Ten great myths about foreign aid

Published in the Daily Mail (July 7th, 2011)

As he pledged to pour hundreds of millions more into propping up Afghanistan, David Cameron accused critics of his foreign aid policy of being ‘possibly hard-hearted.’ The fact is we’ll soon be spending more on the developing world than on the Home Office and, while other budgets face cuts, overseas aid is being increased by billions. Here’s what really happens to that money…

MYTH 1: We can afford to spend a few billion pounds  to help the world’s poor

Defenders of aid say we have a moral duty to help those less fortunate and we are a rich country that can afford it. This argument is put forward by ministers and supporters such as the heiress Jemima Khan, who claims Britain is wealthy enough to spend such trifling sums on aid.

Here are the facts. When Tony Blair established the Department for International Development (DFID) as the political wing of the charity movement in 1997, its budget was £2.6 billion — more than twice the Foreign Office allocation. 

Today, we spend £8.1 billion, which will increase to £11.4 billion in 2014 — a 34 per cent rise, despite spending cuts elsewhere.

Unsurprisingly, MPs are getting a growing postbag over this. We are giving more than £300 per household to the world’s poor while public sector jobs are lost and vital services for the elderly and disabled are closed. The head of the Royal Navy has warned there may not be enough money to pursue the war in Libya.

Four out of five voters oppose the cross-party consensus of increasing aid spending, according to a new YouGov@Cam survey. I share the ideals behind foreign aid — and, if it worked, I would say spend more. Unfortunately, the policy is based on old-fashioned concepts, outdated figures and all too often makes life worse, not better, for people in poorer nations.

MYTH 2: We must hit the UN target to give away 0.7 per cent  of our GNP in aid

Ah yes, the sacred target. For a government promising to sweep away targets, the Coalition is strangely wedded to this particular one. We’re handing over 0.56 per cent of national income — far more than our economic rivals. Germany contributes 0.38 per cent of its income, while we donate twice as much as Japan and five times as much as Italy.

But this target is absurd, arbitrary and outdated. It was first calculated more than four decades ago based on theoretical data from the Forties, and was the result of back-of-the-envelope calculations of the needs of poor countries. 

Since then, Western economies have soared while many poor nations have stagnated. Five years ago, the United Nations itself said the amount of aid really needed was 0.44 per cent of national income.

Development economists applying the original calculations to today’s world yielded an aid goal of just 0.01 per cent of rich countries’ gross domestic product (GNP).

MYTH 3: Aid works

The economist Peter Bauer famously said aid transfers cash from poor people in rich countries to rich people in poor countries. His words have been underlined by scores of studies that found idealism tempered by harsh reality. 

Zambian economist Dambisa Moyo revealed the West had given more than half a trillion pounds to Africa, but over the past three decades the most aid-dependent recipients saw negative annual growth rates.

Haiti is another example. It was given official aid of more than £6 billion — four times as much per person as Europe received under the Marshall plan for post-war reconstruction — in the 50 years before last year’s earthquake. Private aid poured in as well, with more charities operating in Haiti per capita than any other place on the globe. Despite this, income fell by a third.

It has, of course, endured despotic leaders, dreadful corruption and political unrest. The same goes for the Dominican Republic, with which it shares an island — but while receiving far less aid, this nation saw incomes and life expectancy soar over this period.

MYTH 4: OK, it hasn’t worked in the past, but it will in the future

Whenever people point out that mountains of money have disappeared into thin air, the aid lobby says it has learned the lessons of the past. So yes, cash funded dictators, fuelled corruption, fostered a dependency culture and aided genocidal killers, but things are different now. The new buzzword is ‘smart aid’.

To be fair to Andrew Mitchell, the international development secretary, he has stopped some of Labour’s most outrageous abuses, such as £115,000 spent on stalls at summer music festivals in Britain, and he is right to boost transparency and encourage trade. But the flawed fundamentals remain the same. 

And his department’s top civil servant admitted this week the Government still has no idea how much money is being lost to fraud and corruption.

MYTH 5: We will ensure 100 pence of value for every £1 spent on aid

This was the message Mr Mitchell gave a sceptical Tory Party conference last year, which he repeated to an equally sceptical looking Jeremy Paxman on Newsnight last month. But it’s not true.

There have been many attempts to quantify how much Western aid really helps intended beneficiaries. Generally, it is estimated by think-tanks and charities that the real figure is in the region of 40p in every pound, though British aid is seen as more cost-effective than most.

The rest is swallowed up by bureaucracy, corruption, consultants, charity costs and duplication between donors — bear in mind dozens of countries and thousands of charities give aid. Indeed, an African nation must waste precious resources churning out 10,000 action reports for aid donors a year.

One UN adviser looked into a house-building project in Bamiyan, Afghanistan, that began with £92 million in the bank. The job was sub-contracted so many times through agencies in Geneva, Washington and Kabul — each taking administration fees — that by the time the money got to those working on the project, they could afford to buy only some wooden beams from Iran. 

They were delivered for five times the normal cost by a company owned by the Bamiyan governor, but turned out to be too heavy for village houses. So they ended up as firewood.

