Fake Aid

Over US$119 billion was budgeted for aid from rich to poor countries this year, up US$16 billion from last year. But about half of that stays with donors in "tied aid" and other domestic spending. 

Aid activists Oxfam complained recently that “it is time for G20 leaders to stand up and deliver the money needed to protect poor people,” as heads of the world’s biggest economies met in Pittsburgh in September. The real problem is that aid is actually rising but much of it never reaches poor countries and, when it does, it causes economic, social and political damage.

In fact, over US$119 billion was budgeted for aid from rich to poor countries this year, up US$16 billion from last year. But about half of that stays with donors in "tied aid" and other domestic spending.  "Almost 50p of every pound of donor aid fails to target poverty, but instead aims to meet other donor priorities," charity and pressure-group ActionAid said in 2006, an estimate largely confirmed in 2008 by the Organisation for Economic Coopeation and Development (OECD).

Britain budgeted US$8 billion for aid to countries such as Ghana last year but recent research has uncovered numerous examples of waste and mismanagement within government.

The British government pays pressure groups to campaign and lobby governments abroad and citizens at home, at the expense of actual aid projects. This year alone, the Department for International Development (DfID) put £140 million (about US$170 million) in its "communications" budget–much of it propaganda within the UK. By 2011, a total of £1 billion (US$1.2 billion) of public money will have been spent on this.  Most of it is given away in unrestricted grants to hand-picked activist groups, with little accountability and transparency – and, worse, little evidence that the programmes are helping the poor.

Many of these are at best controversial and often hostile to development. ActionAid, for example, doing the "other donor priorities" mentioned above, used government funds to campaign against free trade, on one occasion stating: “There is very little evidence to support claims that free trade lifts people out of poverty.”

This assertion simply ignores all the millions of people around the world who have been allowed to escape poverty through freer trade after decades of economic oppression.  Anti-poverty campaigner Bob Geldof said this year that “probably the great unsung triumph so far of the twenty first century was the lifting of 400 million Chinese people out of extreme poverty—through trade”. Ideological groups like ActionAid can only make things worse for the world’s poorest people, who already face high barriers to trade.

Some Western groups funded with “foreign aid” money lobby and pressurise developing-country governments to change their own policies.  The UK charity Voluntary Service Overseas took offence at package holidays in Gambia and convinced the Gambian government to ban them. Realising that the ban was doing more harm than good, the country dropped the policy just a year later.

Of the “foreign aid” that never even leaves the UK, the government has given millions to British trades unions who in turn fund the ruling Labour Party. This cosy system would be condemned by Westerners in a poor country yet is openly taking place in the supposed birthplace of modern democracy.

The Trades Union Congress (a group of 60 unions) describes on its website how, In the name of “development,” UK taxpayers have paid for its three-year DfID "Strategic Framework Partnership Arrangement (SFPA)" whose "key achievements" included "the TUC’s fifth International Women’s Day celebration."  How a party with Caribbean food and music helps women in poor countries, or indeed anyone other than the guests, remains unclear.

At the very least, the next government should ensure that foreign aid is just that–help to the poorest people abroad. Better would be to reconsider the outdated and disproven ideas of development aid.

But even this government has started to question its approach, accusing Oxfam of the “prioritising of advocacy over humanitarian delivery” with its £27.8 million (US$31 million) grant.

Such mismanagement and the recession will cut into the amounts of aid actually transferred from rich to developing countries. But this might not be bad news: experience and economic data have shown how foreign aid props up bad governments and bad policies. It should be no surprise that aid fuels corruption and waste when it is poisoned at the source.

Caroline Boin is a Director and Julian Harris a Research Fellow at International Policy Network. They recently wrote "Fake Aid: how foreign aid is being used to support the self-serving political activities of NGOs."