An indictment of foreign aid: Is it too late?

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States do not have friends, only interests. (Charles de Gaulle)

 

1. As we have it now, foreign aid is instrumental in decreasing constructive social, economic, and political tensions and internal contradictions that would tend, sooner or later,  redress or resolve the growing imbalances and injustices of the prevailing internal exploitative system in many a recipient country.

 

2. In the best of cases, donors give their aid in a well-intentioned, but nevertheless vain and futile attempt to mitigate or remedy this ongoing internal economic exploitation.

 

3. In the worst of cases, as we all know, donors channel their aid through ruling national elites, most often fully aware of how these elites are instrumental in perpetuating this state of affairs: therefore, do the donors become accomplices in the process of exploitation?

 

4. Local governments channel their own development funds often to urban and more prestigious projects, resting assured that foreign aid will assume a sizable fraction of rural development costs for them.

 

5. To top things off, foreign aid often attempts to impose Western (Northern) models of development, e.g. cash-crop support or large irrigation schemes, which carry not only the seeds of the further exploitation of those supposedly aided, but also the continuing enrichment of the ruling elites.

 

6. The difficult to take truth is that, if current type Western (Northern) foreign aid does not cease or is drastically reoriented, it will never achieve its stated aims and objectives – a fact that is already widely recognized, but for which all kinds of excuses are found. If donors do not begin to look at macro-economic parameters, their “good will” will be used facetiously to perpetuate the status quo. (Chances are strong that many of the donor countries would not mind being used in such a way, as long as their public image looks good to the rest of the world, especially to the other members of the club of donors).

 

7. Most countries face quite a number of problems in managing to absorb all the foreign aid efficiently and clearly lag behind in that task. The bottlenecks that explain this are related among other factors, to shortages of trained manpower, serious limitations in infrastructure, and a slow-paced bureaucracy.

 

8. Instead of asking ourselves how much foreign aid poor people need, we must ask ourselves whether  Western (Northern) tax dollars are being used to shore up the economic and political power of a few who make the powerlessness of the many inevitable. Do these tax dollars go to regimes who sustain themselves in power by repression against the poor? Statistics cannot help us answer such questions. Only identifying with needless human suffering will.

 

9. Foreign aid is rightly accused of many things: being based on a false logic: doing more harm than good; maintaining (and protecting) the status- quo in Third World countries; undermining food autonomy; being a political weapon of the rich countries; perpetuating underdevelopment.  There is no indication that policies regarding this aid  –both in donor and recipient countries– are changing drastically despite mounting evidence for the above claims.

 

10. Short of a call for an overall discontinuation of all aid, foreign aid can play a role in fostering development, but not just any kind of aid. In this context, it is important to determine which kind of aid would be needed, for whom, and under what circumstances.

 

11. But foreign aid has its own politics. Simply denouncing its deleterious effects is not enough. Some political actions need to be taken.

 

12. The mere thought that foreign aid can automatically bring mutual benefits is simply a political fiction. Moreover, the assumption that this aid can be neutral is as shaky as the now-discredited notion of a value-free education. Present day aid policy makers, therefore, have to be confronted with the pressing questions regarding the relevance of their own work. Development assistance cannot automatically be considered as well-suited to developing countries. In the international development community, it has actually gotten a rather bad image as a resource that has been poorly used. Mostly, the way it has been used is what has given it its bad reputation.

 

13. The fact that most formulas for using aid moneys were actually developed to expedite rapid disposal with minimal financial and political costs has conditioned the current drawbacks that have been pointed out. The result is that there are serious deficiencies in the operation and theoretical foundation of Northern foreign aid projects. These projects are often not implemented as planned and ultimate impacts remain unrealized.

 

14. Aid is extremely vulnerable to political pressures and is an area in which ‘politics-literally-stands-directly-between-the-life-and-death-of-millions’.

 

15. Some seem to believe that without foreign aid, the present development crises would be even worse. If this view were correct, there would be no reason to alter present development strategies and one should simply spend a great deal more money on them. The basic problem, however, is that these present strategies do not adequately address the issue of Human Rights violations, the issue of redistribution of assets and income, the issue of income generation for the poor and of adequate expenditures for public services for the poor.

 

16. Therefore, for alternative development strategies to become a cornerstone of genuine development (such as the Human Rights-based approach), policy cannot be usefully discussed outside a broader geo-political and socio-economic framework.  Much more far-reaching steps must be taken to avoid the catastrophic failures of the past.

 

17. Moreover, the sad reality is that aid given with one hand as a soft loan is actually being taken away with the other. The debt trap in which many a developing country is caught makes it necessary to service the debt in hard currency, this directly undermining the whole idea of foreign aid.

 

18. Another valid criticism voiced about aid is that it gets too involved in looking at improving the system’s management, ignoring the need for the system’s drastic reform. Donor agencies somehow avoid raising the issues of structural changes, because of the conflict of interests this inherently raises for them. For many, aid is actually still coupled with a strong belief in the (discredited) trickle-down process despite the evidence that the actual value of the net transfers from most foreign-funded development projects is often less than 30% of the budgeted funds; a big proportion of it, donors spend at home in procuring goods and in expensive consultants (the latter often far removed from the realities in the South).

 

19. Further, there has also been a trend away from aid to the lower-income countries. The concentration of US aid on only a few countries, for example, shows that its objectives are strategic rather than humanitarian. But the US is not alone in this.

