Foreign aid has been accused of not promoting economic growth and development in developing countries. In fact, many studies have criticized foreign aid, stating that it does not promote what it should, such as investment and less poverty, but what it should not, such as more government. Some even argue that it is not promoting democracy because evidence was found that corrupt governments tend to receive more aid than less corrupt governments.
Foreign aid or (development assistance) is often regarded as being too much, or wasted on corrupt recipient governments despite any good intentions from donor countries. In reality, both the quantity and quality of aid have been poor and donor nations have not been held to account.
There are numerous forms of aid, from humanitarian emergency assistance, to food aid, military assistance, etc. Development aid has long been recognized as crucial to help poor developing nations grow out of poverty.
It's been almost 2 years since one of the deadliest natural disasters in modern history devastated Nepal. In the early days of 2015, a 7.8-magnitude earthquake occurred and killed over 9000 people in Nepal and leaving thousands stranded without the basic necessities of life. By the government count, the 2015 earthquakes damaged nearly 900,000 houses, over 900 health facilities, and more than 8,300 schools.
International leaders immediately called on the global community to provide help. What happened after that underscores the flaws in the developed world's approach toward foreign aid: Governments gave generously, pledging more than $4.1 billion. Yet the humanitarian response to the crisis fell far short, as the condition seems same as they were and many desperate needs are unmet.
For years, it was believed that solutions to complex global problems could be engineered if only wealthy nations mustered enough will and funding to see them through. But despite a desire to help and a willingness to give, the international community keeps stumbling to address both short-term crises, such as natural disasters, and longer-term challenges, such as global poverty and economic development. Why measures intended to alleviate suffering often go so wrong ?
Most people agree that wealthy countries have some responsibility to help relieve hardship in distressed areas. But while they are usually clear about the goals, they rarely stop to consider whether government can realistically accomplish them. Their efforts abroad tend to be marred by culturally illiteracy. Without meaning to, they frequently create perverse incentives that harm the people which they are trying to assist.
Foreign aid is the main tool of state-led humanitarian efforts among wealthy members of the Organization for Economic Co-operation and Development (OECD). While such spending accounts for a mere drop in the bucket of the donating nations' budgets, the combined sum from governments around the world is enough to cause big problems in developing economies.
In Fiscal Year 2015, OECD countries spent a total of $138 billion on foreign aid. From 1962 to 2015, they contributed a cumulative $3.98 trillion.
It was long believed that directing money to stagnant communities could jump-start economic growth. Yet numerous studies have found little evidence that foreign aid actually leads to greater economic development.
Take Africa as an example. To date, the continent has received well over $600 billion in outside assistance. World Bank data show that a majority of African countries' government spending comes directly from foreign aid. Yet much of Africa remains impoverished, and rampant corruption continues.
Foreign aid to Nepal is an "unmitigated economic, political, and humanitarian disaster" that has actually made the country poorer. Nepal will never see their governments as legitimate, as long as most of the spending for infrastructure, education, health care, etc comes from foreign countries. Continued aid spending reinforces the perception that Nepal government is ineffective and it makes nearly impossible to break free from dependence on foreign help. Sketching the sad outcome for outside observers, it looks like "Stuck in an aid world of no incentives, there is no reason for government to seek other, better, more transparent ways of raising development finance." Of course, no amount of evidence can dissuade the believers that foreign aid often fails.
Aid programs can be made effective. Unfortunately, acolytes have failed to grapple with the fundamental reason so much aid fails: Governments simply do not have enough information to know what each dollar's best use would be. People are forced to compete for resources in the political arena, and money ultimately goes to those with the most connections, not to those most in need.
Delayed response also led to large-scale waste of donated aid. In December it was found that large quantities of the tens of thousands of tons of rice provided by international donors had not been distributed, but stored in warehouses where it was photographed rotting and infested with insects. To prevent further waste, in January the government announced plans to begin selling rice that had been donated for earthquake victims.
“We have 26,000 metric tons of rice in storage, and because there has been no demand from the earthquake-affected areas, it will be best to sell the rice so that we can convert these donations into funds,” said Shree Mani Khanal, a spokesman for the Nepal Food Corporation (NFC), the government agency responsible for managing food donations.
Aid providers also have trouble figuring out which investments are most appropriate for a particular developing economy, so money ends up being poured into bad projects. These powerful nations not only fail to encourage economic growth but frequently divert scarce resources to destructive ends. Aid money becomes a tool of oppression rather than empowerment. "A constant stream of 'free' money is a perfect way to keep an inefficient or simply bad government in power.
Like governments, multilateral aid institutions can suffer from central-planning paralysis, which makes it difficult to isolate mistakes and find ways to better serve their "clients."Foreign aid suffers from a principal-agent problem, in which organizations prioritize donors' political and commercial interests over recipients' needs.
In 2012, for example, Egypt received $1.3 billion in U.S. military aid. Most of those funds flowed through Foreign Military Financing (FMF), a program that provides foreign governments with grants for the acquisition of U.S. defense equipment and services. One of the program's objectives, according to the State Department, is to "support the U.S. industrial base by promoting the export of U.S. defense-related goods and services." Translated from bureaucratese, that means FMF funnels dollars to foreign governments for the explicit purpose not of helping people on the ground but of benefitting U.S. contractors and manufacturers.
The same is true of many other aid programs.The problems caused by poverty and natural disasters are enormous, but aid's track record suggests that it too often only makes matters worse. Global neighbors deserve more from developed nations. To serve everyone well, they must have the humility to admit that they don't have all the answers.