The Effectiveness of Aid in Promoting Economic Development in Developing Countries - Essay Example

?Topic: Outline a framework for assessing the effectiveness of aid in promoting economic development in developing countries. Critically examine the view that "aid does not work" When discussing international development assistance and foreign aid, as given through private individuals, international aid agencies, NGOs, charity groups, and governments themselves to developing countries, it is important to be clear about the different types of foreign aid and the methods through which the programs are implemented. First, aid given through private groups and donations can be distinguished from that which is given through government policies. Second, aid that is implemented directly to the communities themselves through assistance programs can be distinguished from aid that is received by foreign States directly for their national economic development. Thus, the difference between government enacted foreign aid programs and private, charitable, or volunteer groups donating money and services to development causes can be distinguished as two categories of international development aid: public policy and private charity. What is classified as “foreign aid” for example under public policy and is “given” to foreign States as part of a nation like Britain or America’s foreign policy might include military and economic aid together in a package that is intended to strengthen State structures of authority rather than indigenous community economic development. Private groups that seek to implement assistance programs independently of foreign States may have different obstacles and program criteria than the government aid assistance programs. Therefore, it is important to understand the difference between public and private development initiatives, and to analyze each on its own unique set of standards and requirements relating to the way the issues are framed and the policies set into practice. Government aid programs to developing countries may be undertaken unilaterally, as many of the developed economic States such as Britain, the U.S., Japan, France, Finland, China, Denmark and other countries enact as part of their foreign policy. At the same time, these same countries may also engage in official assistance to international aid programs as part of the UN, EU, OAS, or NATO. This foreign aid is intended as economic assistance but donated in relation to the political goals of the nations involved. Historically, this would be considered the aid most easily lost to corruption, most likely to land in the Swiss bank accounts of despots, to be wasted, funneled into military and police repression tectics, and generally used to encourage a greater system of inequality in the foreign country by exacerbating the division of wealth in the society, or the inequality of capital distribution among its citizens. This type of foreign aid may lead to crony capitalism, dictatorships, banana republics, or proxy States that exist in opposition to their populations and actually deter economic and social development through the production of a corrupt and unequal society. These patterns typified foreign assistance aid to Africa in the 1970’s, Central and South America in the 1980’s, and Pakistan, Egypt, and other countries considered vital in the war on terror in the current paradigm. The characteristic of this type of aid is that it goes to a corrupt or undemocratic and non-transparent proxy State of the superpowers and the resources are used exclusively by the corrupt or crony class of insiders related to the local national party structure. This type of foreign development aid is generally the least effective and the least likely to actually “trickle down” to the communities represented by three billion of the world’s poorest, families who live on less than $1 per day, often lacking any type of clean water, sanitation, education, or electrical facilities. Yet, the government policy driven types of foreign development assistance may also take the form of “Peace Corps” groups where actual development aid and assistance programs are implemented by paid staff and volunteers in a manner that provides new health clinics, medical facilities, schools, or lacking utilities to a community. Other positive examples of this form of development aid would be UNESCO, the World Food Fund, the WHO, and other UN agencies working to alleviate global hunger and health issues as they relate to the poor in the developing world. Some aspects of developing nations’ economic growth is related to structural issues such as roads, public utilities, electricity, and water transportation that require huge organization outside of the abilities of all but government agencies to actually implement. In this regard, the World Bank and IMF can be seen as examples of government policy based foreign development aid on the largest scales of finance proceeding generally as contracts between the political parties of the foreign sovereigns who control State power and international financing. Similarly, this is the type of traditional foreign aid that is most likely to bankrupt a developing nation historically, such as Argentina, or be defaulted upon after being embezzled by a corrupt regime. (Boone, 1995) It is for this reason that these policy driven forms of international development aid need to be based in transparency of operations at all levels, including the foreign sovereign and international aid organizations. This can also be seen as the cause for the development of benchmark standards related to democratic government in the foreign aid contract itself. This process exemplifies the way that international development aid is used as a tool of foreign policy to coerce the behavior of foreign States rather than to directly help its people, though theoretically the increase in democratic structures should promote a greater standard of living and economic development in the society. (Boone, 1995) Private aid initiatives working in foreign development assistance are generally built from the recognition of a need that is not being met by the government led programs. These groups usually operate on the NGO standard internationally, which most nations