Or take India, which spends £1.5 billion a year on a space programme, but is still one of the biggest recipients of our aid. The World Bank just carried out the first major evaluation of its aid programmes and found so much corruption that only 40 per cent of grain given to the poor reaches its target.

MYTH 6: Aid changes the world for the better

British aid props up repressive autocrats. 

Human Rights Watch issued a devastating report last year that revealed how DFID’s 250-strong staff in Ethiopia failed to monitor annual spending of nearly £300 million. Worse, British taxpayers’ money was shoring up an autocratic regime, funding indoctrination and with food used as a political weapon.

The same is true in Rwanda, where Britain aided a sham election last year by funding the electoral body that prevented the president’s rivals from standing and the media council that closed independent newspapers. This tiny nation, a favourite of Mr Mitchell, is being given an average £83 million a year despite last month’s disclosure it had sent a hit squad to assassinate exiles living in Britain.

We have also given substantial sums to Yemen, despite the concerns over the regime’s appalling human rights record that has helped fuel unrest. 

MYTH 7: The slew of statistics prove that aid is a success

Here is the core argument, repeated by the Prime Minister in a passionate defence of aid last month. As ever, it was accompanied by a grief-stained tale from a slum and statistics on lives saved and children educated thanks to British generosity. Unfortunately, this is far from the full story.

The Coalition is tackling welfare dependency at home, but encouraging it abroad. When countries are given more than half their income, they have less incentive to respond to citizens’ needs. Harvard Medical School found local spending on health fell when health-related aid was given in sub-Saharan Africa.

This means we pay for schools and hospitals, enabling politicians to steal vast sums or fritter away revenues on arms and security (usually sold by the West, with bribes involved). 

They win elections through bribery or violence rather than improved public services, while innovation is stifled and local entrepreneurs are driven out of business by dumped goods and cheap money. The result is that aid corrodes, rather than builds, civil society, as senior charity officials have admitted to me.

This was the message from a conference I attended in Pakistan two months ago, where academics from across the political spectrum blamed aid for their nation’s mounting problems, with venal politicians ignoring citizens’ concerns and an over-powerful army grown fat on foreign funding. 
Needless to say, Britain plans to double aid to nearly half a billion pounds a year to Pakistan. Compare this with Somaliland, which emerged 20 years ago from the chaos of Somali civil war. 

Because this state is not recognised, it depends on local tax revenues rather than huge dollops of aid — and, as a result, it has rapidly developed one of the most inclusive, accountable governments in Africa. 

MYTH 8: Britain will no longer tolerate mis-spending of funds

Uganda has historic ties to Britain and is among the most favoured recipients of aid. When Mr Mitchell was confronted on Newsnight over a Daily Mail report that President Yoweri Museveni had bought a £30 million private jet, he said this happened under Labour and such behaviour would no longer be tolerated.

So here is a conundrum for Mr Mitchell. Put aside Mr Museveni’s use of violence and bribery to win a disputed election this year. What about the recent revelation that he has bought six Russian fighter jets at twice the market rate and without parliamentary approval?

The sum involved was nearly half a billion pounds — three times annual spending on Uganda’s health service and the same amount, coincidentally, as we plan to give over the next five years.

It’s thought nearly £2 billion has been spirited out of Afghanistan since 2007, some to Gulf tax havens, with the family and associates of President Hamid Karzai linked to a £90 million Dubai property empire. 

Much of this cash is from aid donations, with £25 million  disappearing from one donation to a hospital alone. Despite this, last year Britain announced that aid was rising by 40 per cent to £178 million a year.

MYTH 9: Aid is in our interest to prevent immigration

When all else fails to persuade voters on aid, politicians appeal to self-interest. It makes sense, they say, because developing the poorest countries means less immigration here.

This sounds logical. But it is wrong. Dr Hein de Haas from the International Migration Institute at Oxford University has shown that social and economic development leads to more migration because it increases people’s ability to move and raises aspirations. 

Travelling across continents is costly, while education lifts expectations and technology such as TV and computers offers a glimpse of wealthier lifestyles. As Dr de Haas points out, this is why the heaviest immigration come from countries such as Mexico, Morocco and the Philippines — hardly the world’s poorest places.

MYTH 10: Developing nations are desperate to be saved

Overseas aid began as a political stunt and remains a political stunt, used to prove politicians have a heart. But the more I travel around Africa and Asia, the more criticism I hear of how the constant emphasis on aid and endless negative imagery demeans developing nations.

This is worsened by the associated boom in the highly competitive charity sector — as one British official said: ‘If you don’t have starving babies, you don’t get the money.’

It is noticeable the most passionate saviours of the world are Western pop stars and politicians, while the most trenchant critics come from developing nations. ‘The premise is that Africans lack the capacity to save themselves and must rely on the kindness of strangers,’ said Thabo Mbeki, former president of South Africa.

Last month saw the first steps taken in the creation of an African free trade area that will stretch from Cape Town to Cairo and straddle 26 countries. It also saw the largest amount raised yet for a private equity fund targeting the continent, a reflection of the fast pace of growth in much of the region.

This is the future, not our outmoded obsession with aid.

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