“Aid Makes No Difference to a Country’s Development”

At the aforementioned dinner, Dr. Richard Feachem accepted an award and gave a speech. In it, he summed up the research on international development assistance this way (I’m paraphrasing, as I’m going on memory):

In countries with a suitable policy environment, development has happened whether or not aid was provided. … In countries with a poor policy environment, development hasn’t happened and the presence of aid made no difference.

That’s quite an admission for the director of a (currently) 5 billion USD international assistance fund to make. Basically he’s saying that, by and large, the whole enterprise of international aid hasn’t made any difference.

He went on to spotlight notable exceptions, such as the eradication of smallpox. He also went on to describe how they were doing things differently.

Unfortunately, it confirms for me much of what I suspected when I worked as a low-level contractor for USAID (yep, the development game has given me a lot of money directly or indirectly–think of me when you do your taxes). Namely, that the whole development enterprise is filled with well meaning people who haven’t a clue how to induce a country to develop. Some are actively corrupt, but most simply operate in a vacuum under the assumption that if they are Doing Something about a problem, they are actually solving the problem.

Indeed, many of the congratulatory remarks were not for measurable successes, such as a reduction in malaria, increases in life expectancy, or other somewhat objective yardsticks of progress. They were instead for building new mechanisms with which to distribute aid–which in and of itself, if Dr. Feachem is right, doesn’t do anything to actually help people outside the professional classes in rich countries and a few select members of developing countries who work for them.

That being said, I get in trouble with my fellow libertarians when I argue that international development should be continued. Not because it’s been shown to be effective–it hasn’t–but because it’s a good political tool, and the international arena is a political stage; and importantly for libertarianism, it’s a political stage without the governmental structure (property rights, a universally recognized authority for conflict resolution, and an enforcement mechanism that has the consent of the governed) that libertarianism requires. Remember–we’re minarchists, not anarachists.

As for international aid through multilateral agencies such as the U.N.–well, they are not doing much good. At least the method that the Global Fund, which Dr. Feachem directs, is using has had the best track record for addressing domestic charity needs: grants given to on-the-ground organizations who have first-hand local knowledge of the situation, with objective performance monitoring.

Given the sorry history of development, I sincerely doubt the new trend will have a revolutionary impact. It’s a pity–I think everyone would be better off if we could discover how to induce a country to get those positive policy environments that economic and social progress depend upon. However, there is a possible model.

Perhaps the greatest force for global development right now is the IMF and its stringent “conditionality” programs. These are well-hated by the development community and the Western political left. However, they have had the only measurable impact on developing country governance short of getting on G. W. Bush’s bad side and attempting to kill his Pa. The IMF has the leverage of essentially holding a country’s purse strings–if they don’t adjust, they can’t get structural adjustment loans, which basically means they can’t import the luxury goods that make it nice to be a corrupt leader in a shith- er, developing country.

Rather than fighting this leverage, development professionals should be talking with economists about the fundamental conditions for growth (the World Bank gave some clues in a historically-now-rehabilitated report on the Asian Tigers), and seeking similar leverage. Failing that, they should work with the IMF to refine conditionality to give it more of an impact in areas they care about.

Because, in the end, they really have to answer the question they ask of aid recipients–what good have you done with our money? It would be nice to have a better answer to that question than Dr. Feachem’s summary would suggest.

2 thoughts on ““Aid Makes No Difference to a Country’s Development”

  1. Didn’t Paul O’Neill get pilloried for saying essentially the same thing? Maybe there’s a consensus emerging…

    I’d be curious if Feachem has more innovative, microfinancial aid efforts like Grameen Bank and Spirit of America* on his radar, or if he’s only concentrating on Big Huge Projects of the sort that are traditional to USAID.

    * http://www.spiritofamerica.net

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  2. It’s an interesting concept–check out the Global Fund’s site. Basically they work via proposals, and don’t work with governments. They award grants for work to local organizations through a country-level intermediary.

    That being said, it remains to be seen if it really makes much of a difference. My guess is it will on narrow issues, but overall it may not make as much difference as the IMF (or the US Military, for good or ill).

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