Bad Aid

Patta Scott-Villiers
24th May 2010 — Issue 171 Free entry The government’s promise to up foreign aid risks pumping more cash into a broken system
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With the election over, tax hikes, public spending cuts and possible job losses are on the way. But the new government is still promising more aid abroad. It is morally right and pragmatic, said the Tories before the election: cutbacks would cost lives and leave Britain vulnerable to dangerous resentment in the world’s most beleaguered corners. The Lib-Con agreement even promised that the target of 0.7 per cent of national income spent on aid by 2013 “will also remain in place.” This could mean £12bn to £16bn by 2013, depending on the performance of the economy.

Yet much existing aid is spent badly, and there is little sign that the new government has a workable plan to fix it. Yes, David Cameron’s 2009 green paper proposed aid based on evidence of effectiveness, a new independent watchdog, increased transparency, punishing corruption and promoting the private sector. That all sounds fine. But the department for international development (DfID)—which gives out Britain’s aid money—would be forgiven for saying there is nothing much new here.

DfID puts prodigious effort into independent evaluations, while financing plenty of private sector initiatives. Britain’s bureaucrats (alongside phalanxes of outside experts) constantly push leaders of poor countries to deal with disorder and dishonesty. Labour even created a new “stabilisation unit” between the ministry of defence, the foreign office and DfID to try to solve the most intractable foreign conflicts that threaten our security.

But the difficulties with the aid system go deeper. Most aid goes to governments, so auditors aren’t able to evaluate programmes without treading in murky political waters. Instead they produce bland reports, which all too often are ignored in the rush to spend money. And the Tory promise to focus on results could see more focus on easy wins: counting children into schools, miles of road built, or police trained, while riskier projects that might deliver balanced economic growth or durable security are ignored.

As I’ve learned working in east Africa for 25 years, successful aid requires not just money for infrastructure and training, but also a social consensus on how to run things effectively and fairly. I have recently been part of a small team working on a DfID-funded project in Ethiopia. Over seven years we organised events for thousands of ordinary citizens to meet and debate with traditional leaders, politicians, administrators and aid providers. We commissioned research on local issues and fed it back to those who came. While the priorities of ordinary people are the same as those on Cameron’s list—more security, less corruption, and more say in their government—they are certainly not pleased with the way the aid system works.

Poor aid is not just a waste of money, it’s dangerous. As economist Dambisa Moyo points out in her recent book, Dead Aid, too much of it creates corruption, fuels inflation, reduces domestic investment, undermines the market and limits innovation. In Africa, Moyo reports many cases in which aid increases have gone alongside decreases in growth: a government that gains much of its revenue from abroad has less incentive to be good to its citizens at home.

Similarly, a report in April from Harvard Medical School found that when health-related aid was provided to the governments of countries in sub-Saharan Africa, governments’ healthcare budgets tended to go down. In the countries where I worked, I have seen regimes investing heavily in security forces, winning elections with violence rather than performance, while aid pays for schools and healthcare. Without political accountability, excessive foreign aid contributes to an irresponsible leadership or worse.

Back in Britain, officials will always try to disburse the money they are given. So a rise to 0.7 per cent could mean more problems, not less. To keep transaction costs down, DfID will have to give larger grants to the poorest countries—often to governments answerable to no one but themselves. The perverse result of doubling aid could even be to deaden progress and increase corruption. Tory thinkers, I suspect, see violence and mismanagement as occasional and avoidable slip-ups, rather than systemic to the logic of foreign aid.

To fix this, we must focus on what it means to hold aid to account. We are politically responsible for what aid does to a country, and so we should strengthen the hand of its citizens, not undermine them. This means understanding that aid is part of the politics of the countries to which it is given. What we need is quality rather than quantity: a target for 0.7 per cent of excellent aid, and one which may well take much longer than 2013 to reach.

We must do more than insist that financial accounts are kept and reported properly. Cameron should certainly consider Moyo’s suggestion of promoting foreign direct investment and domestic savings mobilisation before aid. This means extending lines of credit to investors, while putting aid money towards reducing trade barriers. Experience in Asia has shown how an expanding private sector brings demand for improvements to legal and administrative governance.

We also need to rebalance aid so that it goes equally to government bureaucracies, civic and private initiatives. And instead of crowding out domestic investment, we should put money into the more difficult areas where new thinking can happen, including the arts, media, public gatherings and old and new institutions of learning.

At an event I chaired last year to consider strategies for some of Kenya’s least developed areas, an old man was presented with a diagram. It showed his country’s political elites at the apex of a tall pyramid. Bureaucrats and aid workers were the middle, while an undifferentiated poor massed at the base. He asked me, incredulous: “who built this house?”

People in countries like Kenya must never be put at the bottom of a pyramid, waiting to be given aid. Instead they should be at the centre of an intricate system capable of renewing itself. Rather than stifling it, our aid should support this renewal.

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