Issue 213: 2019 09 05: Foreign Aid

05 September 2019

Foreign Aid

The sacred cow that needs to be culled.

By Richard Pooley 

photo Robin Boag

“The Brexit Party wants to cut foreign aid by half!” cried my Liberal Democrat Party colleague in high dudgeon.  He was sitting in my car as three of us toured the Brecon Beacons on August 1st trying to get our party’s vote out in the Brecon and Radnorshire by-election.  A conversation about the iniquities of such a policy ensued between the other two while I concentrated on driving down a lane which my car’s sat nav insisted led us to three cottages (it didn’t).  But I kept quiet for another reason.  I agree with the Brexit Party on this, though nothing else.  Indeed I would be even more radical: reduce the UK’s foreign aid budget to cover only disaster relief, humanitarian aid and payments to some effective multilateral organisations (there are some).  The first two accounted for 15% of the £13,400,000,000 which the UK spends on aid.  In fact, of course, no UK Government, not even one led by Mr Farage, could cut the aid budget so drastically overnight.  We have contractual commitments to governments, multilateral agencies, companies and individuals from which it will take years to be totally free.  And Parliament decreed in 2015 that the government has a legal duty to spend annually 0.7% of the UK’s Gross National Income on overseas development aid, a target set by the United Nations way back in 1970.  Even so, it’s time to acknowledge that foreign aid has failed to do what most of its proponents argue is its primary purpose: to reduce poverty and induce economic growth.

This is not a conclusion I have come to recently.  For almost ten years as a young man I was involved directly or indirectly with Britain’s foreign aid programme.  As long ago as 1978 I wrote an article in The Guardian in which I cast doubt on its value to the poor of the world.

When I was still only 18 I spent a year on Voluntary Service Overseas teaching at a junior secondary school on the edge of the Kalahari Desert in Botswana.  I learned a huge amount but I doubt my pupils benefited equally as much.  I may have helped a few pass their Junior Certificate exam and end up as Government bureaucrats in Gaborone.  But most either returned to working the land with their families or migrating to toil in the South African gold mines.  In fact the year that I arrived – 1971 – was when diamonds first began to be extracted from their Kimberlite hiding-places not too far from that school.  It was this, the private investment that followed and some wise government policies which enabled Botswana to shift from being one of the poorest countries in the world to one of the richest in Africa.

My father, a diplomat, spent four years in the 1970s in Kenya helping British citizens who wished to sell the farms they owned to get fair prices for their land.  British aid money was being used to buy them out. In many cases the farmers were being forced to sell, often to Government ministers, senior officials or local powerbrokers.  It was ugly work and certainly not helping to lift Kenya’s peasants out of poverty. But I don’t imagine many British taxpayers would have objected to the use of their money in this way.

After university I spent three and a half years working at the UK’s Ministry of Overseas Development (ODM), predecessor to what is now the Department for International Development (DfID).  One of my jobs was to help banana farmers in the Windward Islands – St Lucia, St Vincent, Grenada and Dominica – improve the quality and quantity of their fruit and ensure they got a decent price for it in their only market, the UK.  I was introduced as Mr Bananas at meetings in Whitehall.  At the time I felt this was indeed enriching the smallholders that the project was aimed at.  But on reflection I reckoned the main beneficiaries were Geest and Fyffes, then the two main banana importers into the UK.  The British taxpayer was paying for research and development that the companies would normally have done themselves.

My final job was to put flesh on the bones of the Labour Government’s new aid policy: targeting “rural development”.  There were two of us (my boss, Michael Jay, eventually became head of the Diplomatic Service and is currently an active member of the House of Lords).  I’ve never forgotten the meeting at which someone from the Ministry of Defence argued, with apparent conviction, that extending the planned paved runway at Port Stanley airport in the Falkland Islands qualified as rural development and therefore should be paid for out of the aid budget.  I’m sure the Argentine pilots were grateful to us when they landed their planes on that runway four years later.

I have kept a sceptical eye on Britain’s foreign aid programme ever since, particularly on the aid going to countries in eastern and southern Africa.  Undoubtedly some good work has been done which really has reduced poverty among certain people in some of these countries.  Agricultural research and advice paid for by foreign aid because agrobusinesses can’t make any money from them have made big differences to many poor farmers’ lives.  But I can’t see a clear link between aid and economic growth in any African country that I know.

