Tuesday, 14 June 2011

Why we should question the value of bilateral aid

I’ve always believed in the value of international aid, that it is right that wealthy nations should assist less wealthy countries. I absolutely believe that, most of the time, governments are better placed to provide emergency assistance than private individuals or private organisations.

However, the problem with bilateral aid – where country X gives money to country Y – is that it becomes quickly a tool of realpolitik rather than a genuine act of philanthropy. Even where, as is the case with the UK, the use of aid as, in effect, an exporter subsidy is no longer allowed we can see how decisions relating to aid become wrapped up in other considerations – votes on international bodies, support for military action, clamping down on migration, and even investment decisions in the home nation.

The idea that Government is a benign, innocent compared to non-governmental bodies or international bodies is a complete misperception. And this self-interest extends to the people employed – the hundreds of people administering our huge aid contribution to nuclear armed India will be working tirelessly to try and prevent that subvention being cut.

Finally bilateral aid has to go via the government – there is no alternative as it is a sovereign transfer. And this means that, however well meant the decision to support a struggling place might be, the corrupt government there will take its cut of the aid before it arrives with those it is intended to assist.

Sadly, we do not apply ourselves enough to these considerations, to making the aid we give effective. Instead – much like the “I buy fair trade” argument – we shout around about how big the budget is rather than about the real outcomes of the work funded by that budget. I really don’t care whether the UK spends 0.5% or 0.7% of GDP on aid – what I care is that the money actually does some good.

Taking this view doesn’t make me some kind of moral leper, someone who doesn’t care about the development of Africa or the suffering of the world’s poor. Indeed, those who advocate increased aid budgets but support the subsidising of western agriculture should look to their own contradictions – the Common Agricultural Policy does more damage to Africa than our aid programmes do good. And much the same can be said for other market distorting actions of the developed world – the structure of financial regulation (making it ever more difficult for developing countries to build a financial sector – even massive countries like India), the subsidising of basic industries, the dumping of production surpluses in the name of “aid” and much else besides.

If we really cared about helping Africa transform we would start removing these barriers, we would concentrate on opening up our home markets to the products of poorer countries, we would incentivise moving production upstream (processing and packaging the coffee in Ethiopia rather than Banbury maybe) and we would concentrate our aid on disaster relief, educating women and disease prevention.

Instead we choose to wave and shout about how good we are and how much money we spend. I find this sad.


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