Second thoughts about first aid for the Third World

Way back in 1970, in a General Assembly resolution, the world’s rich nations agreed to commit 0.7% of their gross national income (GNI) to international development aid. Many failed to stick to this promise, but, in 2005, the EU made a further pledge to collectively donate 0.7% of GNI by 2015 and the UK coalition government resolved to have the commitment enshrined in law.

However, the global financial crisis has now prompted closer scrutiny of such beneficence and a leaked letter from Defence Secretary Liam Fox to David Cameron has revealed a split within the coalition over the issue. “I cannot support the proposal in its current form,” Fox wrote in the leaked letter. “The bill could limit (the government’s) ability to change its mind about the pace at which it reaches the target in order to direct more resources toward other activities.”

Foreign aid (or development assistance) has long been criticised as being excessive and/or counter-productive. Many believe it’s wasted on fraudulent and corrupt recipient governments. There’s little evidence that it has significantly improved the lives of people in the developing world. Arguably, it has prevented these countries from adopting free-market economic policies and created a culture of dependency. Many of the Third World’s largest aid recipients have actually suffered negative economic growth in the last 40 years. Even where aid reaches its intended beneficiaries (and it often doesn’t), relief programs tend to create disincentives for food production.

As the UK is running a huge budget deficit, one could argue that we literally don’t have the money to give away in foreign aid and we would have to borrow more to do so. While we don’t want to be perceived as uncaring and stingy, public support for an increase in aid is understandably waning, particularly as beneficiaries include countries with nuclear weapons and space programmes. Some politicians even regard it as a form of protection money. Home Secretary Theresa May recently told a Police Federation conference: “If you get aid right in certain parts of the world, such as Pakistan, it will reduce the possibility of terrorism on the streets of the UK.” Her words were greeted with derision.

The most viable route out of poverty for developing nations is the one that best facilitates trade and business. The first step involves the eradication of market distortion. Currently, aid is used as a lever to open disadvantaged Third World markets to products from rich countries. And protectionism snatches away the ladder. The EU is effectively a corrupt protectionist bloc that denies poor countries access to markets that might ensure their economic viability. It has become more and more sophisticated at this game, imposing sneaky trade barriers by applying over-stringent safety and quality checks.

Wasteful and counter-productive as it is, foreign aid is essentially a smokescreen. And there’s nothing philanthropic about it. The developed world is focused as hard as ever on its vested interests, i.e. preserving the status quo.