Other sceptics argue that if only DfID disbursed all the UK’s foreign aid, the poor in the poorest countries would be more likely to receive it.  This is almost certainly true.  30% of this aid is managed by other government departments – just over £1,000,000,000 by the Foreign and Commonwealth Office (FCO) and £765,000,000 by the Business, Energy and Industrial Strategy Department.  Is the £115,000,000 which the FCO spends on subsidising not-so-poor foreign students who are at British universities really helping the poor?  But whilst much of the 70% which DfID is responsible for does try to target the poor, where is the proof that it also brings long-term, sustainable economic growth?

I came across the term Aid Effectiveness Literature  recently.  It appears to have been coined by two economists, Hristos Doucouliagos of Deakin University, Australia, and Martin Paldam of Aarhus University, Denmark.  These two professors have conducted several studies in which they have tried to see if aid leads to growth.  Their most recent meta-study*, published in July 2014, is full of mystifying equations but also some humour (“Economists are human!”).  Their conclusions are damning:

“The Aid Effectiveness Literature is now 43 years old.  Our study covers 141 papers with 1777 estimates of the effect of aid on growth. … the average is 0.03.  This result has proved remarkably stable over time. …the average is statistically significant but it is economically negligible.”

The UK foreign aid budget grew by 600% in real terms over 38 of those 43 years.

So, if not aid, what will reduce global poverty?  The Economist, when commenting on Doucouliagos’ and Paldam’s 2014 study, suggested “freer trade or more liberal immigration”.  I agree but I don’t see either of these happening in these Trumpian times.  I would add greater respect for the rule of law, in particular property rights, and less corruption.  Ho hum.

Accepting that no government would be as drastic as I wish, what should be done?  Er … Boris, Nigel, Sajiv or whoever is in charge right now (Alok who? ): Take back control!

I never went to those Caribbean islands.  I had to trust that local officials were providing the equipment, fertilisers and advice to those banana farmers that ODM had promised.  But, sitting 6,700 kilometres away in London, I had no real control of the project I was supposed to be running.

Ah, you say, but that was in another time.  True.  I know from ex-colleagues and friends in the aid world that DfID has tried its best for years to be more hands-on with its projects.  But its best is still not good enough.  The latest in a long line of aid snafus was revealed in The Financial Times on 24 August.  It concerned a £107,000,000 DfID school-building project in Pakistan, the top recipient of British bilateral aid (£463,000,000).  Of the 1,389 schools covered by the project 1,277 have new classrooms, toilets and other facilities which are thought to be structurally unsound.  793 schools are having to conduct classes for some 115,000 children in tents, under trees or on verandahs.  The main contractor is a UK company, IMC Worldwide, that “specialises in delivering infrastructure projects in developing countries.”  Yet DfID has been aware of these problems for the past three years.  Two separate reports by British engineering experts warned that classrooms did not comply with Pakistani building codes, failed tests for earthquake safety and were often shoddily built.  Only when a third highly-critical report was received by DfID in June did the civil servants in London take action and tell the relevant Pakistani authorities to stop their children using these British-built buildings in 793 schools. (Wouldn’t you love to see the email “telling” them this?)

I said at the beginning that the UK should spend its foreign aid money on disaster relief and humanitarian aid.  There we can be absolutely sure that taxpayers’ money will be doing good – saving lives and rebuilding communities (though avoiding the use of such companies as IMC Worldwide).  Take what has just happened to the Bahamas, many of its islands reduced to rubble by Hurricane Dorian.  All the evidence points to such catastrophes growing in number and size as a consequence of the changes in world climate.  Other natural events unrelated to climate change – earthquakes and tsunamis – will continue to strike some of the most heavily populated areas of the world.  And then there are the lives and communities wrecked by war.  Perhaps in ten years time the UK’s foreign aid budget will be the same as it is now but entirely spent on helping people elsewhere in the world recover from natural and man-made disasters.

 

*Hristos Doucouliagos & Martin Paldam, 2014. “Finally a breakthrough? The recent rise in the size of the estimates of aid effectiveness,” Economics Working Papers 2014-07, Department of Economics and Business Economics, Aarhus University.

 

 

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