Rethinking Foreign Aid

There have been plenty of critics of Western foreign aid, and quite often, rightly so. They have pointed out the waste, inefficiencies and counter-productive nature of much of our overseas aid programs.

One primary example of this is Lord P. T. Bauer (d. 2002), who worked for many years at the London School of Economics. An expert in development economics, he wrote extensively on this theme. He famously (and perceptively) said that Western foreign aid was “an excellent method for transferring money from poor people in rich countries to rich people in poor countries”.

Some of his major books include Dissent on Development (1972), Equality, the Third World, and Economic Delusion (1981), and Rhetoric and Reality (1984) – all published by Harvard University Press. These volumes dealt with a number of related themes: poverty, development, foreign aid, colonialism, imperialism, and Marxism in the Third World.

He brilliantly critiqued dependency theories, Marxist economics, Western guilt manipulators, and the notion that Western nations thrive by exploiting developing countries. And he provided actual case studies, having himself lived in West Africa and Malaysia.

But of course such critics can simply be dismissed as stingy Westerners, or out-of-touch capitalist pigs. But what happens when economists from the developing world themselves denounce much of what passes for Western overseas aid? That is exactly what one young woman from Zambia has done.

Image of Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa
Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Moyo, Dambisa (Author), Ferguson, Niall (Foreword) Amazon logo

Dambisa Moyo is an economist who has just penned an important new book called Dead Aid (Farrar, Straus and Giroux, 2009). In it she argues that most overseas aid in fact creates more poverty, not less. She does not oppose all foreign aid, and certainly finds a place for disaster relief and emergency aid.

But she is against the usual pattern of Western governments propping up corrupt and lazy governments in the developing world. Most money going there never makes it to those who most need it, but stays in the hands of greedy and crooked leaders.

Indeed, decades of money being thrown at Africa has done very little good. Says Moyo, “In the past fifty years, more than $1 trillion in development-related aid has been transferred from rich countries to Africa. Has this assistance improved the lives of Africans? No. In fact, across the continent, the recipients of this aid are not better off as a result of it, but worse – much worse.”

This is because government corruption is simply subsidised and perpetuated; dependency is created and maintained; and accountability is seldom required of those receiving the handouts. Says Moyo, “You get the corruption – historically, leaders have stolen the money without penalty – and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people.”

She is also critical of so many Western celebrities who run around holding rock concerts, thinking they are doing some good for world poverty. Far from it, says Moyo: “They perpetuate a negative view of Africa. All that comes out from them is what I call it the Four Horsemen of Africa’s Apocalypse: war, disease, corruption, poverty. They never say, ‘Wow, guys, let’s try and change people’s image.’ They focus very much on the negative. They’ve become the face of Africa, and that’s an artifact of the aid model.”

To get the full picture, you need to get her book. But for starters, a few quotes from a recent interview may be of help. When asked about which countries were the worst offenders in terms of perpetually relying on handouts, she said this:

“Across the continent, most countries have at least 70% dependency on aid. It’s easier for me to strip out the good ones. South Africa and Botswana – those two are on one scale. Ghana. Rwanda – President Kagame has been on record saying that aid is not the solution. Barring those guys, everyone else is guilty on some level of pursuing a lax model. For instance, I get irritated when I hear of countries pulling their bond ratings. Zambia is one. Yes, we know the system of bond ratings is not perfect, but it’s a good thing to be transparently measured.”

She continues, “Many African countries have a lazy muscle. Why go to the trouble of getting a bond rating when I can just go to the World Bank? Or go to the G20? Or actually, have Bono go to the G20 and ask for you. I don’t even have to leave my country. That’s a cynical view, but it’s hard for me to interpret it any other way.”

Instead of over-reliance on intergovernmental transfers, she prefers – in part – mechanisms such as micro-financing. She admits that this is not the only piece of the puzzle, but in many ways it is to be preferred to the current inefficiencies, corruption and waste of our overseas aid programs. I have written about micro-financing elsewhere, and how successful it has been, at least on a smaller scale:

Welfare dependency is always harmful on an individual level. But it is worse when we have entire nations addicted to aid. If we really care about the poor in developing nations, then we have to get them off the drug of aid dependency, and help them to become productive, responsible and forward-looking nations.

A good place to start is to look at the sorts of ideas that Dambisa Moyo and others are offering. Such ideas may not be a panacea, but it doesn’t appear that they are competing against any other panaceas here either.

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24 Replies to “Rethinking Foreign Aid”

  1. I assume you are aware of the Hoover Institute out of Stanford University, California and also of Dr Thomas Sowell, a black economic historian? He and his associates have been writing along similar, cogent lines for years.
    Steve Swartz

  2. Hi Bill,

    Amazing that you should’ve written this! Last night I saw a joyful bunch of Ugandan children (aged between 9 and 12) singing and dancing their way about God in front of a receptive audience in the Melbourne CBD. There was nothing negative about these kids – they were quite open, happy and not at all shy of coming up to you and introducing themselves. Especially amazing, since all of them had lost their parents, most of them to HIV/AIDS.

