Despite our noble intentions, aid does not solve problems – it just makes them worse

Published in the Daily Mail (May 18th, 2011)

The Marriott Hotel in Islamabad symbolises Pakistan’s profound problems with terrorism and its amazing spirit of survival.

Three years ago, a truck laden with explosives destroyed the landmark building in the centre of the nation’s lush capital, killing 54 people in a blast that left a 60ft-wide crater and was heard more than ten miles away.

Just three months later, the five-storey hotel was back in business. And ten days ago, I walked through the rings of intense security to attend a conference on the challenges now confronting Pakistan.

These challenges are deep-rooted in a country deemed the most dangerous in the world. It is ripped apart by terrorism and run by some of the globe’s most venal politicians, who pour money into dubious defence projects rather than desperately-needed schools. Behind everything is the shadowy presence of the military, taking billions in Western aid to fight terrorism while protecting some of our bitterest enemies.

So it was surprising to hear a panel of speakers from Left and Right unified in contempt for this aid. While the United States offers an incredible $7.5 billion package to Pakistan, and Britain plans to double donations to approaching half a billion pounds a year, these experts said this cascade of cash was the cause of their country’s huge problems, not the solution.

They are not alone. More and more people in the developing world, from academics to economists, from journalists to politicians, share this view that the flood of paternalistic Western aid is corroding their countries. They say it encourages a dependency culture, fosters corruption and fractures society. It is not just British voters who are concerned that so much money is being sent overseas at a time when our own economy is in such dire straits.

Yesterday, it emerged the Defence Secretary Liam Fox had written to the Prime Minister opposing plans to set in law the supposedly sacred target of spending 0.7 per cent of gross national income on aid. Given this is the second leak of a letter written by Dr Fox, there is a strong suspicion that someone is playing political games, whether on behalf of —  or indeed to undermine — the Defence Secretary.

Regardless of the politics, and although I am far from his biggest fan, I share Dr Fox’s concerns. The Coalition’s stance on overseas aid is wrong in every way possible, from the muddle-headed idea of making the pledge legally binding — ensuring the creation of a lucrative new seam for lawyers and litigants to mine — to the core principles underpinning the policy.

Just listen to those experts in Pakistan who have seen their country come close to implosion over the past decade, with terrorists killing 35,000 people and so much political and social progress stunted.

‘The argument has been that without aid our country will get more militant and more unsafe. But all this is happening with aid, which raises the question of whether it is making things worse,’ said S. Akbar Zaidi, a prominent social scientist.

Professor Zaidi said the torrent of aid broke the chain of political accountability between rulers and citizens. After revealing figures showing two-thirds of those who should pay income tax evaded it, including many in the governing elite, he concluded that aid reinforced all the nation’s difficulties. ‘Aid donors are not helping Pakistan, they are hindering us.’

It makes sense, of course. A government handed huge chunks of money from abroad — and some impoverished nations receive half their revenue from donors — has less reason to respond to the needs of its people. This is why, for all the noble intentions, our aid ends up causing corruption, disrupting democracy, reducing local investment, undermining innovation and even boosting military spending in nations that can ill-afford it.

Politicians take the huge sums on offer from Western governments to pay for schools and hospitals, then fritter revenues on security or stash them away in private bank accounts. At election time, they rely on bribery or violence rather than the provision of decent public services.

Indeed, Harvard Medical School researchers found that when health-related aid was given to governments in sub-Saharan Africa, they often reduced their spending on health.

From the very start, aid has been a gimmick used by Western politicians. It began when U.S. President Harry Truman was looking for ideas to give his 1948 inaugural speech more punch, and a speechwriter came up with the idea of helping the world’s poor.

His team were amazed how the vague concept seized the headlines, but quickly turned the declaration into action, giving birth to the era of foreign aid.

Since then, more than $1 trillion has been transferred to Africa alone — but over the past three decades, according to Zambian economist Dambisa Moyo, the most aid-dependent countries exhibited an annual growth rate of minus 0.2 per cent.

There have been some successes, especially in immunisation programmes to fight disease, but far too many failures and far too much profligacy.

Too often, foreign donors think they know better than local people what they need. Take the tale of the village in Kenya that built its own school, only to be told by foreign donors it needed a bigger school, then another. So now this small community has three schools — one that was functioning perfectly well and now sits vacant, an expensive new one plastered in foreign names, and a third that has never been finished. All on half an acre of land.

Despite mounting evidence of failure, foreign aid remains a useful prop for politicians seeking to burnish populist credentials. Typically, Tony Blair was quick to see this, tapping into the short-sighted emotionalism of the charity concert Live8 in 2005 with ludicrous promises to ‘make poverty history’. Now, the Coalition uses aid to counterbalance the cuts at home and show it cares.

When Mr Blair established the Department for International Development (DFID) in 1997 as the political wing of the charity sector, it had a budget of £2.6 billion. Incredibly, this has grown to £8.1 billion and is set to keep on growing by another £3 billion by the end of this parliament, despite domestic spending cuts hitting nearly everything from defence of the realm to services for people with disabilities.

Even insiders admit it is difficult to spend such huge sums without ensuring much of it is wasted — especially when the number of DFID employees has risen only marginally. After all, staff don’t win promotion by finding savings or pointing out wastage in such a culture of philanthropy.

This explains why British taxpayers have propped up a one-party state in Ethiopia, collaborating with a regime that has a shocking human rights record. And why huge sums are spent supporting another repressive regime in Rwanda, where aid even funded an electoral commission that endorsed blatantly undemocratic elections and a state media body that suspended critical newspapers.

And again in Uganda, riven with unrest after a controversial election, where the veteran president has been caught buying Russian fighter jets at seemingly twice the market rate without parliamentary approval.

One critic pointed out the sums spent — close to half a billion pounds — were enough to run the Ugandan health service for three years. Britain will hand over a similar amount in the course of the next five years.

But still we keep on pressing towards that target of giving away 0.7 per cent of our nation’s income. Strangely, no one ever bothers to question this hallowed figure, the result of a messy compromise more than four decades ago, based upon assumptions that are no longer true and justified by a model that is no longer credible.

When two experts at the respected Centre for Global Development in Washington applied the same methods of assessment to modern economic and social conditions around the world, they found it yielded an aid goal of 0.01 per cent of national income. An uncomfortable truth that lays bare the folly of our policies, which seek to send abroad 70 times that amount.

And still we refuse to face the facts that our best intentions may be backfiring, and that aid is part of the problem in places such as Pakistan and Uganda rather than the solution. It is so much easier to salve our consciences with stunts and soundbites.

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