. The aid skeptics tend to be far less vociferous about these issues.

Third, there is plenty of evidence to show aid is working. The charity One has compiled a list of 14 African countries — including Ethiopia, Tanzania, Malawi and Senegal — that shared characteristics in the period after 2000: They qualified for debt relief; they were not dependent on extractive industries; they were not embroiled in civil conflict.

On average, in these countries aid flows increased threefold between 2000 and 2010, but there was no sign that official assistance crowded out private investment. Far from it, foreign direct investment increased fourfold over the same period. Growth averaged 5.5 percent between 2000 and 2011, an impressive performance given the meltdown in the global economy that followed the financial crisis of 2007.

In 2002, there were 300,000 people receiving HIV/AIDS medicine; today the number exceeds 8 million. As a result of international aid efforts, the number of Africans with access to a bed net has increased from 3 percent to 50 percent in a decade. Spending on vaccines, bed nets and nutrition has meant child mortality in sub-Saharan countries has dropped by 41 percent. Education is seen — rightly — as the key to competing in the global economy, and over the past decade 51 million more children are in primary school because of the resources provided by debt relief and aid.

The DFID funds a scheme in Sierra Leone called “Making it Happen,” where skilled health workers from Britain share their expertise with doctors, nurses and midwives in an attempt to reduce high levels of infant and child mortality.

Far from creating a dependency culture, this is an example of “smart aid”: the provision of know-how and best practice that will help Sierra Leone help itself. There are similar UK government initiatives to sponsor technology transfer and to boost private sector investment in infrastructure.

All these seem worthy uses for the £0.70 in every £100 of national income the British government allocates to help countries far less fortunate than our own.

It is certainly strange that the government is making life more difficult for poor people in the UK at the same time it is trying to improve the lot of even poorer people in the rest of the world.

The disparity between welfare policy at home and welfare policy abroad has certainly made the attacks of the anti-aid lobby more politically potent.

However, it is not coalition policy toward countries facing what Jamie Drummond, co-founder of One, calls the three extremes — extreme poverty, extreme climate change and extremist ideology — that is incomprehensible. It is the rest of it.