Hannah (Year 12)
Editor’s note: Hannah wrote this essay during her time in Year 12 at GSAL. It was entered into the annual Minds Underground Essay Competition. Hannah is now studying Geography at the University of Durham. CPD
Dambisa Moyo argues in her book ‘Dead Aid’ (Moyo, 2010), that foreign aid has failed to promote economic growth and alleviate poverty in Africa. Aid has created a dependency culture, stifled local entrepreneurship and innovation, fostered corruption and perpetuated inefficiencies in African economies. She states that aid has done more harm than good by crowding out private investment, creating disincentives for domestic resource mobilisation and distorting local markets. However, the effectiveness of foreign aid in reducing poverty and promoting economic development in Africa remains a subject of debate. While some studies support Moyo’s views, others suggest that aid has contributed to significant improvements particularly in health, education and infrastructure in Africa.
Development aid is financial aid or assistance given to a country by an organisation or another country to help support its human development. Most official development assistance (ODA) comes from National Governments (bilateral aid) and Intergovernmental Organisations (IGOs) as multilateral aid. Non-governmental Organisations (NGOs) and private foundations also contribute aid. One of the first examples of bilateral aid was aid given to Europe by the USA after the Second World War as Marshall Aid, which was largely used to help the economies of Western Europe recover. By the beginning of the 1960s, US$100 million had been transferred to Africa and the overall amounts of aid given have steadily increased since then (Moyo, 2010). The rise of neoliberal thinking in the 1980s meant that IGOs put conditions such as free trade and reducing government spending on their aid, aiming to promote economic development. The conditional loans were known as Structural Adjustment Programmes (SAPs). These policies were controversial, with critics arguing that they’ve increased poverty and inequality in the countries receiving the loans. There is now a growing focus on environmental sustainability, health, and education to improve skill levels, and human rights when providing aid.
In several ways, the evidence is inadequate to answer the most central question about aid effectiveness: does foreign aid work? In his book ‘Does Foreign Aid Really Work?’, Roger Riddell (2008) explicitly argues that the situation in Africa could have been a lot worse than it is now had there been no aid as almost all global development indicators show that people live longer, eat more, go to school and are healthier than in the past (Hurst, 2017). However, it’s not always clear whether aid actually promotes human development or improvements in human rights. The question ‘does foreign aid work?’ is difficult to answer, partly because there are so many possible outcome measures and confounding factors. Measures of success could include economic growth, indicators of human development, indicators of how well human rights are upheld and how well the negative consequences of aid are managed. But confounding factors often exist. It is important to note that when considering the effectiveness of aid, most studies examine ODA; humanitarian emergency aid is almost always assumed to be worthwhile. In many cases, the outcomes of development aid are a mixture of successes and failures.
Traditionally, in research into the effectiveness of aid, economic growth in real GDP per capita has been used as an outcome measure; however, more recently, poverty reduction and the millennium development goals have been used to measure success. This perhaps helps explain why some of the most influential studies of the early 2000s produced mixed results. Some found that aid robustly causes positive economic growth (Boone, 1996), others could not distinguish the average effect from zero (Easterly, Levine and Roodman, 2003) and others found a positive effect of aid only in certain countries such as those with good policies or governance (Burnside and Dollar, 2000). However, more recently Asra et al. (2005) and Fielding, McGillivray and Torres (2006) have used different outcome measures for assessing the effectiveness of aid. Asra used poverty reduction and found that aid, in moderate volumes, is effective in poverty reduction. Fielding used indicators of human development including measures of health, education and fertility and observed that in general, aid has a substantial positive impact on many development outcomes. However, assessing the effect of aid on development in studies, is often hampered by a paucity of data, and the specific contribution that aid has made to the aggregate outcomes because of the difficulty of identifying the range, strength and importance of the factors other than aid, which also influence such outcomes (Riddell, 2008).
What cannot be disputed is the success of some aid programmes in the health and education sectors. Successful aid programmes have often been those tailored to the local context, involving strong partnerships with local communities and governments. Public health programmes have helped to combat diseases such as malaria, polio, smallpox and measles through vaccinations, which has helped reduce child mortality rates. Malaria kills hundreds of thousands of people every year; however, when IGOs and NGOs including ‘Nets for Life’ funded awareness campaigns as well as distribution of mosquito nets, diagnosis kits and medicine, global death rates from malaria fell by 50% between 2000 and 2015 (WHO and UNICEF, 2015). Additionally, globally in 2021, 87% of children attended primary school with four out of five children completing their primary education. Over the past two decades, the number of out-of-school children decreased by over 35% (UNICEF, 2022). The goals of achieving gender equality and initiatives to promote trade (which is an essential driver of economic growth) have also seen some progress. Notable successes include increased school attendance for girls, decreased maternal mortality rates, increased female representation in parliament and a decreased gender inequality index. The Fairtrade Foundation is a successful trade intervention, which seeks to obtain a fair price for a wide range of goods exported by developing countries.