    One comment made by one of the adults touring with them was along these lines:
    “We don’t have a shortage of resources in Uganda, we have a shortage of leaders.”

    Sums it up, really. I notice they were particularly strong about ultimately building themselves up, not relying on outside help. I was reminded of that old adage of giving a man a fish, feeding him for a day, or teaching a man to fish and feeding him for life.

    The group is currently touring Melbourne churches for the next week before they head on to Japan. The locations/dates can be found by following the ‘Choir’ link on the website and clicking on Australia on the map.

    Mark Rabich

  3. Steve and Bill, another good book is David Chilton’s “Productive Christians in an Age of Guilt Manipulators” (esp. 3rd Ed).

    David wrote it mainly as a thorough rebuttal of the Christianised socialism of Ronald Sider’s “Rich Christians in an Age of Hunger”.

    Sider was all for greater aid, whereas David Chilton and others in the Gary North Institute for Christian Economics group wrote more about localised productivity and cultural/religious factors and their economic consequences.

    David often quoted approvingly from PT Bauer.

    John Angelico

  4. I probably should read it myself, but does she say anything about Christian relief agencies? I have always felt they were pretty good at getting the money to the people who need it.

    My denominational relief organisation recently pulled out of India because they could net get the local arm to submit to an auditing process after some iregularities. Rather than shake my confidence in them, it bolstered my confidence.

    But I have also always wondered what the point of sponsoring a child through schooling was? Is there a job there waiting that requires schooling?

    But not having any better ideas, I continue to sponsor a child for each of my children. I’d love to hear some better ideas from other readers.

    God Bless,
    Michael Hutton, Ariah Park

  5. Thanks Michael

    She does not appear to be a Christian, so she would lump all NGOs together, but she would seemingly much prefer these to impersonal, bureaucratic government to government transfers. But she also critiques the “aid industry” including the rock stars, who seem to have vested interests in all this.

    Bill Muehlenberg, CultureWatch

  6. These days my mail is flooded with requests for donations for good causes. One helpful filter is ‘does it unashamedly mention the name of Jesus?’. Jesus is an embarassment to some causes and they just get discarded by me. I believe we should be helping Christians in disaster zones, so that others will ask why they got help and others missed out. It is our love for one another (John 13:35), that people notice.
    Rob Merrells

  7. I know the article is particularly about ‘Foreign Aid’, but most western democratic nations also have some form of social security which inevitably leads to many becoming or desiring to be dependent upon Govt. handouts or abusing the ease with which they obtain them. It is also often a ‘pull’ factor for migration.

    There is a similar abuse of Government grant monies, often used as a ‘pork-barreling’ exercise to persuade voters. These grant monies often perpetuate the Govt. dependency cycle as well.

    In Australia, these two causal factors often lead to corruption, alcohol & other drug abuse, disease and poverty. Just ask Noel Pearson in Cape York. He eloquently describes the pathetic conditions of his and other indigenous communities because they are addicted to welfare and corruption.

    Alison Anderson in Central Australia says the same thing, and left the ALP because she saw their socialist policies as perpetuating the poverty cycle instead of eradicating it. Both of these leaders are distristressed about the plight of their people’s future, or lack of it if they remain ‘dependent victims.’

    Mal Brough (himself of indigenous descent) instigated the Federal Govt’s Intervention as an attempt at improving the health and well-being of at least some indigenous people, particularly those most often abused or neglected, children and women. The ALP opposition made much political mileage opposing the Intervention leading up to the 2007 Federal Election, but when the Rudd ALP Govt came to power, they retained almost all of the Liberal Party’s Intervention which they had opposed. Mal Brough lost his seat trying to save the people.

    We also have had our share of ‘celebrities’ running around telling us how ‘bad’ we are because of the situation in Indigenous communities.

    Federal Minister Peter Garrett (former Midnight Oil frontman) has visited several communities, but doesn’t seem to do it outside of the ALP ‘hot-air machine’, and seems to only notify the press at the last minute so that they have to rely on his press releases or the ABC.

    Here in Central Australia nepotism and largesse by indigenous organisations is legendary.

    Centrecorp is reputed to be one of the wealthiest indigenous charitable organisations (well over $100 million), yet they refused to disclose the details of their wealth or who are the beneficiaries. See:

    Even ‘The Age’ was disturbed by this organisation’s wealth and lack of accountability –

    Shalom, Michael Evans

  8. My father has investigated shifting his tractor manufacturing business from Australia to the pacific for the last ten years. We investigated Fiji, Tonga, and a number of surrounding island nations. We also spent some time trying to persuade the East Timor government to back our project. We found first hand the effect of Aid programs to local government attitudes. The aid industry is more insidious than even Bill presents.

