Future of International Aid: Helping the Helpless by Finding Altruism in Self-Interest

By 2015, we will have nearly eradicated extreme poverty and hunger throughout the world by halving the proportion of people living on under $1.25 per day. We will have achieved universal primary education worldwide, reduced child mortality rates by two thirds, and halted and reversed the spread of HIV/AIDS, malaria and other diseases. We will have promoted gender equality, improved maternal health, and ensured environmental sustainability. Or at least, this is the promise that we made to ourselves, and to each other, almost 15 years ago.

These were the targets, noble if ambitious, that the global community set for itself at the turn of the millennium. As the 2015 deadline approaches, more than one in six human beings still lives below the ‘extreme poverty’ line, and nearly a billion people do not have access to safe drinking water. Yet political pressure in donor countries has never been higher to freeze, reduce, or even halt aid spending. As the indebted rich search for ways to save cash, the even more indebted poor seem to disappear off our moral horizons, and the future of global poverty alleviation remains unclear.

A Lack of Commitment

To be clear, there has been some noteworthy progress toward the Millennium Development Goals: the first target of halving the number of people living on less than $1.25 per day, compared to 1990 levels, has been met due to the rapid rise in living standards in China and India, and among other parts of southern and southeastern Asia. Furthermore, there have been noticeable improvements in primary education rates, falling child mortality, and a slowing of HIV/AIDS infection rates, although these indices remain far from the 2015 targets.

Crucially, however, there has been an obvious unevenness in progress across the world: while a number of Latin American, North African, and Asian countries have met or exceeded these development goals, sub-Saharan Africa remains critically underdeveloped and abjectly impoverished. Vast swathes of the world remain beleaguered by famine, drought, disease, and war. The spectating outsider has a moral duty to do something, anything, that it can to alleviate the suffering.

In 1970, long before the Millennium Development Goals were conceived, the UN General Assembly set the developed world the target of spending 0.7% of GDP on foreign aid every year. Decades later, the rich are not even halfway to this aid target and in fact are going backwards. The US, although the largest aid spender in dollar terms, donates only 0.2% of GDP. Only Denmark, Luxembourg, the Netherlands, Norway, Sweden, and the UK are committed to fulfilling this obligation in 2013.

However, this has not come without domestic resistance. In the US, aid spending in nominal terms is projected to fall over the next five years, from $44bn to $38bn. In the UK, there has been widespread conservative criticism of the government’s decision to increase aid spending to 0.7% of GDP whilst other budgets face substantial cuts. Even the Netherlands, a global pioneer in aid spending, has made moves to focus its aid less on direct development assistance and more on promoting Dutch trade and investment, a backwards step according to liberal international commentators.

Ineffective Aid

Beyond wavering development commitments, the aid that we do give is not only insufficient but hopelessly ineffective. It is often argued that the billions of dollars pledged by governments rarely reach the front line where help is most desperately needed. In all too many cases, corrupt governments prevent funds from building the schools, hospitals and water resources for which they are intended.

World Bank reports suggest that an estimated half of funds dedicated for healthcare development in sub-Saharan Africa do not reach clinics and hospitals. Furthermore, an estimated 80% of funds donated to Ghana do not reach the front lines. As already mentioned, plummeting absolute poverty rates in China and India have bolstered global figures; however, these countries have received comparatively little foreign aid. Instead, huge unconditional sums given to African governments, some of which derive over half their budget from foreign aid, have merely propped up corrupt regimes and supported ruling elites.

The US alone gave over $9bn in 2011 in direct aid to countries listed as the top 10 most corrupt according to the Corruption Perceptions Index published by Transparency International. Over half the aid money is unaccounted for, with no official record of where and how it is spent, so it is almost impossible to know whether well-intentioned aid is in fact spent to actually improve lives. In Ethiopia, the single largest African recipient of Western aid, Human Rights Watch found that much of its $3.4bn annual aid grant had been siphoned off by the government and used for political repression.

In response to this concern, Western donors often link aid spending to political outcomes, such as free markets, the rule of law, and democracy. Whilst nobly intended, this sometimes has the adverse affect of unfairly discriminating against disadvantaged citizens under despotic rule, as in Zimbabwe or North Korea, where political sanctions often involve a cessation of aid.

The so-called Washington Consensus has involved the granting of bilateral aid and loans (as well as multilateral loans from sources like the IMF and World Bank) tied to strict economic reforms: fiscal tightening, privatization, and liberalization of interest rates, exchange rates, and trade policy. The catastrophic failure of these programs, termed ‘Structural Adjustment Programs’ by the IMF and World Bank, and the less explicit conditions on aid imposed on a bilateral basis has been well documented. Economic reform and debt repayment have been forcibly prioritized on national budgets ahead of health and education spending, and a race to the bottom to deregulate markets has led to ravaging exploitation.

Furthermore, far too often self-interest enters into the moral realm of altruism. Aid is often “tied” so that it must be spent on the donor country’s own produce. Programs to distribute malaria nets, vaccinate children and provide safe drinking water get replaced with the gift of a military helicopter produced in the donor country. Even when this doesn’t happen, tied aid has the effect of increasing the cost of development projects by as much as 15 to 30%, as sourcing supplies locally is far cheaper than shipping in foreign goods. Tied aid thus reduces the effective value of aid, as well as meaning that recipients do not get the resources that are most desperately required. Although rates are falling, still almost 60% of Western aid is tied.