However, aid can also have negative consequences as suggested by Moyo in her book and supported by others. Firstly, long term aid creates a culture of dependency where countries rely on aid for the most basic services, and this discourages local entrepreneurship, innovation and growth. This further perpetuates poverty within the recipient country, instead of promoting the development of their own economies. Efforts to reduce aid dependency focus on increasing ‘real aid’ (aid with few strings attached), allowing countries to lead their own development and work on projects which may improve infrastructure.
Secondly, foreign aid can lead to corruption and ineffective governance and Moyo sees this as a particular problem in Africa. In some cases, aid money can be diverted from its intended purpose, ending up with corrupt officials. Furthermore, aid can be spent on development projects that serve the interest of a small elite. Research has shown that giving aid to countries with high levels of corruption can actually increase their corruption (Alesina, 2002). Money doesn’t always reach minority groups who need it the most, resulting in fewer opportunities for them for example decreased access to jobs, funding and equality. It also undermines human rights and development of democracy. Countries are ranked on a ‘global corruption’ scale and many of the countries receiving most overseas aid are also some of the lowest rankings in terms of good governance.
Aid can also distort local markets and create imbalances in the economy. When foreign aid is used to subsidise particular sectors, such as agriculture, it can create unfair competition for local producers and distort the natural market forces. This can ultimately harm local businesses and limit their growth potential. Additionally, debt often accumulates after money has been loaned to the government of the recipient country. Loans attract interest and risk the receiver country entering a downward spiral of increasing debt.
Furthermore, development aid can lead to higher levels of inequality. In countries where inequality is high, health indicators are poor (the poorest are unable to afford healthcare) and growth in living standards is hindered as a less healthy population is less economically productive. Additionally, environmental damage can occur if foreign aid is directed towards natural resource extraction. Air, water and soil pollution leads to loss of traditional livelihoods such as farming and fishing and possible health problems in local communities. Conflict and human rights abuses between the developers and the original inhabitants of the land can arise.
In conclusion, the impact of foreign aid on poverty reduction and economic development in Africa is complex and context specific. While there are some who disagree with Moyo’s views and argue that aid can be effective in alleviating poverty, her concerns highlight the need for careful consideration of the impact of foreign aid on local economies. It is worth noting that foreign aid alone cannot solve Africa’s development challenges and that aid must be complemented by sound economic policies, good governance and effective institutions. In addition, aid should be targeted at the most vulnerable populations and aligned with the priorities and needs of recipient countries as bottom-up aid appears to work better than trickle down. In the current climate, more partnerships with collaboration between partners and more reciprocity is needed. Ultimately, a sustainable approach to development must focus on building local capacity and empowering communities to take charge of their own development.
References
Alesina A., Weder B., (2002) “Do Corrupt Government Receive Less Foreign Aid?” The American Economic Review, Vol. 92, No. 4, pp. 1126-1137
Asra A., Estrada G., Yangseon K., Quilbria M.G., (2005) “Poverty and Foreign Aid Evidence from Recent Cross-Country Data,” ERD Working Paper No. 65, Economics and Research Department, Asian Development Bank, Manila.
Boone P., (1996) “Politics and the Effectiveness of Foreign FAGIA,” European Economic Review, Vol. 40, No. 2, pp. 289-329
Burnside C., Dollar D., (2000) “Aid, Policies, and Growth” American Economic Review, Vol. 90, No. 4, pp. 847-68
Easterly W., Levine R., and Roodman D., (2003) New Data, New Doubts: A Comment on Burnside and Dollar’s “Aid, Policies and Growth” (2000), National Bureau of Economic research
Fielding D., McGillivray M., Torres S., (2006) “A wider Approach to Aid Effectiveness: Correlated Impacts on Health, Wealth, Fertility and Education,” Research Paper No. 2006/23 UNU- Wider
Hurst C., Adams L., Chapman R., Cowling D., (2017) Geography for Edexcel A Level Year 2, OXFORD, Oxford
Moyo D., (2010) “Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa,” Penguin, London
Riddell R., (2008) “Does Foreign Aid Really Work?” OXFORD: Oxford University Press.
UNICEF (2022) Primary Education. Available at: https://data.unicef.org/topic/education/primaryeducation/ (accessed: 16/04/23)
World Health Organisation and the United Nations Children’s Fund (2015) Achieving the malaria MDG target: reversing the incidence of malaria 2000-2015, pp. 10
Bibliography
Dunn C., Adams K., Chiles M., Holmes D., Oakes S., Warn S., Witherick M., (2021) PEARSON EDEXCEL A LEVEL GEOGRAPHY BOOK 2, 4th edn, Hodder Education, London
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