Last week, the UN Undersecretary-General for Humanitarian Affairs Jan Egeland caused a mini-storm by saying that Western governments are stingy when it comes to foreign aid.
Broadly speaking, foreign aid can be divided into two categories: emergency relief similar to the aid being rushed to the Asian tsunami victims, and longer-term development projects.
Egeland's comments relate to the latter; a common gripe from those in the aid industry, recently echoed by Oxfam's James Ensor on these pages (The Australian, December 30).
There are, however, a number of problems with Egeland's assertion and its underlying assumptions.
First, in 2002, official development assistance, according to the OECD, totalled $US58 billion, an increase in real terms of 7 per cent over 2001 and the highest real level achieved since 1992. Under the Monterrey Consensus, Western donor nations have pledged to increase ODA by 32 per cent by 2006.
Second, these claims assume that the more aid the better. Setting aside the emergency relief being rushed to tsunami survivors, which is vital and absolutely necessary, foreign aid has, in general, not been very effective. Indeed, if the aid industry's effectiveness was judged by its success in poverty alleviation, it would have been shut down years ago.
For example, according to World Bank figures, despite spending $US100 billion in aid in sub-Saharan Africa between 1970 and 1999, about 17 countries experienced a decline in real per capita gross national product.
It's not surprising that Oxfam's Ensor would speak glowingly of how "aid works". As Alex de Waal observes in his book Famine Crimes, non-government organisations and aid agencies are alike in that they do not commission public evaluations or publicise their internal assessments because the demands of fundraising and institutional survival make it imperative not to admit failures.
There is a disconnect between how effective the public thinks its aid contributions are and the reality of aid. Western governments, which to a degree evaluate their own aid funding, are aware of its frequent failures. This explains, in large measure, the donor fatigue felt by Western governments. They are not just aware of aid's ineffectiveness; they are also aware of how aid, even emergency relief, when channelled into conflict zones, serves to feed armed conflict and undermine the ability of local economies to recover.
Christmas saw the re-relaunch by Bob Geldof of his Band Aid project. It was originally designed to help those suffering from famine in Ethiopia. But as Daniel Wolf argues in a recent issue of The Spectator, the influx of aid only served to prolong the conflict that caused the famine in the first place.
Third, there is still a great deal of waste and inefficiency and outright corruption in the aid sector, with the UN oil-for-food scandal a case in point.
Recently, Afghanistan's Planning Minister Ramazan Bashardoost was forced to resign after coming into conflict with Western aid NGOs. Bashardoost's main concern was that he had "yet to see an NGO that has spent 80 per cent of its money for the benefit of the Afghans and 20 per cent for their own benefit". He went on to say that "international NGOs get big amounts of money from their own nations just by showing them sensitive pictures and videos of Afghan people, and there are even some individuals who give all their salaries to NGOs to spend it on charity here, but they [NGOs] spend all the money on themselves, and we are unable to find out how much money they originally received in charitable funds".
These sort of complaints are not unusual. Anyone who has read Michael Maren's account of the aid industry in Africa in The Road to Hell would be more than aware of these problems.
Fourth, the aid industry greatly exaggerates the importance of foreign aid to the developing world. Aid is only a part of the development picture. For instance, while ODA flows stand at about $US63 billion ($80.8 billion), foreign direct investment has in recent years been twice the level of aid flows. Even remittances from workers employed abroad are worth about $US80 billion to the developing world. Moreover, most capital accumulation comes from domestic sources rather than from abroad. Indeed, economic growth is largely about freeing up local equity and getting locals to invest locally.
The true insignificance of aid is revealed by the fact that trade contributes almost $US1.7 trillion to the developing world, making free trade an imperative -- hence the emergence of the slogan "trade, not aid".
Unfortunately, in many cases the rhethoric of Western governments is not matched by their policies -- the Howard Government being a notable exception.
A focus purely on aid outlays ignores the important contribution made by the military and police to development. Australia has been at the forefront of making a real difference in countries such as the Solomon Islands and Papua New Guinea, which rate as the most important contributions to development in the region for a long time. Not to mention other important peacekeeping operations around the globe.
Of course, Western governments could do more to help the developing world -- but it would be foolish to measure this commitment solely in terms of aid. However, just as Western governments are open to criticism about their efforts, so too are the Third World's self-appointed advocates in the aid industry.
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