If Western countries wrongly tie aid, gift it directly to corrupt states, and use aid as a geopolitical tool, newly developed economies are using it as an economic one. Brazil, India and China, former recipients now burgeoning donors themselves, are changing the aid landscape by offering financial assistance with no political strings attached but with explicit economic and natural resource deals in the fine print.

India, once the world’s largest aid recipient, set up its own aid agency in 2012 with a budget of 800 billion Rupees (US$15 billion). China has spent 450 billion Yuan (US$75 billion) on aid to Africa in the last decade. However, the mining contracts that accompany this aid tend to receive more criticism than the infrastructure projects receive praise. Although national leaders maintain a political discourse of aid and cooperation, there are widespread allegations of exploitative and extractive practices involved in infrastructure creation and associated natural resource investment. While the checks may now be denominated in different currencies, there still seems to be no such thing as a free lunch for developing nations.

The Future of Aid

However, the answer is not to abandon aid but to improve it. Where aid is lost through corruption, it must be targeted directly to the front line where it is needed, with a focus on multilateral giving through NGOs rather than bilateral state-to-state payments. Where aid comes with oppressive strings attached, there must be a promotion of unconditional funds.

Donations through charities and international organizations such as Oxfam or UNICEF, as opposed as covert state deals, are on the rise. Whilst this avoids issues such as tied aid and corruption and thus ensures help is provided where it is needed most, it is also associated with a ‘fragmentation’ of aid distribution, with too many uncoordinated originators of front line aid. Over the last ten years the number of separate aid programs across the globe has risen from 10,000 to 80,000. Projects are therefore difficult to manage and coordinate, leading to inefficiencies. The future of aid certainly involves fewer state actors, but it also requires a more coordinated approach.

Many critics argue that recipient nations can become economically dependent on aid funds, reducing incentives to create efficient tax systems or promote development themselves by creating efficient markets. Whilst this is a valid concern, without the aid in the first place, these nations are stuck in a poverty trap in which insufficient economic infrastructure hinders wealth creation; without economic growth, the funds to create this infrastructure don’t exist. Effectively targeted aid can seek to reduce the reliance of nations upon aid. A number of nations, including India and South Africa, had been substantial recipients of Western aid in past decades, but in future years are set to see aid spending fall substantially or even cease altogether, showing that, to some extent at least, aid does not necessarily lead to dependence.

There are some promising signs for the future, but the impetus has undoubtedly been lost in the global development initiative. Tightening national budgets in North America and Europe, which provide the backbone of current global aid spending, has certainly been one factor behind this. Furthermore, the last fifteen years have seen other priorities dominate the immediate priorities of the international community, such as environmental concerns.

However, this abandonment of development concerns has been misguided. Environmental sustainability, one of the eight Millennium Development Goals itself, cannot be achieved without significant capital investment in sustainable industries in the growing, industrializing economies of central and southern Africa and southern Asia. Such investment cannot and will not be internally funded; external aid and investment is essential to tackling the environmental challenge. Thus, global economic development must remain a priority of the international community. Although there have been some modest improvements, there is still a mountain to climb to revolutionize the global aid landscape to insure that international aid promotes development where it is so desperately required.

Room for Improvement

Whether it originated from post-colonial guilt, a desire to create a prosperous world economy, or genuine altruism, the spirit of the Millennium Development Goals has been lost. If the Goals were created with the sentiment that all people of all nations are linked, with the prosperity of fellow global citizens of fundamental importance of everybody everywhere, as the UN Foundation states, then this has been replaced by a tendency to only help others if it also helps you. Actions certainly speak louder than words, and the sphere of international aid and development has been offered noble words but only selfish actions.

Many would consider such a stance hopelessly naïve in the modern international political sphere: altruism simply isn’t an incentive that motivates policymakers. Perhaps they are right. That would certainly be a damning indictment of the ability of the international community to cooperate towards what seems to be an uncontroversial goal.

Or perhaps not. There is some hope for the future: the Obama administration has proposed to revolutionize its food aid program by donating funds instead of US-grown food. China, along with the other BRIC nations, is pioneering an infrastructural aid revolution in sub-Saharan Africa, with varying degrees of effectiveness. Western aid is becoming less tied, coming with fewer strings attached. If a global drive for austerity can be answered with more efficient aid rather than slashed budgets, then tangible results can be achieved.

International aid is an imperfect and evolving business. Some progress has indeed been made towards the Millennium Development Goals, which were intended to ensure the most basic needs of every human being are met. However as time rolls on there is still much more to be done. There must be more aid, developed nations must meet more of their obligations, and there must be better aid in the form of community-level projects with no caveats in the fine print. While developing nations are still plagued by disease, destitution, and drought, aid to alleviate the injustices of extreme poverty must be a global priority; the international community must find a way to replace obstructive self-interests with altruism.

About Author

James Watkins

James Watkins is a former Editor-in-Chief of the Harvard International Review, and contributes Global Notebook, World in Review, and Blog articles on a range of issues.