recognize as a legal form of operations intended to provide development assistance in healthcare, education, nutrition, or other issues. The Red Cross and Red Crescent Society can be seen as one of the best examples of this type of organization, with groups like CARE, Greenpeace, Doctors without Borders, church groups, and other faith or ideology based initiatives exemplifying the private organization model. These groups may be able to implement more innovative or targeted programs directly in the communities of the developing world to build water facilities, sanitation & irrigation projects, provide food distribution services, or basic health care and education to villages without schools or hospitals. Generally, it can be accepted that the private, faith and ideology based initiatives are based on a genuine spirit of altruism, the willingness to give, volunteer, donate time and money or personal service to the greater cause of suffering humanity. In some situations, these groups may organize and influence public policy politically, but the fact that they organize and operate outside of government policy and in association to it is more definitive. In summary, the private aid organizations operating as NGOs are more genuinely based in the human altruistic spirit ideologically, whereas public policy initiatives built from government policy and funding on the national and international level may be more motivated by national self-interest and in influencing the political evolution of foreign States than actually helping its people. In examining whether foreign aid actually works or is effective in accomplishing its goals of the alleviation of human suffering and the economic development of the so-called “Third World” both the policy led foreign aid of governments and the altruistic inspired charity of the private groups must be analyzed in the context of their own unique goals as well as objective standards to assess efficacy. For example, the government approach is exemplified in a “top-down” methodology that would donate billions of USD to a foreign sovereign and hope that the implementation in macro-economic development and structures would benefit the general standard of living in the nation. (Hansen & Tarp , 2000) The problem is that in order to be successful, development has to actually happen locally through activism in the very poorest and remote villages where the people have no electricity, water, food, medicine, or schools. When the aid is transmitted to the foreign State directly, it is more likely to feed the State and its corruption rather than the grass-roots poor at the very bottom of the global economy. Conversely, when private NGOs attempt to organize to implement a policy directly in a foreign community to make a difference in helping suffering human beings as a measure of solidarity, the task is often so massive, the costs so prohibitive, and the social need in the developing community so great that the individual or small NGO’s efforts cannot even scratch the surface of the problem or begin to address the structural causes that create the situation of despondency and poverty. There is an inevitable disjunction between the motivated volunteers willing to work and make a difference but lacking funding, and the wasteful government programs that fuel corruption in the State hierarchies of developing world countries and furthermore exclude the altruistic volunteers from participation in government programs, despite their willingness to serve. Having developed the context through defining the two types of foreign aid relating to development assistance internationally, it is necessary to determine where each method has been successful and where each has failed, in order to learn the lessons required to build more efficient policies and programs in the future. Yet, it is also important to note that “world poverty” and development issues are something people seem to either relate to through compassion and solidarity, or to ignore and not be concerned with in favor of pursuing individualistic and personal socio-economic goals. Historical figures such as Mahatma Gandhi, Dr. Martin Luther King Jr., Nelson Mandela, and others have placed the issues of the world’s poor at the top of their agenda of what is important socially to address through government action, but the actual vision of these leaders is very far from being implemented by any political system in the world. Millennium goals have been adopted through negotiations and social pressure on developed economies to donate a greater portion of their incomes to social justice issues related to global poverty. To many, this is an aspect of income re-distribution, which is fundamentally or philosophically rejected by political parties in many advanced economies. Thus, a legitimate question arises as to whether the governments should be involved at all in this activity, or rather leave it as a question of charity, religion, and individual moral choice whether or not to help the poor and suffering on the other side of the planet. While it seems crass and unbelievable to some, the democratic process may even reject foreign aid and developmental assistance, as people in advance economies simply do not believe they have the responsibility, resources, or duty to address these problems internationally. A review of the moral basis for foreign aid is important in the consideration of the efficacy of these programs, for without a recognition of the moral imperative popularly, there will be no broad social action on global poverty. A general view typifying mainstream Western response may be paraphrased as: “Jesus, Gandhi, Martin Luther King Jr., Mother Theresa, and the saints are all examples of our highest moral ideals and sentiment, but few people can actually put these ideals into practice.” In believing and acting such, the majority of the population of the advanced economies may go on their day to day business in whatever social or economic activity is chosen, wasting throughout the day resources that could feed or save innumerable human beings in the developing world. It is truly difficult to create the moral or legal obligation of these individuals in advanced economies to leave everything they believe in and work for or