Is Foreign Aid the Solution to Global Poverty?

Foreign aid is one of many solutions to the multi-faceted problem of global poverty and would of course make a more telling difference than present if it were properly administered, divorced from political praxis (arms transfers to client states), specifically targeted (white elephant projects), untied from ideologically determined conditionalities (the push for privitisation in the water sector) and, moreover, actually in accordance with internationally agreed commitments (the famously defunct .7% of GNP).

There are also powerful arguments to be made from those who suggest that the focus on aid detracts from other initiatives. We may look no further than the support for the removal of agricultural supports for producers in the West as they drastically lower the international purchasing price for sellers in the global south. Likewise, there are those who maintain that the “dumping” of these often subsidised goods on developing markets drastically undermines the ability of domestic producers to maintain their livelihoods. Also, shouldn’t consumers in the rich world be made more aware of the existence of the fair trade label and how that delivers real and lasting benefits to the communities involved.

In international trade policy, attention has been paid by campaigners in achieving preferential trade tariffs and quotas for exporters in the developing world. Some have argued that the World Bank and IMF should reorientate its loan strategy and instead focus on encouraging the development of tertiary industries that can exploit these countries own natural resources. For example, why hasn’t West Africa which produces three quarters of the world’s cocoa beans not established its own Hershey’s or Cadbury’s?

Or why hasn’t there been sufficient capital raised to develop domestic refining capacity for nations dependent on crude oil export revenues. In all too many cases they are simply importing the finished version of what they have previously exported. Others again argue that the World Bank has become irrelevant in dealing with global poverty and should actually be abolished. Also, shouldn’t workers in Export Processing Zones producing textiles for foreign markets be entitled to a minimum wage under international law since they are producing for a global market? And what about the crippling debt still being paid by so many developing countries? Is it right that Kenya pays back $600 million annually to international creditors while it only receives $100 million in bilateral aid disbursements.

Foreign aid is a vital component of a multi-pronged attack on what still remains a scandalous state of affairs and we should not be blinded by superfluous arguments which pit the merits of “Aid” against those of “Trade”, “Debt” and other socially progressive initiatives. With respect to the above mentioned internationally agreed commitments on aid it may be said that the benchmark for official development assistance (ODA) was set almost forty years ago when the UN General Assembly voted for a commitment of .7 per cent of GNP from the developed countries. This was reiterated at the Rio Earth Summit in 1992 with the adoption of Agenda 21 where developed countries agreed to; “augment their aid programmes in order to reach that target as soon as possible”.

Ten years later an international conference on “financing for development” sat in Mexico and produced the Monterrey Consensus wherein signatories agreed to “urge all developed countries that have not done so to make concrete efforts toward the goal of .7 percent of gross domestic product as official development assistance”. In that year, 2002, ODA was around $53 billion or just .2 percent of rich-world GDP. If, therefore, rich countries had met the target, aid that year would have reached $175 billion or .7 percent of the $25 trillion rich-world GDP. It as well to bear these figures in mind because they are used as reference points by those, such as Jeffrey Sachs, who contend that poverty can be alleviated almost exclusively through the transfers of financial largesse. Leaving this aside for the moment we may say that though non-binding legally, these agreements are neither a “letter to Santa Claus” to borrow from Jean Kirkpatrick’s infamous dismissal of the UN Declaration on Human Rights nor are they mere vaguely worded aspirational documents. This is mainly because, despite all their foot dragging and rhetoric, OECD governments have at least been shoehorned into making public avowals of their commitment to adjust incrementally upwards their donations to reach .7 by 2015. This is all meant to coincide, happily enough, with the completion of the Millenium Challenge goals.

Now, the point about Sachs’ work, and he is the world’s leading academic proponent of boosting foreign aid, is that he must demonstrate almost beyond dispute the eventual effectiveness of these massive disbursements if and when they do arrive. Hence Sachs’ task in “The End of Poverty” is to produce what project managers everywhere will be familiar with, though not on such a grand scale; a full cost-benefit analysis – for ridding the world of poverty.

There is an exhaustive case study made of Sauri, a group of eight remote villages with a 5,000 strong population in Nyanza province, western Kenya. We are spared the ghantt charts and log-frame analyses but the procedure is still one of an admirable clinical efficiency and each projected “output” comes with a readily quantifiable price tag. Thus the “Big Five” development interventions for Sauri are assessed roughly as follows (1) agricultural inputs: fertilisers and improved fallows for the five hundred arable acres will cost roughly $100 per hectare per year which comes to $50,000 per year for the community. (2) in health: a proper clinic staffed by a doctor and nurse providing free malarial care and other necessities – $50,000 (3) for power, transport and communications – $25,000 (4) for water and sanitation; a combination of protected springs, bore wells and community taps – $25,000 (5) investments in education – school meals would be paid for through increased grain yields through the application of fertilisers . and so on.

This is just a snapshot to give readers an idea of the detailed planning involved. The eventual cost of all these improvements was estimated to be around $350,000 per year for a an initial few years until the village complex became self-sufficient. The progress of Sauri can be viewed from the website of the Earth Institute and is an important pilot project which is ultimately intended to dispel the doubts of sundry naysayers and foot draggers who bemoan the supposed waste of our tax dollars. In a few short years it has reduced the incidences of malaria tenfold, tripled food yields, drastically reduced chronic hunger and malnutrition and given birth to small cottage industries such as horticulture, carpentry and animal husbandry. As Sachs himself says “sooner rather than later, these investments would repay themselves not only in lives saved, children educated, and communities preserved, but also in direct commercial returns”.

In short, we can conclude by saying that “Aid” can work miracles, it is demonstrably effective in saving lives but let us not forget also that it is but one strategy among many that should be deployed to address a complex ethical imperative.

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