The “Dead-Aid” Perspective

30 Jul

Today the New York Times featured an article on the failure of the Ugandan Healthcare System that highlights one crucial perspective on global-development:

As the United States and other donors have given African nations billions of dollars to fight AIDS and other infectious diseases, helping millions of people survive, most of the African governments have reduced their own share of domestic spending devoted to health, shifting to other priorities.

For every dollar of foreign aid given to the governments of developing nations for health, the governments decreased their own health spending by 43 cents to $1.14, the University of Washington’s Institute for Health Metrics and Evaluation found in a 2010 study. According to the institute’s updated estimates, Uganda put 57 cents less of its own money toward health for each foreign aid dollar it collected.

Rogers Enyaku, a finance expert in Uganda’s Health Ministry, disputed the assertion, saying the country’s own health spending had increased, “but not that substantially.” Still, the government set off a bitter domestic debate this spring when it confirmed that it had paid more than half a billion dollars for fighter jets and other military hardware — almost triple the amount of its own money dedicated to the entire public health system in the last fiscal year.

Read the full article HERE.

This is a view articulated most notably by William Easterly, an American development economist:

His contemporary, economist Dambisa Moyo, has received a lot of flack for her book Dead Aid: Why Aid is Not Working and How There is a Better Way. (which is next on my summer list)

The simplified version of the argument is that aid corrupts by creating all sorts of perverse incentives, and as a result governments receiving boat-loads of aid aren’t encouraged to work towards productive aid and development on their own. Hence high military spending and little maternal healthcare in Uganda. Moyo and Easterly advocate a market driven and not a aid driven approach to international aid and development.

Ghanaian Economist George Ayittey makes a similar point in a riveting TED talk.

“Now we’re not saying don’t help Africa. Helping Africa is noble. But helping Africa has been turned into a theater of the absurd. its like the blind leading the clueless.”

Obviously this is not the only perspective. The counterpart to the dead-aiders, Jeffrey Sachs (seen here with Steven Colbert), argues that a poverty trap makes Moyo and Easterly’s argument for market driven aid unfeasible. He advocates for more aid, not less, though not without more nuance to his argument.

There is, of course, a lot of room for debate and most views find some middle ground:

One such middle-path follower, Paul Collier, provides a helpful response to both sides of the argument in his review of Dead Aid in the Independent:

There is indeed some evidence that aid tends to worsen governance, though whether enough to offset its beneficial effects is unresolved. Certainly, the evidence is sufficiently troubling that respected experts share her concerns. Adrian Wood, formerly chief economist of the Department for International Development, has argued that there should be a ceiling to aid as a proportion of the budget. The consensus academic view, to the extent there is one, is probably that large aid inflows, like large oil revenues, tend to reduce government accountability to citizens.

However, cutting aid may not be the best response. My preferred alternative is to strengthen its potential for “governance conditionality”: aid agencies should insist on both transparent budgeting and free and fair elections. That said, I have to admit that Moyo has a good retort. She shows how feeble aid agencies have been: when occasionally one gets tough, others compensate. Within aid agencies, performance is judged predominantly by short-term criteria such as how much aid is disbursed, rather than longer-term effects on accountability. Based on past behaviour, a government could assume that the aid would keep flowing more or less regardless of what it did.

 

 

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