serve the global poor, as advocated by the saints and prophets. Most just go on with their lives in 9 to 5 jobs doing what is required for their families to survive in the difficult economic conditions that they themselves live in with little social assistance for others outside of the extended family & local friends. Thus, from these examples it is possible to posit that it is actually the level that people care about others that will ultimately determine whether any charity work or public assistance program will be successful. Yet, conversely, just hoping for world peace or an end to human hunger really does little to actually bring the event about. People who actively care and would like to see social justice eradicated do not change the world simply through their hopes, but their hopes are a vital motivation in determining the course of their behavior and the management of personal resources. From another perspective, without compassionately caring and feeling the suffering of others in the context of global poverty, there is unlikely to be any real recognition of the problem or any initiative taken to act to provide assistance. Once individuals collectively recognize the importance of the moral imperative or compassionate response socially as it relates to international global economic development, they will be able to join together politically to build solutions to the problem that are practical but based on a more genuine sense of altruism. This duality between the need for recognition of the moral issues underlying the social justice aspects of international economic development aid and the need to have resources and funding to organize adequate social responses illustrates the problems inherent in the two forms of development assistance. The importance of these moral issues in determining the efficacy of the programs can be illustrated by comparing how someone like Mother Theresa with few material resources could help so many and do so much good, yet the U.S. Army with its “hearts and minds” bribery and Pentagon budget can still not convert a population ideologically to its cause. Human individuals, even the poorest of the world’s poor with no education, are not unable to determine sincerity in the motivation and response of other individuals. Thus, in judging the efficacy of foreign aid programs methodologically from these moral criteria it can be said that a foreign aid or international development program must be based in altruism and sincerity to succeed, but also must have sufficient funding, staff, and skill to be effective. These moral criteria can be applied to both public and private initiatives to assist the global poor in methods ranging from religious charities to government-to-government loans or direct assistance. In both cases, by applying the moral criteria and asking first whether the program is based in altruism and second, if it is sincere, a determination of efficacy will be made that is valid in predicting the success of the program, but is still conditioned by the level of social organization accompanying the initiative through budgetary support, staff, volunteers, etc. in relation to the scale of the problem. This moral approach suggests that even when States throw billions in budgetary spending to foreign aid and development assistance programs internationally, they will fail in achieving the actual goal of helping people and alleviating suffering unless the programs are conducted in a manner based in altruism and sincerity. If the aid is just a mask for the will to control or dominate another society, or an aspect of foreign policy that props up a dictator State as a puppet, it is unlikely to meet the moral criteria or accomplish actual benefit socially. Conversely, even small groups or individuals with knowledge and the altruistic urge to public service can save lives by working as volunteers in medicine, education, and other development projects in the service of the poor. The efficiency of volunteers who genuinely care would be more effective as foreign aid on this model, even if unfunded, than wasteful, State sponsored foreign aid that is lost in corrupt individuals and institutions. The problem is that religion and not politics is the traditional venue for the cultivation of altruism, and the altruistic morality must be actually understood by the individual who experiences it practically and puts it into action. Altruism cannot be forced upon others or it may become insincere. These issues are discussed in a World Bank study that addresses the criticism of scholars who question the altruistic motive of governmental aid agencies and their claims of endemic corruption in the State hierarchies of developing nations. “During the last decade there has been a surge in criticism of how the World Bank, International Monetary Fund (IMF), and other international aid institutions do business. Popular media critics such as Michael Maren (The Road to Hell) and Graham Hancock (Lords of Poverty) depict an aid culture in which corruption is rampant and donor organizations lack basic expertise, focus, clear intentions, communication skills, and cultural understanding. Maren, Hancock They argue that the aid community is more concerned with competing to lend money and disburse aid than it is with holding managers, programs, governments, and it own institutions accountable for failure. But these critics, and others in popular literature, have a tendency to fall into simplistic and sometimes patronizing analyses that either depict developing countries as backward, corrupt and unable to generate returns on aid investment, or argue that donor agencies are paternalistic incompetent, and driven almost entirely by self-interest. Though there may be elements of truth to both claims, it is not productive to lay blame on one party or another. Conflicts of interest exist on both sides of the donor-recipient equation.” (World Bank, 1998) From this perspective, the moral criteria suggested earlier may be considered a “simplistic and sometimes patronizing analysis,” for in many ways it does suggest that the World Bank, IMF, and other global institutions involved in developmental assistance are acting with less than altruistic motives. For example, to serve personal or corporate profit over common humanity and solidarity is questionable morally and critical to the moral issues of altruism and sincerity as posed. Are the policies of the World Bank and IMF serving the foreign policies of advanced economic nations or the needs and interests of the poor themselves? Do the financial contracts of the World Bank directly assist the world’s poorest or are they directed to the corrupt political elites in the society? What percentage of aid goes to operational costs vs. the actual provision of services in the communities? These and other questions are addressed with the criticism of academics by the World Bank itself, whose analysts then recommend policies based on the following principles: 1. “Aid resources should be allocated more effectively to ‘good-policy / high-poverty’ countries.” 