The international aid business

Cha-am Jamal, May 2010

If you think that the objective of foreign aid is to help poor countries to get economic
development started or to end poverty as so nobly stated by Jeffrey Sachs in The end
of poverty, you will find that it has been a complete and utter failure and that if
anything it has done more harm than good.

In other words, if you look at how foreign aid has benefited recipient countries, you
find an industry that has spent trillions of dollars since its inception and has achieved
nothing. As reference to support this conclusion, take a look at one of these books.

1. Graham Hancock, The lords of poverty

2. Michael Maren, The road to hell
3. Dambisa Moyo, Dead aid
4. Bill Easterly, The white man’s burden
5. Glenn Hubbard, The aid trap

They tell of the utter failure of foreign aid to achieve any of its stated objectives of
economic development and poverty reduction as described in The end of poverty.

On the other hand, if you look at how foreign aid has benefited donors you get an
entirely different picture. From case studies of foreign aid one may derive certain
perverse motivations that have more to do with gains to donors than the end of
poverty. Some gains from foreign aid that has accrued to donors include the
following:

1. provide employment for economists, aid workers, and specialists

2. protect agriculture markets and subsidies
3. develop markets in recipient countries for goods and services
4. explore and capture investment opportunities
5. explore and capture sources for energy and raw materials
6. export values and culture
7. develop soft power
8. cultivate values and practices in the recipient country to benefit the donor
9. maintain the rich-poor divide with the rich nations as caretakers of the poor
10. leverage international trade advantages
11. leverage political and military advantages

The rich donor nations compete with each other for global dominance and influence
and it would seem that foreign aid is one of the tools used in this game. The
international aid business should therefore be judged according to these more
meaningful goals because it has been shown that the attempt to evaluate them
according to their stated goal of ending poverty has not led to any meaningful results.

Conclusion
The international aid business does not make a lot of sense if you look at it from the
recipient’s point of view but it can take on new meaning and interpretation when
viewed from the donor’s perspective.