A group of young professionals working in the international development industry sat down to discuss questions that have been debated for years by academics and practitioners such as Jeffrey Sachs, Dambisa Moyo, and Bill Easterly. Have international development organizations been successful? Does foreign aid work? The young professionals launched into a lively debate, with some defending aid as a worthwhile investment that has improved the lives of millions of people living in poor countries, and others condemning it for causing dependence and breeding corruption.
With traditional donor countries in North America and Western Europe facing budget constraints, the debate over the effectiveness of aid is likely to intensify. But before this issue is debated, we need to first establish what the purpose of aid is, how the impact of aid and international development organizations should be evaluated, and what types and amounts of assistance are most beneficial in each circumstance.
Firstly, aid and other development assistance can serve two general purposes. One of these purposes is not to turn poor countries into rich countries. The process of development is incredibly complex, and often involves the complete political, economic, and social (and sometimes cultural) transformation of a nation and its people. There is still much debate on the causes of development, but in my opinion, domestic governments, businesses, and social groups, not foreign donors, are the driving forces of development.
What aid can do is to a) contribute to the process of development through small, yet important contributions at key moments to feed a virtuous circle, or b) help to relieve the suffering caused by extreme poverty. Contributions that spark a virtuous circle may include the transfer of technology or training that improves agricultural productivity, lays the foundation for start-up businesses, or drastically improves the ability of government ministries to do their jobs. The additional income from agriculture or a new industry, or better public management could lead to better policy, increased economic growth, and eventually development and poverty reduction. Interventions that relieve the suffering of the poor include the elimination of infectious diseases, programs to improve and expand education, and micro-lending to help poor people start small businesses. In one example of this type of aid, I am working on a program to reduce the burden of Elephantiasis and other tropical diseases in Latin America as part of my GHC fellowship at the Inter-American Development Bank.
Now that we have defined the purpose of foreign aid, we need to change the way aid is evaluated. The effectiveness of assistance programs should be measured on an individual basis through randomized trials and other evaluation techniques. Policy-makers should ask if each program has achieved their objective: Has it created a virtuous circle of development? Has it relieved the suffering of the extreme poor? Foreign aid should not be evaluated based on how many countries “graduate” from poor to developed. Aid alone cannot achieve such an ambitious goal, and that is not its purpose.
Finally, understanding the purpose of aid should make it easier to determine what type of foreign assistance should be deployed in which context. I argue that aid to spur a virtuous circle should be reserved for countries that are poor yet relatively stable. The virtuous circle of development requires a peaceful and somewhat orderly environment that would allow local businesses and the government to take advantage of foreign assistance. Very poor, conflict-ridden countries and middle-income countries should only receive aid meant to relieve the suffering of the extreme poor. Conflict-prone, wildly unorganized countries are unlikely to be able to benefit from transfer of technology or capacity building. Middle-income countries already have strong and growing economies and capable civil servants, and do not need transfers of technology and capacity building. Aid can still be used, however, to improve the lives of poor and marginalized populations that are not benefiting from economic growth.
Hopefully the next round of debates on the “success of international aid” will start with a discussion on the purpose, types, and limitations of aid.