Inherent flaws in the global aid system

For decades, rich countries have allocated billions of dollars each year to help the poorest countries around the world. Yet the ability of this aid to address the most basic deprivations afflicting the so-called “developing world” remains modest at best.

There are several reasons why foreign aid remains ineffective. One is the amount of aid allocated for “development” purposes. Rich countries struggle to dedicate 0.7% of their national income to international aid, mainly intended to fight against the poverty caused in the countries of the South by centuries of colonial exploitation. Of course, the exploitation of the global south did not end with the dismantling of the colonial empire, but continued through the current era of imperialist extraction. Unfair trade policies, extractive global supply chains and high indebtedness partly due to the failure of development lending programs to spur sustainable growth, continue to take more money from the Global South than don’t give it to them in the form of help.

Nor is the aid process itself entirely driven by altruistic goals. Powerful countries see aid as a carrot to induce poorer countries to do their bidding. Significant amounts of US aid to countries like Egypt and Pakistan have been motivated by the pursuit of strategic objectives rather than the demonstrated ability or desire of the leaders of those countries to channel aid to those who need it most. Often, authoritarian and unrepresentative regimes manage to get help if they have strategic relevance, while many deserving countries with little strategic value still struggle to get the help they desperately need. .

Then comes the issue of aid management. Often aid comes with strings attached. Bilateral aid and loans granted on concessional terms by institutions such as the IMF and the World Bank oblige the poorest countries to open their economies to multinational corporations and to implement other policies of economic liberalization. Unfortunately, economic liberalization does not automatically ensure growth, it can also allow the most affluent to improve their lot without tackling the glaring inequalities within them.

A related question about why aid produces poor results is because of the way it is delivered. The phenomenon of ‘tied’ aid means that many rich countries ensure that a significant proportion of the aid they give to poorer countries stimulates their own economies by requiring recipient countries to use goods and services provided by companies located in the donor country. While there is growing recognition that poorer countries should be allowed to use their aid allocations to hire local companies and experts, the phenomenon of ‘tied’ aid persists.

According to a study published by the Center for Global Development, less than a third of foreign aid is directly managed by the poorest countries it is supposed to help. Analysis of aid disbursed in 2020 indicated that donor governments manage a significant amount of aid directly and through their own private sector companies and NGOs. Or they channel aid to multilateral development agencies. Conversely, only 32% of aid funds are directly managed by poor “partner” country governments, private sector companies and NGOs combined. Despite all the focus on corruption in poor countries, which is often blamed for wasting development aid intended to help the poor, recipient countries have very little direct influence over the aid that goes to them. is provided.

Failure to allow recipient governments and relevant local entities to control the aid allocated to their countries reflects the skepticism of donor countries about the ability and willingness of poorer countries to help their own people. This skepticism may be justified in part, but then the failure of aid to achieve the intended objectives is a responsibility that lies mainly with the donor countries themselves.

Published in The Express Tribune, July 1st2022.

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