Articles

DOES FOREIGN AID DO MORE HARM THAN GOOD?

Do developing countries benefit from our help, or does it prevent them from using their own resources to get ahead? Four experts debate the best approach.

The Sydney Morning Herald, March 19, 2011

THE STATESMAN MALCOLM FRASER

AMID the backdrop of disasters in Australia and when foreign aid is under scrutiny some who maintain "charity begins at home" may suggest that aid does more harm than good. My own experience has overwhelmingly convinced me that aid does far more good than harm.

First, in humanitarian emergencies, lives are at stake. When people are in desperate need of food, water, medical care and shelter as a result of famine, conflict or natural disaster, who else will help? Such urgent assistance is the responsibility of nations and organisations that have the capacity to do so. In 1992 in Somalia, I experienced the lives of desperate women and children being saved as a result of foreign aid.

Foreign direct investment has far outstripped foreign aid in many countries. Yet such investment does not seek to reach the poorest and most vulnerable, it does not seek to ensure significant gains in health or education nor does it seek the equality of women and minorities.

Effective aid addresses the basic needs of livelihoods, education, health, clean water, sanitation, and the rule of law for the poor and vulnerable in developing countries. Foreign direct investment alone cannot break the cycle of poverty for the "bottom billion" of the world's poor who live on less than a dollar a day.

Aid builds the capacity of people, communities and countries to move out of poverty. This capacity-building works. Last year alone CARE, the aid organisation which I founded in Australia in 1987, assisted 10 million children go to school, improved the health of 35 million people and given 11 million people access to clean water.

AusAID reports that Australian aid has had a significant impact in the region. Polio has been eradicated in the Pacific and 1.5 million children have been immunised against measles and polio in Papua New Guinea. Research by UN agencies has found that the incremental increases in aid over the past 20 years account for an extra 14,000 lives saved per day.

These benefits have been generated from tiny proportions of national budgets. This year in Australia foreign aid consists of only 1.2 per cent of the federal budget.

Aid, foreign direct investment and trade are all needed to address poverty.

But we must recognise the good that aid continues to bring to hundreds of millions of poor people around the globe.

Malcolm Fraser was prime minister from 1975-1983 and founding chairman of CARE Australia, 1987-2001.

THE RESEARCHER TERENCE WOOD

THE simple answer to this question is no. While aid's critics often make the claim, it is at odds with the evidence.

Critics argue that aid stifles economic growth, promotes corruption and leads to dependence. Yet the best available research suggests that on average aid's impact on growth, while modest, is positive. A recent study from the Quality of Governance Institute found that since the end of the Cold War aid has tended to reduce corruption. And the example of countries such as Botswana and South Korea, which have gone from being poor and reliant on aid to relative prosperity, shows that aid need not lead to dependency.

Critics also claim continued global poverty shows aid has not helped. But this ignores slow but significant improvements in areas such as health and education almost everywhere, which partially stem from aid. Only when critics point to the failures of particular projects do they have a point. Because while aid has helped on average, some has done harm. From flawed infrastructure projects to aid given to dictators, there are many examples of failure. Of course, there are also examples of success. But the failures are a reminder: success is not guaranteed.

Which means the real question is not whether aid does more harm than good. It is: ''How do we ensure aid works?''

There are three simple rules of thumb for better aid:

 Aid should be given with good intentions. Some of its worst failures have occurred when it was given for geostrategic reasons, or given in ways designed to benefit businesses in wealthy countries.

 Different things work in different places. Just like Tolstoy's unhappy families, no two poor countries are alike. Aid needs to follow context, not formula.

Learning is important. Agencies need to devote resources to research and to learning from experience.

Encouragingly, many donors are improving in these and other important areas. Yet others lag and there is still much to be done.

Aid does more good than harm, but it could do better.

Terence Wood used to work for the New Zealand Aid program and is on the steering committee of New Zealand Aid and Development Dialogues (nzadds.org.nz).

