Many thanks to Jamie Gardiner for this week’s Sunday Essay. Thanks also to every other CoffeeHouser who sent in a submission. If the various authors don’t mind, we’ll consider some of those submissions for future Sundays. If any other CoffeeHousers would like to submit an essay, please click here for further information – Pete Hoskin
There’s an old quip that foreign aid is a matter of taxing the poor in rich countries to help the rich in poor countries. Most of us aren’t quite that cynical. Empathy may be blunted by distance, but where we hear about unimaginable suffering that could be relieved for just pennies, our humanity compels us to dip into our pockets. Even supporters of aid, though, have to step back periodically to read out the scorecard and justify the bill. It’s not a small bill – government aid costs each UK taxpayer £258 a year. Yet most taxpayers would be horrified to learn how much of that is wasted and spent in the wrong places.
By ‘waste’, we mean aid money that never actually reaches aid projects. A scandalously high proportion doesn’t even manage to leave Whitehall. The Department for International Development (“DFID”) is like a huge sponge that sucks in aid money. It has a staff of 1,800. This legion of bureaucrats get to fly business class when posted overseas, while the Chief Executive of the Commonwealth Development Association fights poverty on a salary of £380,000 a year. Altogether £234 million is spent on administration. This would be enough to double the annual income of almost 1.3 million of the world’s most desperate dollar-per-day poor. And before accepting it as inevitable, ask the question: what does DFID actually do? Not actual aid work, certainly – the agencies that it passes money onto do that. It is an obese bureaucratic middleman that eats its way through £234 million just deciding where to spend the aid budget.
Not content with channelling aid money through the oversized bureaucracy at home, DFID gives a growing proportion directly to other national governments so that it has to go through their bureaucracy too. Currently £500 million is handed out as government-to-government ‘budget support’ aid. Here, there is the added and larger problem of kleptocratic officials skimming off money to fund their own lifestyles. Last year we gave £90 million and £40 million directly to the governments of Tanzania and Uganda respectively, for example, even though around 20% of procurement spending in these countries is lost to corruption. But instead of insisting on giving our money to aid projects directly, we continue to feed it through pilfering governments.
Of the money that actually makes it as far as an aid project, too much is misdirected – spent, that is to say, somewhere other than where the need is greatest. We don’t even manage to spend our aid money in the right countries. Most people assume that aid goes to help the poorest countries in the world. In fact, only 50% goes to ‘Least Developed Countries’, or the poorest of the poor. The biggest recipient of UK aid is not Ethiopia or Sudan or Liberia. It is India, which has an income per head 8 times that of those other countries. It also has a space programme, a nuclear bomb, $312 billion in foreign exchange reserves and a foreign aid programme of its own. Astonishingly, we also give money to China, which has an income per head twice as large as India and has $1.7 trillion in foreign currency reserves.
If aid goes to the wrong countries, it also goes to the wrong projects within these countries. In particular, we misdirect scarce funds into expensive economic development projects. We justify this as addressing the ‘root causes’ of suffering. But all our experience tells us that the link between development aid and actual development is non-existent – what matters is whether a country’s own policies are pro-growth. Between 1990 and 2002, China received a paltry £13 per person in aid, but its annual economic production grew by £1250 per person. By contrast, in that same time period Zambia received £550 per person in aid, but annual economic production fell by £70 per person. The story of devoured development aid with little to show for it is replicated right across Africa: in the past 50 years the world has sent over £500 billion in aid to Africa, far more than to any other continent. Yet over that same period Africa experienced zero growth and the proportion of the world’s poorest people living there increased from 1 in 10 to 1 in 2.
The price of throwing away money on development projects is that we neglect the humanitarian crises arising from war, famine and disease that create the most extreme and blameless suffering on our planet. Most people think this is where the bulk of our aid goes; in reality, only 13% of the aid budget is spent on humanitarian relief. The result of this neglect is that 2 million babies die each year from diarrhoeal diseases, even though the oral rehydration salts that would save them cost only 5p. 1 million people die of malaria, when medicine to treat it costs 6p and preventative bed-nets cost £2.50. An aid policy that prioritises development spending over humanitarian relief is the equivalent of a health policy that funds expensive long term treatments that have no track record of success, but turns people away at the emergency room.
So the story of our aid spending is one of waste and misdirection. If we concede – as we surely must – that the policy is broken, then the next question is: how do we fix it? There are no panaceas, but there is a decentralising reform that would reduce waste, increase scrutiny and raise the quantity of money available without a rise in taxes. The government should wind-up the DFID bureaucracy, and spend the entire aid budget topping-up private donations to approved charities doing priority humanitarian work. The exact top-up rate would be adjustable: it would be decreased if spending looked like going over-budget, and increased if there looked like being some money left over. Irrespective of ideological leaning, this reform would achieve 3 things that should gladden the heart of anyone who cares about aid. First, it would replace the expensive bureaucrats who decide where to spend aid money with ordinary people who will do it for nothing. This unlocks £234 million to spend on aid instead of administration. Second, it would subject projects to a far greater degree of scrutiny, because individuals donating their own money are less tolerant of waste than officials who are spending someone else’s. Third, the top-up will act as an added incentive for people to give to their favourite charities, so private donations will increase too. This raises the total amount available.
Aid policy is never going to win an election, or be the first section that people turn to in a party’s manifesto. But as long as the government spends £258 of our hard-earned cash each year on aid we ought to demand value for money. And remember: foreign aid is one area where it isn’t melodramatic to say there are places in the world – perhaps refugee camps in Chad or camps for the displaced in Somalia – where some people will live if our aid spending is as effective as it can be, and will die if it is not. Let’s make sure that it is.
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