 

20. On another political note, donors actually agree that aid can discourage local production, increase dependency, alter people’s habits, encourage corruption, and does not reach the more needy. Nevertheless, they contend that none of these problems need happen under ‘proper’ safeguards. They genuinely seem to believe that aid, when used for ‘strict’ developmental purposes, can be made to have none of the above drawbacks. How this is going to come about is seldom elaborated upon.

 

21. In addition, the same aid often causes severe budgetary and logistic problems to the recipient countries since donors often pay for only some (or none) of the local recurrent costs.

 

22. According to Susan George, the following postulates are generally true for most countries receiving foreign aid:

– A strategy that benefits the least well-off groups will not be acceptable to the dominant groups unless their own interests are also substantially served.

– A strategy that benefits only poor classes will be ignored, sabotaged, or otherwise suppressed by the powerful, insofar as possible.

       A strategy that serves the interests of elites, while doing positive harm to the poor, will still be put into practice and, if necessary, maintained by violence so long as no change occurs in the balance of social and political forces.

 

23. So, to be more effective, foreign aid should:

 

-generate a multiplier effect on the amount of resources allocated for other disparity-reduction programs in the recipient country;

-primarily meet the transitional needs and costs of such disparity-reduction policy adjustments, acting mainly as a catalyst; aid is good only when used as a vehicle of transition;

-in some way, help increase the bargaining power of the poor and the politically marginalized. For this to occur, peasants, workers and women must be helped to form or strengthen their own representative associations.

 

24. If a recipient government cannot agree to these basic conditions  –which will necessarily alter the internal balance of power–  a simple syllogism would indicate that it would be better for the donor to withhold aid.

 

25. But perhaps aid needs to be rethought and restructured, not necessarily withdrawn. Centering it around the human rights-based framework is an option rapidly gaining ground. That will require fostering the political and economic changes necessary in the recipient country to make it possible for aid to really make a difference. The risk is for the latter effort to become another area for the donors being (rightly or wrongly) accused of neo-colonial interference.

 

26. The real commitment to the eradication of Human Rights violations, such as hunger, malnutrition, ill-health plus all the other, implies a massive assault on the roots of underdevelopment and poverty  Foreign aid thus only adds false hopes to the prospects of poverty alleviation. At best, aid treats the symptoms of poverty, not its causes.

 

Anybody moved to react?

 

Claudio Schuftan, Ho Chi Minh City

cschuftan@phmovement.org  

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2 Responses to “An indictment of foreign aid: Is it too late?”


  1. 1bronxdoc

    Thanks Martin. It is good to know that there are people who take a critical view of foreign aid. Readers of the Social Medicine Portal may want to visit Martin Donohue’s blog: Public Health and Social Justice: http://phsj.org/
    Matt Anderson

  2. 2Martin Donohoe

    Random figures on foreign aid and US charitable giving from presentation entitled “Environmental Degradation and Social Injustice (http://phsj.org/?page_id=12) – refs in articles

    Foreign Aid
    • In total dollars: Japan #1, U.S. #2
    – Even though the U.S. economy is more than twice the size of Japan’s
    • As a % of GDP, U.S. ranks 21st among the world’s 22 wealthiest nations
    • More money flows out of developing countries in the form of interest payments, profits of foreign corporations, and clandestine investments in financial markets of rich countries than flows into them as loands, aid, and foreign direct investment
    • U.S. Aid: Over 1/3 military, 1/4 economic, 1/3 for food and development
    • Most U.S. aid benefits U.S. corporations, is spent on military, goes to Egypt, Israel, Turkey, Pakistan, and the Philippines
    • Aid agencies often forced to buy from U.S. companies at inflated prices
    – 70% of aid effectively returned to U.S.
    • Food aid inefficient, benefits large agribusiness at expense of local farmers/economies
    – Takes $2 taxpayer money to generate $1 in food aid
    • 0.9% of the total federal budget, 1.6% of the U.S. discretionary budget
    • Yet 64% of Americans believed in a 1997 poll that foreign aid was the largest federal expenditure
    • On average, Americans think that 24% of the federal budget goes toward foreign aid
    • Approximately $250 billion/year
    – 2.5% of income
    – 2.9% at height of Great Depression
    U.S. Charitable Giving
    by Income Bracket
    • $15K and under: 26%
    • $15K – $30K: 9%
    • $30K – $50K: 5.3%
    • $50K – $100K: 3.8%
    • $100K – $200K: 3.0%
    • $200K and over: 3.4%
    American Charitable Giving:
    • Religious Groups: 35%
    • Education: 13%
    • Multipurpose Foundations: 10%
    • Social Services: 8%
    • Health: 8%
    • Arts and Culture: 6%
    • Science: 5%
    • Environment and Animals: 3%
    • International Aid: 2%
    • Other: 9%
    – Includes individual, corporate, foundation, and bequest donations
    • Less than 10% goes to groups which directly help the poor
    The Gates Foundation:
    • Endowment of approximately $35 billion, with another $31 billion pledged by Buffett Foundation
    • Donates 5% of its worth/yr, invests 95% (typical for charities)
    • At least 41% of its assets invested in companies that counter the foundations charitable goals or socially concerned philosophy
    – E.g., Oil and chemical companies, agrobusiness, pharmaceutical industry
    http://www.latimes.com/news/nationworld/nation/la-na-gatesx07jan07,0,6827615.story

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