Reply to Easterly: There is No Fix
for Aid*
By Deepak Lal
April 6th, 2006
Reaction Essay
I agree with Bill Easterly that aid has not achieved goals
"such as promoting rapid economic growth, changes in government economic
policy to facilitate markets, or promotion of honest and democratic
government." But his hope that aid can achieve the less ambitious goals of
getting "medicines to children to keep them dying from malariaÉ, $4
bed-nets to the poor to prevent malariaÉ$3 to each new mother to prevent child
deaths..[and to] get Amaretch into school" through making the aid agencies
accountable for specific tasks through rigorous academic evaluations of
outcomes is also likely to be belied. This is so for a number of interrelated
reasons, at the center of which is the character of the domestic governments to
which aid is extended.
Thus consider the main form of humanitarian aid–food during
famines—which would seemingly be an uncontroversial objective. But, as
has been copiously documented, many famines, particularly in Africa, have been
created or aggravated by governments who have used them as an instrument to
coerce opponents in ongoing domestic civil conflicts. They have then prevented
the food aid from reaching its victims. The latest example is the famine
engineered in the former breadbasket of southern Africa—
Zimbabwe—by its current Big Man, Robert Mugabe, to punish and coerce his
political opponents.
These problems of "governance," as they are
euphemistically labeled, relate to the central dilemma faced by those who wish
to use foreign aid to meet the obvious needs of the poorest in the developing
world. For unlike private charity, foreign aid essentially transfers money from
rich country governments to poor country governments. How can these donor
governments ensure that the recipient governments use these resources for the
purposes they were intended? As the history of foreign aid's failures,
particularly in Africa show, despite their promises there is little that the
donor governments have been willing or able to do if the recipient governments
do not fulfill them. Nor is channeling these flows through international or
domestic NGO's likely to overcome this problem, for these so-called
"agents of civil society" too can be coerced or co-opted by predatory
governments. That is why in a recent book I had argued that short of direct or
indirect imperialism there seems to be little hope of overcoming the domestic
political obstacles to the efficient utilization of foreign aid, particularly
in Africa, where most of the current efforts of the "do gooding"
brigade in the developed world are rightly concentrated.[1] Given this
political constraint, the best the rest of the world could do for Africa is to
keep its markets open for the free flow of trade and capital, but otherwise leave
Africa alone, to sort out its own problems.
Easterly clearly thinks that there might still be some form of
escape from what will appear to the world's great and the good as a defeatist
and gloomy conclusion. But the very example he cites—the role played by
accountability and evaluation in the Mexican Progressa education program as a
prototype for future aid projects—shows up why foreign aid is unnecessary
for such programs. This was a Mexican program not funded by foreign aid. In
fact in all the currently fashionable "soft" areas—health,
education, democracy, gender etc.—favored by aid donors, there is no need
for foreign money. Countries which subscribe to the worthy objectives of the
aid donors do not need foreign money to do the right thing; they today have
enough domestic money for these purposes. It is the ineffectiveness of this
expenditure in meeting these objectives that leads to the observed dismal
outcomes. Thus India spends a fair amount on public education but as official
report after report has documented, this expenditure is wasted as the teachers
do not turn up to teach, the school buildings are not built, and there are no
books for which expenditure has been sanctioned. It is the will to do the right
thing that remains in question in achieving even these modest objectives
favored by Easterly. Foreign aid will make no difference, for as the adage has
it: "You can lead a horse to the water but you cannot make him
drink".
Secondly, in these soft areas foreign aid agencies have no
comparative advantage in effectively targeting these expenditures as they lack
the local knowledge on which their efficiency depends.
Neither is Easterly's desire to ensure professional evaluations of
aid projects likely to deliver the goods. In fact in my first incarnation at
the World Bank in the early 1970s I was involved in helping it to produce a
project evaluation manual which was then supposed to be used to evaluate both
projects and their outcomes for their social costs and benefits. As one wag
commented this soon became "social cosmetic" analysis. The project
officers who were making the loans had moved on by the time the project was
completed, their career prospects depended on the amount of lending and not on
the outcomes, which would in any case take a long time to manifest themselves.
The official World Bank post evaluations, as Easterly rightly notes, are little
more than window dressing which do little for the effectiveness of aid.
The unpalatable truth for the many well meaning people who are
moved by world poverty and want to do something is that, over the years,
alleviating world poverty has become a large international business from which
a large number of middle class professionals derive a good living. They have
been aptly described by a former East African correspondent of the Economist
as the "Lords of Poverty."[2] Easterly's suggestions for making aid
effective will merely provide them a new play! The truth is that aid is not
only ineffective; it is actually counterproductive. It will be a cruel joke on
the Amaretch's of the world if it is now believed that some bureaucratic fix of
the aid machinery will get them to school.
Ideally the time has come to pension off the Lords of Poverty. But
this will not happen. For, as the recent outpouring of support for various celebrity
promoters of foreign aid shows, there is a large constituency in the West to
continue these failed programs to assuage their guilt. But then it is best to
be clear headed about what can be achieved. The best analogy I find is with my
action in giving a dollar to a beggar on the streets of Los Angeles or London.
I do not take him to the nearest food shop to buy something nourishing. I know
perfectly well that he will probably blow it on drink or drugs. But I still
hand over the dollar because it makes me feel better. Similarly, it is best to
end the futile attempt to fix "aid" to make it more effective. It is
best to just hand the requisite checks to the governments of the poor, in the
full knowledge that this will not do much for the world's poor but will make us
feel less guilty!
Notes
* This is based in part on a section of
my forthcoming book Reviving the Invisible Hand: The Case for Classical
Liberalism in the Twenty-First Century (Princeton University Press, 2006)
[1] Deepak Lal, In Praise of Empires, (Palgrave
Macmillan, 2004).
[2] Graham Hancock, The Lords of Poverty: the Power, Prestige
and Corruption of the International Aid Business, (Macmillan, 1989).
Article printed from Cato Unbound: http://www.cato-unbound.org
URL to article: http://www.cato-unbound.org/2006/04/06/deepak-lal/there-is-no-fix-for-aid/