The Spectator

What’s wrong with foreign aid?

What's wrong with foreign aid?
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Justine Greening is a robust politician and bean counter who reportedly used extremely fruity language when told she was being reshuffled to the International Development Department. Even though the new Secretary of State has made a strong start in her role, announcing the end of Britain's aid programme to India by 2015 and suspending bilateral aid to Rwanda, she remains in a difficult position.

In this week's Spectator aid special, two writers examine the problems with Britain's international development policy, from its target to spend 0.7 per cent of Gross National Income to politicians' underlying assumptions about aid.

Jonathan Foreman asks why politicians continue to throw money at aid projects that don't work:

One of the more bizarre mysteries of contemporary British politics is the ironclad, almost fanatical intensity of the government’s commitment to foreign aid spending and the activities of DFID, the Department for International Development.

It is bizarre because the Prime Minister talks about foreign aid as if it’s all about famine relief and saving children’s lives. But he and his Cabinet are intelligent, worldly people and they know that the real world of aid rarely resembles the one celebrated in DFID pamphlets and Oxfam ads. They know that most aid is ‘development aid’ intended not to help in emergencies, but to foster prosperity.

They also know that this development aid is at best useless and at worst counterproductive. A quarter of Britain’s foreign aid goes as ‘budget support’ into the treasuries of some of the world’s least competent, honest or responsible governments. Even more goes to multilateral institutions, like the World Bank or the EU aid body that Clare Short described as ‘an outrage’, ‘a disgrace’ and ‘the worst development agency in the world’.

He examines the different arguments used by the Conservative party for aid spending, and proposes a way forward to ensure the money is used effectively. You can read his piece here.

Meanwhile J.M. Shaw examines Greening's role in all of this, praising her stringent approach to spending. But no matter how hard she works to scrutinise aid spending, Shaw writes, there will always be the the problem that she can't save money overall when the department must reach the 0.7 per cent target. This is how Shaw describes the minister's predicament:

It is not only that she must now justify the government’s spending priorities to a cynical public — explaining, for example, why foreign aid is increasing when accident and emergency departments are being closed across the UK, and police and military manpower is being cut. Rather, and just as seriously, the government’s emphasis on expenditure, rather than results, is likely to exacerbate the economic, political and social problems of recipient states. Greening has described herself as being on a ‘vertical learning curve’ in her new job. But one thing she will surely have grasped is that the world’s poorest countries are not easy places in which to spend large amounts of money without causing harm.

Not only are such countries wide open to political violence and corruption, but the use of large amounts of western cash to purchase the local currency unavoidably drives up its exchange rate value, damaging the recipient country’s export industries and so choking off the one tried-and-tested means by which poor societies have actually become richer over the past half-century. Overseas development aid also tends to stoke inflation, forcing recipient governments to raise interest rates, which is bad for local businesses, and particularly bad for people with debts and little income. Aid contributes to political instability, coups, rebellions and civil war, providing a casus belli and handsome personal rewards to anyone who can seize power. It is also an important source of war revenue: the Oxford economist Paul Collier estimates that as much as 40 per cent of military expenditure in Africa is financed by overseas aid.

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