    He puts it as rich people in developed nations giving to rich people in undeveloped nations, but it is worse than that. At a recent conference in Brisbane on East Timorese aid and opportunities in which senator Bob McMullen was a key speaker, my father found out for the first time the difference between “soft” and “hard” aid. “Hard” aid is what Bill is talking about (money given to foreign governments) but ‘soft’ aid is money spent to fund reporting, research and study programs from Australian and international consultants and in terms of quantity, soft aid hugely outweighed ‘hard’ aid and very little of the enormous sums of money spent on aid adds anything to the lives of the intended recipients. The conference room was packed with Western consultants seeking ways to access money in the aid program. My father was perhaps the only person in the room who genuinely wanted to increase the quality of living of average East Timorese through the setting up of a manufacturing enterprise that would give jobs to the people.

    Also other keynote speakers said that providing vocational education was a complete waste of time as there were no jobs (East Timor has about 70% unemployment) and no way of creating them. The tragic thing about the East Timor situation was that the Timor government was sitting on a huge foreign reserve from oil and gas field royalties ($5 million AUD per day) and refusing to spend a dime in keeping their own people from abject poverty.

    We had similar responses from Tonga where the controlling nobility showed absolutely no interest or real understanding of the benefit manufacturing could bring to their country even though the common people were desperate for opportunities. The nobility in Tonga controlled all of the government and finance positions in the country.

    Fiji was more positive but due to the political problems there at present, accessing finance is just about impossible even for the locals.

    We firmly believe that small enterprise is the best way to drag these countries out of aid cycle, both indiogenously created or set-up by ex-pats from developed countries who invest their own lives and skills in the local peoples. It seemed to be extremely difficult to overcome the cultural and bureaucratic lethargy caused by decades of aid as well as the notorious “Pacific Time”. Australians in fact take it for granted that we should work hard and guard our time but this notion of time as well as a host of other foundational economic principals has come from Christianity and is difficult to reproduce in countries even with Christian orientations.

    Lennard Caldwell, Clifton, QLD

  9. Dambisa Moyo recently spoke at the Sydney ‘Festival of Dangerous Ideas’.

    Her presentation was brilliant – so to hear her explain the ideas in her book ‘Dead Aid’, listen to her speech.
    It is posted on the ABC Fora website page.
    Dambisa Moyo on Dead Aid

    Jenny Stokes

  10. I wonder what Bill and his readers think of the “population control” programmes – they seem to me to be about just that – control, ie control by the West, of possible future rivals. And, of course, in their promotion of abortion, they’re just more promoters of the Culture of Death. (I’ve heard it suggested that Africa does need more people, and that economic development is impossible without many people, and that the resources they need include human resources.)
    John Thomas, UK

  11. Hi Bill,

    Call me cynical, but I’ve often suspected rich countries really use foreign aid as a way of controlling rather than helping poorer countries.

    If control is the aim, then there could hardly be a more effective tool than the “giving” of foreign aid. Consider:

    If you want to keep a neighbouring country poor so that it will never become a military or economic threat, simply keep a modest amount of general foreign aid flowing in. As Moyo says “corruption is simply subsidised and perpetuated; dependency is created and maintained”.

    Or if you want to destroy any particular nascent industry, then targeted foreign aid is your answer. If you are concerned, for example, that country X is starting to build decent cars which could threaten your domestic production, simply offer large prizes to their auto industry for, say, ‘environmental innovation’. Before long, they’re not putting their energy into designing and building cars that anyone actually wants to buy, but chasing the big aid dollars. You don’t have to do this for long before that industry collapses.

    The dependence on foreign aid also buys enormous political influence with the country’s leaders whenever you need it. Even the hint that their foreign aid is “up for review” will ensure ready compliance.

    And the best thing about foreign aid (from a Machiavellian politician’s perspective) is that not only can you do all this completely openly but most people will actually think your motives are only selfless and noble!

    Mansel Rogerson

  12. Hi Michael (Evans),

    You make a good point. Socialism and the welfare state are just ‘foreign aid’ applied domestically. Makes one wonder whether switched on socialists (if that isn’t an oxymoron) are also motivated by the reasons I outline in my previous post.

    Mansel Rogerson

  13. Mansel, last nights ABC 4 Corners programme on the West’s foreign aid to Afghanistan showed the sham / scam for what it is. Whether domestic ‘aid’ or international ‘aid’ , it doesn’t even amount to a band-aid as it allows the pustulating wound to continue on the carcass of the ‘host’, and feed only the parasites from Govt, military, UN and NGO officials and their contractors.