2. “Policy-based aid should be used to ‘nurture policy reform in credible reformers.’" 3. “Aid activities must take into account the local policy strengths and weaknesses.” 4. “Projects should be more focused on sharing technical capacity and knowledge.” 5. “Donors need to be less proactive when it comes to financial aid disbursement to nations with distorted policy environments.” (World Bank, 1998) As stated previously, this interpretation of government policy based foreign development aid inevitably contains the strings attached by the developed nations as part of their foreign policies, and this is typically designed to strengthen and perpetuate the economic advantage that is already enjoyed over the developing world. It can be argued that the developed economies and their proxies in the World Bank and IMF would seek to exclude the moral arguments of altruism and sincerity because of the tacit accusation that they are not doing enough, or even that the foundation of those economies are unjust due to the legacies of imperialism, slave labor, genocide, etc. That the World Bank and IMF are aligned with neo-liberal and neo-conservative aspects of the domestic politics of advanced democracies on both sides as a controlling factor contains an inherent paternalistic and patronizing bias in the same manner that the imperialist order operated on historically, tinged with racism. It is difficult to understand how these legacies can be purged from the relationship between former imperialist powers and their former colonies; however, it is important to realize that characteristic of the old order was the inability of developing nations to self-determine their political structures autonomously, and the World Bank’s implementation carries the bias of the foreign policies of the former imperial powers primarily as a second generation aspect of hegemony globally executed through the control of finance internationally. As Erik Thorbecke writes in “THE EVOLUTION OF THE DEVELOPMENT DOCTRINE AND THE ROLE OF FOREIGN AID, 1950–2000,” “The economic and social development of the third world, as such, was clearly not a policy objective of the colonial rulers before the Second World War. Such an objective would have been inconsistent with the underlying division of labour and trading patterns within and among colonial blocks. It was not until the end of the colonial system in the late forties and fifties, and the subsequent creation of independent states, that the revolution of rising expectations could start. Thus, the end of Second World War marked the beginning of a new regime for the less developed countries involving the evolution from symbiotic to inward-looking growth and from a dependent to a somewhat more independent relation vis-a-vis the ex-colonial powers. It also marked the beginning of serious interest among scholars and policymakers in studying and understanding better the development process as a basis for designing appropriate development policies and strategies. In a broad sense a conceptual development doctrine had to be built which policymakers in the newly independent countries could use as a guideline to the formulation of economic policies.” (Thorbecke, ) If the imperial powers were not formerly interested in the economic development of their colonies but rather in exploiting them by any means possible including slave labor and genocide, there is a distinct historical correlation between the existence of global poverty in the contemporary context of three billion people living on less than a dollar a day without adequate access to proper food, shelter, electricity, education, clean water, sanitation, or health care facilities. This is a situation that the people, entire families, billions of human lives spanning innumerable nations never escape from – it is almost unimaginable from a Western perspective and it is correlated that the West values these lives at next to nothing. The same lives are as easily extinguished with bombs or firearms in occupations today as they were in the imperial era. The question is, has the Western foreign policy now evolved over the last 100 years, or since WWII to now be based on the altruistic desire to see people in the developing world succeed in every way, socially, economically, politically, and personally – or – is the foreign policy based on the same old patterns of thinking that endured during the imperial age? Following Gandhi and MLK, there is indeed the progression of the moral awareness in international civil society that criticizes Western imperialism from a revisionist historical standpoint. Yet, in returning to the thesis, the application of the moral questions of altruism and sincerity to the issue of foreign developmental aid is seen to be more important than ever, especially pertinent when analyzing the validity of the claims on which the World Bank’s policies are based. Are the World Bank’s standards of foreign aid based in altruism or imperialism? Are they sincere or just another way the developed economies seek to perpetuate the imperial order in post-modern times? These are important questions and are the reason that the moral issues should be made a critical basis for analyzing the veracity of the reasons and methods of foreign developmental aid policies. The World Bank analysts again write: “Recent work by Boone (1994. 