Foreign Aid — Money Well Spent

Foreign aid and its effectiveness on a country’s development has been a continuous debate for the past 100 years. In all likelihood, it has been argued about for much longer than that, but in last 100 years something has happened: the world has become more interconnected and therefore more dependent on each other. For that reason, the topic of foreign aid is now more important than ever. Let us discuss three major points of the critics, who are against foreign aid, and explain why their thought process might not be necessarily correct.

1) Corruption in the field of foreign aid is rampant and much of the money that is there to develop poor countries end up
foreign-aidsupporting self-serving bureaucracies.

This point is one of the most obvious criticisms and also the hardest to argue. After all, no one wants to see their donated money go to corrupt officials instead of struggling families. Economists and critics have estimated that the US had participated in the corruption of about $100 billion. With such outrageous numbers, you can understand why people are against foreign aid. However, this is not the reality. This number and more horror stories about corruption mostly refer back to a time when such aid was designed to win allies for the Cold War rather than development. Times have changed and corruption in this field has rapidly decreased due to more effective targeting and delivery. In their 2014 Gates Annual letter, The Gates Foundation wrote that “small-scale corruption amounts to a 2 percent tax on the cost of saving a life.” Naturally our aim should be to minimize that number; however, we cannot give up if we fail to do so. Corruption still exists and quite probably will never disappear completely, but this does not mean that the moral obligation and common sense investment of foreign aid is superfluous.

“Four of the past seven governors of Illinois have gone to prison for corruption, and to my knowledge no one has demanded that Illinois schools be shut down or its highways closed.” – Bill Gates, Annual 2014 Gates Foundation Letter

2) Foreign Aid makes poor countries depend on developed 
countries and that is terrible for their economy.

g-g6shrahr4sIn 2013 Ethiopia’s ambassador to the UK Berhanu Kebede said, “Aid […] is a declining trend. […]. I’m not trying to undermine the role of aid, but our main aim is to move from aid to trade and investment.” While this makes sense, Kebede is neglecting to mention that foreign aid is what brought Ethiopia in the position of being able to increase their trade and investment. If the country had received no money at all during its struggling decades, the ambassador’s “main aim” would be unreachable and his “target to become a middle-income country by 2020” close to impossible. This is what foreign aid is trying to do: fund research of new tools like vaccines and farm seeds so that countries can develop their economy and eventually move to economic independence. When discussing this topic, the Gates Foundation points out two examples of this type of aid. First, the money that was spent in the 1960s to develop more productive crops made Asian and Latin American countries less dependent, because, after this investment, the countries could use the new tools to become more profitable. Similarly, the Green Revolution today in Africa is helping people grow food more effectively and successfully so that they can have the chance to be financially less dependent. Overall, foreign aid has made huge advances in countries and many, such as Mexico, Chile, Costa Rica, Peru, Thailand, Mauritius, Singapore, and Malaysia, have grown independent because of previous investment from developed countries.

3) “Free” money keeps inefficient and bad lazy-assetsgovernments in power.

If a country receives foreign aid and does not increase its taxes because of that, it will not have angry citizens, who demand a revised political system. This would lead to governments getting comfortable and ending up not doing anything for their country. Many people, including economist Dambisa Moyo, are of this opinion. They think this will happen if we give foreign aid to developing countries. It seems like a very compelling argument until you take into account all of the citizens and the changes they go through because of foreign aid. While the government officials might not have been transformed by this money, the people have. They are getting more economic benefits through newly acquired tools and this means that they are going to be more stable. With stability and wealth come new ideas and eventually even schooling. Both of these factors spur on changes in politics. New leaders will emerge and more emphasis can be put on politics by the every-day man or woman, because he or she is less worried about issues like starvation or sickness.

What_Aid_Buys_CG.AL-Infographic_MASTER-06_1-21UPDATE

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