Does Foreign Aid Directly Contribute to Poverty?

In a series of blog posts, this blog has been covering different assessments of the effectiveness and accountability of foreign aid. Where has aid worked? Where has it failed? What role do governance and monitoring platforms play in the success rate of overseas development funding? Debate rages.

In the past week, the Daily Telegraph and William Easterly’s blog AidWatch have featured commentary on the possible correlation between aid and increased levels of corruption and poverty. Writing for AidWatch, Diane Bennett says: “aid can facilitate worthy projects or encourage greed and graft.” As a director of an international NGO focusing on food-donation in south Sudan, she has seen the diversion of funds and food due to poor planning and implementation.

Daniel Hannan’s commentary highlights a more severe view of aid-induced deterioration in his column for the Daily Telegraph. There, Hannan features the views of Thompson Ayodele, a Nigerian free-market economist (and occasional contributor to this blog) who claims that foreign aid directly causes African nations to decline into deeper levels of poverty. To Ayodele, aid “isn’t useless; it’s actively harmful.”

Speaking only to the concerns surrounding corruption and aid, our philosophy at Global Integrity is that the potential for corruption is everywhere. Rather than taking on the impossible task of measuring corruption, we focus on the safeguards in place to prevent corruption. While Ayodele is correct to say that in some cases, foreign aid has done more harm than good, we see the harm not as a direct effect of the aid but more as a result of the lack of anti-corruption mechanisms to accompany this aid. Therefore, the solution may not be to banish funding, but instead to create proper safeguards and frameworks that define the roles of both international and domestic stakeholders. As it turns out, this is a pretty good strategy for things like democracy and political inclusion as well.

Buzzword of the day: “accountability.”

Accountability is hip, but as Bennett points out, the question is accountability to who? In her post, she discusses DfID’s approach to its aid of Kenyan schools. In this case, there were no safeguards or forums for local stakeholder input to accompany the funding. Instead of developing implementation and planning benchmarks with local school administrators, “accountability” to DfID meant hanging posters in classrooms to advertise the use of British Pounds. After the posters went up, there were no monitoring processes to both manage the funds and evaluate their effectiveness. Acknowledgment and recognition do not hold individuals or institutions accountable.

Hannan’s column implies that Ayodele does not reject all forms of aid. Ayodele promotes funding that is proposed for specific projects (he uses bridge building as an example) which are then managed and monitored by both African and International stakeholders. The accountability frameworks that both Bennett and Ayodele envision rely on mutual dependency between donor and recipient for success. International donors should be judged on their facilitation of local implementation, while decisions surrounding the every-day, nitty-gritty should be lead by local actors. Aid can be effective with the right levels of public engagement to accompany project-based accountability structures.

In order to do this, Hannan encourages his own British leaders to move past their view of aid as empathy and recognize the fixed commitment of their investments. Aid accountability should not be about “self-promotion” (as Bennet puts it), but rather about engagement through dialogue and benchmarks that require defined commitment — and results — from all stakeholders.

— Norah Mallaney

Disclosure: Global Integrity’s funders include some aid donors.