The opportunity costs of aid
This article reflects what one repeatedly witnesses in Africa.
Foreign experts shuttle between ministries which are stretched by juggling
donor efforts. Go into the children`s ward or maternity units and see
mothers and children die for the want of simple equipment or nursing and
medical care limited by the loss of locally trained and precious staff to
the West and to the private sector.
The efficiency of aid has long been debated. Official aid, paid from
taxes dwarfs charity aid. Around one third of official aid is channeled
through international organizations such as the UN and two thirds through
bilateral channels (rich government to poor government) (1). Before we
expect too much from aid, it is important to remember, that after debt
relief, administration and consultancy spending (38%), only 41% of aid is
actually transferred to disadvantaged countries (2). Another factor
reducing effectiveness by up to 30% (3), is the practice of tying; where
countries stipulate that the aid must be spent in the donor country. Also,
contrary to popular belief, bilateral aid does not always go to the
countries most in-need, other factors such as the countries UN voting
pattern may have more influence than the level of poverty (4).
The publicly funded organizations disbursing aid lack the
disciplining influence of a profit margin and shareholders. There is no
constituency monitoring how aid money is spent. We are not able to monitor
how our tax is being spent and the people who are supposed to benefit have
little influence. Countries have multiple donors working in an
uncoordinated fashion, using up time of the countries key personnel.
Aid`s time scale is often short which make long term planning difficult.
While some recent gains have been made in health when, for example,
debt relief is used to pay for the misjudged “user fees” overall, it is
easy to see why aid does not appear to achieve its aim of reducing
However, the downside of aid is potentially much more important than
its inefficiency. Harmful effects of aid include the conditions attached
to debt relief and aid such as pushing countries to open their markets to
subsidized agricultural products thus ruining their own market and
exacerbating poverty (5). By being falsely reassured that our official aid
is making a significant difference, we may not lobby hard enough to insist
that our governments act to reduce inequalities in trading which would
actually reduce poverty.
Thus the opportunity costs of aid are the real tragedy.
(1) Giles Bolton. Aid and other dirty business. 1st ed. 2007.
(2) Arabella Fraser, Duncan Green, Oxfam Research Team. Financing
the Millennium Development Goals and beyond. http://www g7 utoronto
ca/conferences/2005/conf/green pdf 2005
(3) The Commission for Africa. Our common interest; Report of the
commission for Africa. http://www commissionforafrica org/ 2005
(4) Alberto Alesina, David Dollar. Who gives foreign aid to whom and
why? Journal of Economic Growth 5, 33-63. 2000.
Ref Type: Journal (Full)
(5) Jonathen Glennie. The Trouble With Aid; why less could mean more
for Africa. First ed. Zed Books; 2008.
Competing interests: No competing interests