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Home Field Trips Foreign Aid Tour The Arguments Against Foreign Aid

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The Arguments Against Foreign Aid

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Zambia has been a recipient of considerable foreign aid over the years. Foreign aid has grown significantly in absolute terms (if not as a percentage of donor GDP) but this has shown up a paradox - as aid to Africa has grown, the continent has actually become poorer rather than better off. There are a number of arguments put forward against development assistance. The arguments come from different philosophical standpoints.

The political right argues that foreign aid will have a number of negative effects

1. Foreign aid often falls into the hands of corrupt officials who affect the projects that are chosen to be financed. If Official Development Assistance (ODA) is used to build a state-of-the-art hospital in the district of the capital city in which most ministers and their families live rather than to finance vaccination programs nationwide, the waste can be greater than if officials in recipient or donor countries were to embezzle some proportion of the vaccination funding.
2. Aid money is often misspent, even when handled honestly. By imposing solutions from outside, it may be used for projects that generate large numbers of jobs and are beneficial to the government in the short run while providing few long-term benefits. Their creation and maintenance draw scarce local resources and entrepreneurial initiative from other uses, crowding out private investment and initiative. There is thus a particularly sharp divergence between private cost to the government - close to zero - and social cost.
3. Transfers of low interest concessionary finance or grants to fill the savings or foreign exchange gaps will interfere in the market determination of interest rates and exchange rates.

The political left argues that foreign aid will also create problems

1. Aid can create an impression amongst receiving countries that More Developed Countries (MDCs) are wealthy, free-handed donors which provide what seem like huge sums of money by local standards. The impression can also be that this is given without moral judgment, since many of the people who administer aid may be seen as authoritarian and corrupt. As well as leading to a sense that there is some sort of right to aid, it can also distort values of openness, self-help and honesty. It encourages many people in recipient countries to consider migrating to the source of this wealth, since they assume that it must be a rich place where all can prosper.
2. The flow of aid is not always dependable, both because it is manipulated for political reasons and also because in times of recession in developed countries, the aid budget makes an easy target for a reduction in spending.
3. Aid is often seen, like most forms of charity, as quite a patronising concept, one party acknowledging its own superiority and aiding the other party not on merit but out of a sense of wanting to help. Dependency theory argues that aid ensures the continuation of the Less Developed Countries (LDCs) on the periphery and the dominance of the MDCs in the core. Indeed this is often cited as one of the reasons why African countries are reluctant to take a full part in international affairs - partly because they feel that their silence or support has been 'bought' with aid money.

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Related Glossary Items:
Foreign exchange gap
Non Governmental Organisations (NGOs)
Less Developed Countries (LDCs)
MDCs
Infrastructure
Investment
Tied aid

Related Theories:
The Arguments for Foreign Aid
The World Bank
Development Assistance Philosophy
Types of Aid