Laura Oliver: " FOREIGN AID: THE GOOD OR THE EVIL FOR DEVELOPING COUNTRIES?"

Laura Oliver Fernández

 FOREIGN AID: THE GOOD OR THE EVIL FOR DEVELOPING COUNTRIES?

The current debate on the effectiveness of Official Development Assistance in developing countries brings the voices of different experts together. Should we eradicate it or should we try a change of model[1]?

In the last decades the role of International Organizations and their development cooperation programs have been questioned. Nevertheless, it must be said that aid achieved positive impacts in many African countries such as: alleviating famines, reducing diseases, improving the education and quality of life of certain communities, etc. However, despite that, many reports and studies shows that poverty has not been reduced, but it is surprisingly increasing. How did it come about? In this post we are going to state clear the reasons behind that.

THE TRUTH ABOUT DONORS:

We have long been told an idyllic story about how the rich nations shares generously part of their wealth to the poorer countries of the Global South, to help them eradicate poverty and follow the path of development. The truth shows the opposite. In fact, helping to finance development programs is in the interest of developed countries, both in terms of security and economic.

A recent study[2] published by The US-based Global Financial Integrity (GFI) showed that the flow of money from rich countries to poor countries is rather low in comparison to the amount of money that runs the other way round. In fact, for every dollar invested in developing countries, they lose more than $2[3]. This fact just confirms that Aid is flowing in reverse: Rich countries aren’t benefiting poor countries, but poor countries are empowering rich ones.

Dambisa Moyo, a global economist from Zambia, affirms in her book, Dead Aid, that the first world has sent more than $1 trillion to Africa over the past 50 years[4]. However, it didn’t help eradicating extreme poverty, it actually promoted it. Between 1970 and 1998, when aid flows to Africa were at their highest level, poverty in Africa rose from 11 % to 60 %[5]. Of course there could be many factors that explain that, but she states: ‘Aid has been and continues to be an unmitigated political, economic and humanitarian disaster for most parts of the developing world.’

CORRUPTION: A SCOURGE OF DEVELOPMENT IN AFRICA

At the end of July 2016, the Panama Papers[6] revealed that African leaders and billionaires had deposited their fortunes in offshore companies (financial institutions in tax havens) to avoid their fiscal responsibility.  Actually, according to a study conducted by Oxfam, as much as 30% of African financial wealth is estimated to be held offshore, costing an estimated $14-billion in lost tax revenues every year[7].

On the other hand, the list of names that appeared in them goes from kings, to presidents or ministers. Furthermore, Among the 10 most corrupt states, according to the Corruption Perceptions Index are Somalia, Sudan, South Sudan and Angola[8].

As a result of this corruption, the donors and investors’ confidence have been affected, blocking development and hindering progress and prosperity in such countries.

THE MIGRATION FACTOR

While many experts support that the lack of development is the “root case” of migration flows and ask for greeter investments in countries of origin[9] as a way to reduce it, many experts argue that development can actually lead to an increase in migration.  The fact the explains that is quite simple: Leaving a country and moving across the border can be a simple an easy activity for us, living in the first world. However, it requires a huge economic invest and difficult bureaucratic procedures that not many people in the poorer countries can afford.

 Recent studies have shown that with greater incomes, people have more resources to pay the direct costs of migration (transportation, documents, visa fees, etc.).[10]

It is also important to mention that, when developing countries receives aid money from developed countries, they are falling into the trap of dependency. Instead of hearing and attending the real needs of its citizens, schmoozing foreign donors and trying to please them becomes a priority.  As a result of all these factors, it is then clear that aid has been so far a mask trying to hide the misdistribution of resources around the world.  Now, it is time to transform the concept of foreign aid and make it something effective and not detrimental for developing countries. The best way to make it possible is trying to achieve the principles stablished in the the High Level Fora on Aid Effectiveness[11] in Rome (2003), Paris (2005), Accra (2008) and Busan (2011) respectively.

 

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[1] Class Reading 1: Whitfield, L. (2009) https://www.diis.dk/files/media/publications/import/wp2009-34_refraiming_the_aid_debate.pdf

[2] https://www.gfintegrity.org/press-release/new-report-on-unrecorded-capital-flight-finds-developing-countries-are-net-creditors-to-the-rest-of-the-world/

[3] http://eurodad.org/files/pdf/5492f601aeb65.pdf

[4] http://dambisamoyo.com/publications-articles-videos/books/dead-aid/

[5] https://ssir.org/book_reviews/entry/dead_aid_dambisa_moyo

[6] https://elpais.com/elpais/2016/05/20/africa_no_es_un_pais/1463724000_146372.html

[7] https://oxfamapps.org/media/press_release/2016-01-62-people-own-same-as-half-world-says-oxfam-inequality-report-davos-world-economic-forum/

[8] https://www.nytimes.com/interactive/2016/12/09/world/most-corrupt-countries-list.html?_r=0)

[9] Class Reading 2: Fratzke , S. (2018) https://www.migrationpolicy.org/research/moving-beyond-root-causes-complicated-relationship-between-development-and-migration  

[10] https://www.newsdeeply.com/refugees/community/2016/10/31/development-aid-to-deter-migration-will-do-nothing-of-the-kind

[11] Class Reading 3: OECD www.oecd.org/dac/effectiveness/thehighlevelforaonaideffectivenessahistory.htm