1996) found that aid had no effect on investment or growth in a sample of developing countries. Our main innovation is to introduce economic policies into the equation. Does aid have a positive effect on growth in the presence of good economic policies? Have donors systematically allocated assistance in favor of good policies? Has aid affected policies -- for good or for ill? These are the questions that we address.” (Burnside & Dollar, 1997) This statement should be reviewed in conclusion critically from the context of the moral issues introduced previously and also through the division of the two types of foreign aid. The World Bank has been used as an example of international and multi-national approaches taken by governments of the advanced economies to address the problems of global poverty and the social justice issues of international development through the methodology of policy and finance. Boone suggests that this has led to no economic development empirically, and the World Bank has previously been accused of funneling money to corrupt States and minority interests in a corrupt process that promotes embezzlement in governance around the world, as well as waste that is pocketed as profit by hidden interests and pork politics. This is posited to be of a different nature than the grass-roots, privately organized charitable work done by innumerable NGOs in the development sector around the world. Sometimes, governments also implement the grass-roots development assistance through volunteers such as the Peace Corps or the various UN humanitarian agencies, but even these groups display the need for asking the simple moral questions about the policies implemented, as to whether they are done based on altruistic motivation and sincerity, or as a mask for the CIA and U.S. foreign policy, as in the Peace Corps again. Obviously if the altruism is just a charade or cover for a CIA operation, it is not going to be very likely in successfully changing the lives of the poorest people in the world’s poorest communities. So, too, if the World Bank and IMF’s policies are just a cover for a later stage of imperialism, it begs the question of social justice and appropriate response. As Boone himself writes in “Politics and the Effectiveness of Foreign Aid,” “Critics of foreign aid programs have long argued that poverty reflects government failure. In this paper I analyze the effectiveness of foreign aid programs to gain insights into political regimes in aid recipient countries. My analytical framework shows how three stylized political/economic regimes labeled egalitarian, elitist and laissez-faire would use foreign aid. I then test reduced form equations using data on nonmilitary aid flows to 96 countries. I find that models of elitist political regimes best predict the impact of foreign aid. Aid does not significantly increase investment and growth, nor benefit the poor as measured by improvements in human development indicators, but it does increase the size of government. I also find that the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive. But liberal political regimes and democracies, ceteris paribus, have on average 30% lower infant mortality than the least free regimes. This may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs. An implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs.” (Boone, 1995) Studies such as those conducted by Henrik Hansen and Finn Tarp on the effectiveness of foreign aid tended to focus on the macro-economic implementations of foreign aid as implemented by the World Bank and IMF as opposed to the empirical victories of grass-roots aid agencies like the WFO, WHO, CARE, etc. (Hansen & Tarp , 2000) From this perspective, saving one human life from dying of hunger is a phenomenal victory. Saving people – children, families, the elderly around the world who suffer from medical problems that can be cured easily but who lack the basic medicines and healthcare facilities to access – is a huge victory. In foreign developmental aid it can only be done successfully through human to human contact, as in a doctor or a teacher or engineer on location in the grass-roots community. This is where the macro-economic stimulus becomes inevitably lost in the Swiss bank accounts and the poorest of the poor continue as billions of humans with little being done to improve endemic conditions that condemn generations to repeat the same patterns poverty. Undisputedly, what was once called the “Third World” is changing tremendously, and the reason is generally based in strong economic development through increased globalization. Yet, in analyzing the foreign aid and developmental assistance programs implemented by both public and private organizations internationally, it can be stated that the moral questions related to altruism and sincerity can be asked of any implementation of foreign developmental aid and used even by the participants in the programs themselves to guide their own behavior to make the project a success. Furthermore, without an altruistic and sincere basis, the foreign aid programs are bound to fail no matter how much money is thrown at the problem through budgets by policy-makers, and this aspect characterizes the governmental approaches to global poverty around the world, as well as the reason that more has not been done to alleviate the suffering of billions of the poorest humans in the developing world. Sources Cited: Armon, Jeremy 2007. Aid, Politics and Development: A Donor Perspective. Development Policy Review, 2007, 25 (5): 653-656. PDF, 2011. Boone, P. 1995. Politics and the effectiveness of foreign aid. CEPDP, 272. Centre for Economic Performance, London School of Economics and Political Science, London, UK. PDF, 2011. Burnside, Craig and Dollar, David 1997. Politics and the effectiveness of foreign aid, World Bank, Policy Research Paper, 1777, Macroeconomic Growth Division, 1997. PDF, 2011. Dollar, David and Pritchett, Lant 1998. Assessing Aid: What Works, What Doesn't and Why?, World Bank Policy Research Report, Oxford University Press, 1998. PDF, 2011. Hansen, Henrik & Tarp, Finn 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398. PDF, 2011. Thorbecke, E. 2005. The evolution of the development doctrine, 1950–2005, Paper presented at the WIDER conference on the future of development economics, Helsinki. PDF, 2011. Read More