THE ACADEMIC HELEN HUGHES

''FOR God's sake, please stop the aid.'' This is the cry from Africa. To the argument that the West wants to eliminate hunger and poverty through aid, James Shikwati, a Kenyan, answers: ''Such intentions have been damaging our continent for the past 40 years. If the industrial nations really want to help the Africans, they should finally terminate this awful aid. The countries that have collected the most development aid are also the ones that are in the worst shape. Despite the billions that have poured into Africa, the continent remains poor.''

Shikwati shows how food, clothing and other aid destroys the livelihood of Africans and keeps exploitative rulers in power. In Dead Aid: Why Aid is Not Working, Dambisa Moyo, a young Zambian, exposes the way aid supports tyrannical governments. She argues that aid perpetuates cycles of poverty.

Shikwati and Dambisa Moyo are young democratic Africans appealing to Australia's aid lobbies to stop the aid that is keeping autocratic, repressive rulers and their hangers-on in power.

When first discovered by Europeans, the standard of living in the Pacific was so enviable that James Cook had difficulty keeping his sailors from absconding. After 40 years of the highest per capita aid flows in the world - totaling more than $100 billion - social indicators such as maternal and child health and literacy are among the worst in the world.

Australia's pursuit of partnerships with dysfunctional Pacific leaders has paved the way for China's dominance in the region, buying political favours with aid. So many young educated Pacific islanders have fled that there are few democratic voices to evaluate aid.

Village pump, vaccination and mosquito net programs for wide-eyed children make for ''feel-good'' television. Yes, some of these programs are effective for a time. But they have no lasting impact. What lasts are the sums creamed off and the billions of dollars in government aid that keep dysfunctional governments devoted to stopping development in power. Whatever the United Nations bureaucracy gains from increases in Australian aid for Africa, the cost in oppressed, poverty-stricken African lives is horrendous.

Many studies of aid effectiveness have been undertaken. Some conclude that aid can have positive effects, if combined with strong pro-development government policies. Many more show a negative impact of aid on economic and social development. Overall, aid flows tend not to increase investment or growth or reduce poverty, but to increase inefficient government sectors.

Emeritus professor Helen Hughes is a senior fellow at the Centre for Independent Studies.

THE ACTIVIST GARY LEE

MORE than 1 billion people live in extreme poverty. If targeted effectively, foreign aid can make a positive contribution to improving people's lives, reducing inequality and promoting justice.

A fundamental principle for effective aid is that it should be focused on reducing poverty and be driven by those whose needs are being addressed. In other words, the interests and rights of the poor and marginalised must be at the centre of any program.

In reality, however, it is the narrow geopolitical and commercial interests of donor countries that often determine foreign aid allocations and conditions. For example, since 2002 more than 40 per cent of the $178 billion global increase in aid provided by wealthy countries has been spent on just two countries: Afghanistan and Iraq. Of concern are reports that in some cases aid has been made conditional on co-operating with or providing information to the military forces.

Although the last review of Australia's aid program in 1997 called for a shift away from short-term foreign policy and commercial objectives to one focused on poverty reduction, the practice of using the aid program to promote Australia's national interest continues. For example, half of Australian aid to Afghanistan between 2007 and 2009 was channelled through the Australian Defence Force, which is not required to report or evaluate the impact of its aid.

Australia also relies considerably on Australian private contractors to manage and deliver programs. Reliance on for-profit consulting companies has meant that a significant portion of aid money has bypassed the people who need it most, instead funding Australian companies, consultants and advisers. A substantial amount of aid delivered by managing contractors is in the form of technical assistance, which has been criticised for its high cost and lack of effectiveness.

With the review of Australia's aid program to be completed next month, now is the time to ask whose interests are being served by Australia's aid program. The practice of using aid to promote Australia's strategic and commercial interests must give way to a mandate that focuses on poverty reduction in accordance with the rights and interests of the poor and vulnerable.

Gary Lee is co-director of AID/WATCH.

 


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