    Afghanistan is surely out of control politically, militarily, financially, morally, etc.

    Zimbabwe is a basket case instaed of the bread basket of Southern Africa.

    Possibly micro-financing is the only other viable solution, other than prayer?

    Shalom, Michael Evans

  14. It’s enough to make you stop supporting overseas aid. But there are many Christian organisations working at the coal face in impoverished nations ensuring the maximum amount of funds are being used to directly support the people it is intended for. Have you and your friends support these groups. They usually come with annual reports and accountability statements. A great way of being light and salt in this world.
    David Visser

  15. Just a quick note to Rob Merrells.

    I have grave misgivings about the ethics and practicalities of your position. How is it right to make a distinction between Christian and non-Christian in, say, the event of an earthquake? I cannot countenance the refusal to help someone in such a desperate situation because they are not followers of Christ.

    In such cases, I think the Christian’s responsibility is to those who have been made in God’s image – whether they are in Christ or not. If it’s evangelism you’re concerned about, then I think Christians reaching out to all who are desperate – regardless of religious belief or ethnic hue – is a far more powerful presentation of divine love than somehow reserving aid for those who identify as Christian. Do you think that those who miss out on such aid will be challenged to ask why we love each other so much, or do you think that they may perhaps have other, more pressing, issues on their minds?

    In addition, concern for the stranger is amply encouraged in Scripture. Just think of the parable of the good Samaritan: he helped a Jewish man, a member of the community he had been taught to think of as apostate (and vice versa). Surely this is a model for how we are to live and to act in the world.

    Even if reserving aid for Christians could somehow be legitimated ethically and Scripturally, how does a Christian aid group distinguish between Christian and non-Christian in a disaster zone? How would the logistics of such a project actually work in such a chaotic environment? And how would one guard against individuals who are not Christian, but who pose as followers of Jesus, in order to get for themselves desperately-needed aid?

    Rob, I would encourage you to re-think your position.

    Sorry Bill to take the discussion away from the article.

    Scott Buchanan

  16. Interesting point about the issue of foreign aid. I have long known the argument that foreign aid does not help countries – and even the Left tends to be defensive that huge aid programs have done much good.

    For a long time I have tried to persuade Regnery to write a Politically Incorrect Guide to Foreign Aid (and the Marshall Plan), not only to show how foreign aid has brought the culture of dependence you describe for sub-Saharan Africa, but also to try and deal with the common argument found in my own school textbooks that foreign aid has saved many countries (in Europe and Latin America especially) from Communist revolutions. I have read that preventing Communist revolutions (by no means necessarily Soviet-sponsored) has been the raison d’etre for much foreign aid, and a Politically Incorrect Guide to Foreign Aid (and the Marshall Plan) would be the perfect vehicle to refute the argument if it is wrong.

    People like Thomas Woods have in e-mails with me tackled the question superficially. Thus I have concluded that to make the argument foreign aid has accomplished nothing (as Woods does in 33 Questions About American History you’re Not Supposed to Ask) one would have to write a full-length book on foreign aid, and others to whom I have suggested the question are sympatheitc to the idea of a Politically Incorrect Guide to Foreign Aid (and the Marshall Plan). What are your thoughts? Is it a major omission from the series?

    Julien Peter Benney

  17. Thanks Julien

    Yes it would make for a good volume in the series. And given that this is an ongoing series, it may yet appear one day. It just awaits an author – perhaps yourself?

    Bill Muehlenberg, CultureWatch

  18. Bill, I have never seen someone flatter me so much as you have with you suggestion I could write it myself!

    However, I don’t believe I could satisfy Regnery with my viewpoints on the question of whether foreign aid has stopped Communist revolutions. What history seems to tell me is that apart from the very first countries to industrialise (Britain, the US, Australia, perhaps Canada), Communism has always become dominant among the masses when a nation transforms to an industrial society.

    Thomas Woods, whom I had thought would write The Politically Incorrect Guide to Foreign Aid (and the Marshall Plan), has said consistently that such a title would not sell because people are not interested enough in foreign aid. I have trouble doubting his view even if the topic is (and even leftists like Susan George admit this) highly important.

    Julien Peter Benney

  19. Having recently lived in Zambia for a period of 15 months, we experienced this dependency firsthand. One incident I can mention is that after we returned to Australia, we received an email from a close associate who was requesting $27million US! However, not everyone looks to the West. We thank God for the National Director of Youth for Christ in Zambia – John Kaniki and his wife, Florence. Now if we did have 27 million dollars to spare, we’d have no problem sending it over to these two. They’d know exactly how to put it to good use in their country and we’d be certain that their modest little home would still look the same when we returned to visit. What an amazing and Godly couple they are.

    Annette Nestor

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