To kick off our monthly debates, Fellow Joanna Noronha has written the following provocative post on foreign aid. Please join the conversation by commenting below or following up with a post of your own.
Dear YLF friends, I hope this blog post finds you all well.
I have decided to write this brief – and light – post about foreign aid. This is a topic that is currently both incredibly important (due to its claimed impact) and heavily debated (due to its alleged lack thereof). I am sure all of you have thought about it at least briefly. Some of you probably have discussed it at length with colleagues also dedicated to Human Rights work. For example, as you may have noticed, Jakob Lund and I have had long Facebook link-exchanging sessions about foreign aid that have very publically displayed our earnest interest, our deep concerns, our consuming doubts – and a bit of our unapologetic geekiness, too, I might add. So, this post will go over some of the most important answers currently being presented to our Kool-Aid question: is it really cool? Or is it just something bad for growth, sugar-coated, rose-tinted and green-washed, that uses images of little kids as bait for big, fat, grown-up profit?
Let’s begin with a bit of history. When thinking about foreign aid, our minds seem to automatically remember Europe, especially Germany, during the post World War II years. The Marshall Plan consisted of financial aid by the USA to war-torn countries of Europe. This seems to have worked very well, as we can see in the post-war segment of this amazing animated graph. As we know, Germany recovered and is now one of the leading economic powerhouses of the world. Also after WWII, another plan was designed by the US for Japan, and it also produced very good results.
Decades later, a multitude of foreign aid initiatives have taken place. Unfortunately, no other country seemed to follow Germany and Japan’s example as poster countries for the effectiveness of foreign aid. This map uses data from the World Bank to give us an idea of how much aid was donated and received in 2007. Why is it that those countries haven’t taken off economically and socially, just like Germans and Japanese did after their nations were so severely harmed by war?
Jeffrey Sachs, a renowned economist and founder of NGO Millennium Promise Alliance, argues the answer is more aid. In his 2005 book, The End of Poverty, Sachs argues it is possible to overcome today’s extreme poverty by increasing aid. More specifically, he argues it is possible to stop the tragedy that is 8 million people dying from hunger and poverty each year by 2025. He compares the USA’s 2005 expenditures with war ($450 billion) and what it donated to poor countries ($15 billion), to make a case that not only more aid is needed, but also that it would be viable to increase donations if citizens and leaders so chose in the future.
Sach’s most famous critics are American economist William Easterly and Zambian economist Dambisa Moyo. Easterly presents in his books The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done so Much Ill and so Little Good (2007) and Easterly’s Reinventing Foreign Aid (2008) the argument that aid has done very little in the past, and that it is unlikely more aid will produce better results in the future. He argues it is not more aid that is needed, but a different, better form of aid: one that is built from the bottom up, via experimentation and failure, done by “searchers”. In contrast, the grandiose form of aid done by “planners” is doomed to fail, since reality is too complex to fit in a blueprint. In the same stream, Easterly is accompanied by Dambisa Moyo. In her book, Dead Aid: Why Aid is Not Working and How There is a Better Way For Africa (2009), Moyo argues that aid is not improving the situation in Africa, overall: instead, poverty levels have grown and growth has declined. This happens, according to her, because nations that receive aid become economically dependent and economic distortions are generated, hindering growth. Moreover, aid fuels corruption, complicating matters even more. The answer is to force leaders to turn to funding sources that would make them more accountable, such as private sector investment and freer markets.
This leads us to a third, alternative stream I perceive in this debate is one that in a way acknowledges both the potential and the flaws presented above, and presents more market-based forms of capital transfer as the best way to fight global poverty. These people are not interested in the debate between those trying to multiply the fish to feed the hungry, and those reminding us all that it is not wise to think we can be babel fishes and speak all languages at once. Instead, they claim that enabling fishing is more important than debating fishy ideas that only work as red herring. I will here call this dissident group the “teach to fish team”, just for fun, and will present two examples of how to do it: by financing simple fishing sticks, and by building huge fishing nets.
Muhammad Yunus is a Bangladeshi economist, and founder of the Grameen Bank, a bank that gives credit to poor people. In his book Banker to the Poor: Micro-lending and the Battle Against World Poverty (1999), he argues that it is the absence of credit to those who need very little money that traps them in poverty, and prevents them from becoming small entrepreneurs. His answer was to create innovative ways to make micro-financing sustainable, via the Grameen Bank. His bank, then, would work as a factory of small, custom-made fishing sticks.
Others will argue ours is a Big-fish-eat-small-fish world – and that this is a good thing. Thus, the answer to hunger and poverty is to build bigger boats, with larger fishing nets. An example of how to accomplish such a capitalist endeavour comes, surprisingly, from China. In her recent book The Dragon’s Gift (2011), Deborah Brautigam investigates whether China’s investments in Africa are the work of a rogue donor, supporting corrupt dictators and propagating low environmental standards, as some argue. Her conclusion is that the Chinese model might accomplish more than the West’s decades-long type of aid.
So, what do you guys think? Which of these authors seem to be portraying more faithfully the reality you witness in the parts of the world in which you have lived and worked?