What’s the point of overseas aid? Max Lawson versus Stephen Davies of the IEA
Claire Godfrey Senior Policy Adviser
18th Mar 2012
Max Lawson, Oxfam's Head of Public Policy and Advocacy, recently went head-to-head with Dr. Stephen Davies, Education Director, Institute of Economic Affairs on the benefit of overseas aid for the Speakers' Corner Trust. Senior Policy Adviser, Claire Godfrey, took a ringside seat and summarises the debate here.
Oxfam's Head of Public Policy and Advocacy Max Lawson and Dr. Stephen Davies, Education Director of the Institute of Economic Affairs recently went head-to-head for the latest Speakers' Corner Trust debate, entitled: Overseas Aid - What's The Point?
The frame of the debate is what is the justification for overseas aid - in good and bad economic times? Does experience not show that aid is misspent, encourages dependency, or is an extension of donor governments' foreign policy? Or, is there evidence that aid works? Are there approaches that deliver long-term solutions to lift the impoverished out of poverty?
A major problem with the aid debate is that it is so unsophisticated and shrouded in myth - particularly when it's played out in the media. We see either 'bad aid' or 'amazing aid' stories. Of course neither is the reality. Sadly, in this tough media and public environment, we've lost the ability to celebrate aid triumphs, while at the same time speak out about how to improve weaknesses in the aid system. That's why it's great that Speakers' Corner offers this space for Stephen and Max to have a more mature debate on aid.
Stephen's case - Good intentions misdirected
Raising the living standards of poor people worldwide, and in particular those of the "bottom billion", is an objective that all well-meaning people support. There is no argument about the end - but there are disagreements about the means. The debate is over whether government aid programmes are an effective way of helping to realise the goal.
The record in this regard is poor. The evidence shows no correlation between receipt of aid and measures of well-being such as life expectancy and economic growth. In the 1970s aid was low and Africa's economy grew at about 2% per annum. In the 1980s and 1990s aid grew rapidly but growth was negative. Since 1998 aid to Africa has fallen but growth has revived. Asia aid has halved since the 1970s yet the same period has seen rapid growth.
At best government aid makes no difference. But it can also be harmful, not because of bad policy but because its inherent features mean that problems are always going to arise despite the best intentions and efforts.
- First, government aid is subject to political capture at both ends of the process. Donors often use it as an instrument of foreign policy and to serve their own geopolitical ends.
- Second, aid ultimately is money and money is fungible - that is, money intended for one purpose can be effectively used for any other, such as buying arms.
- Third, aid is most often used to fund projects that are unprofitable and this by definition does not lead to the most efficient use of resources. Not only is it a waste of money but there is also a high opportunity cost because the resources taken up in the recipient country would have been more productive if used elsewhere and would then have created greater wealth.
All this is not a counsel of despair. There is much we can do in place of government aid which can have a beneficial impact.
Above all, we can push for freer trade and movement and for removing barriers such as the outrageous agricultural policies of the EU and the US.
Many people have been lifted out of poverty in the last two decades. There is no reason why we cannot do much more, but government aid is not the way to do it.
Max's case - Towards an end of aid
Aid spending is not and will never be a magic wand; rather it is a shrewd investment in our common future. Alone, it cannot end global poverty or redress the extreme imbalance of wealth that characterises our world. But good quality 21st century aid saves lives and can be indispensable in unlocking poor people's ability to work their own way out of poverty. For example, poor health and lack of access to education, training and jobs are all factors that keep people economically inactive and that can be tackled using aid.
It would be wrong to pretend that all aid is perfect; too often it has been tied to the national interest of the donor rather than to the needs of those it is supposed to help. But the good news is that in the past 15 years or so, the UK has helped lead an improvement in the quality of global aid.
Sustainable planning is an essential element of effective development and poverty reduction and aid in support of the long-term national plans of the governments of developing countries is what is needed. Where practical, it should be aligned with recipient government plans. Take Rwanda: the past 15 years have been dominated by economic recovery and the rebuilding of national institutions following the 1994 genocide. Budget support, totaling 26% of aid flows between 2004 and 2006, allowed the government to eliminate fees for primary and lower secondary school education, increase
spending on treatment for people living with HIV and AIDS and provide agricultural loan guarantees to farmers.
Aid on its own will not be enough to achieve the change that is needed - fair trade, private investment and a global system that does not allow companies to avoid paying taxes in poor countries also have a part to play.
But already, aid provided direct to governments to support the effective building of state institutions, deliver essential services, catalyse crucial agricultural development and empower people to demand more from their governments is working to reduce poverty and inequality.
Aid in the right way has resulted in huge successes and this kind of aid - 21st century aid - is the kind that will work itself out of a job.
For the full opening arguments, and subsequent debate, see http://www.speakerscornertrust.org/forum/forum-for-debate/