The Aid Debate
By Zulfiqar Rana, MD,
MPH
Mobile, AL
www.soach.org
According
to the Millennium Project "more than one
billion people in the world live on less than
one dollar a day. In total, 2.7 billion struggle
to survive on less than two dollars per day".
Eradication of poverty is a noble but utopian
goal according to many. When Jeffery Sachs published
"The End of Poverty: Economic Possibilities
for Our Time," amid much fanfare it was considered
by some as the answer to this perennial problem.
The book had a gusto that was infectious, a vision
that was grand and a flair of a rock star (its
introduction was written by Bono). According to
Sachs who also works for the Millennium Project,
"Extreme poverty can be ended, not in the
time of our grandchildren, but our time"
– a lofty claim indeed. One of the key factors
to end poverty is through aid given by rich countries.
However, there are problems with this approach.
There is often a disparity between the money pledged
and the money actually donated. Also, the goal
of optimal amount of aid as defined by 0.7% of
the national income is rarely realized. An average
American on the other hand thinks that the US
gives about 25% of its budget in foreign aid (the
actual number is less than 1%).
A recent book by William Easterly, "The White
Man's Burden: Why the West's Efforts to Aid the
Rest Have Done So Much Ill and So Little Good,"
suggests that the world's official aid agencies,
especially the World Bank, the International Monetary
Fund, the UN, have been peddling the same failed
aid plans for the last 50 years or so. He is critical
of the Sachs idea of big money and big push to
end the poverty trap. Instead he makes a distinction
between Searchers and Planners. Planners approach
the problem from supply side, go big and mostly
underachieve. The Searchers think small, piecemeal
steps and bring about a slow change. According
to him Searchers achieve the most in the end.
Easterly does no go without a challenge though.
Amartya Sen is pretty critical of him. The most
serious charge against Easterly is not about his
premise though. According to Sen his analysis
falls short of academic standards. For example,
Sen points out that his statistical analysis fails
to establish a negative association between economic
aid and poverty. Sen goes on to say:
"Many such studies are also impaired by difficulties
in identifying what is causing what. For example,
a country's economic distress may induce donors
to give it more aid -- which may, in terms of
associative statistics, suggest a connection between
aid and bad economic performance. But using such
a correlation to prove the bad effects of aid
turns the causal connection on its head. Easterly
tries to avoid such pitfalls, but the statistical
associations on which he draws for his comprehensive
pessimism about the effects of aid do not offer
a definitive causal picture."
It is hard to prove negative or positive association
in this sort of studies where there are too many
variables involved. Often it is hard to measure
progress or change in concrete terms. For some
the answer lies in too-little-too-late approach
by the donor countries while for others it is
the corrupt and inefficient bureaucracies of the
countries accepting donations that are to blame.
We thus see two opposing paradigms pitted against
each other. One is for big push and big money
and the other is for piecemeal change that comes
from within.
The former premise appeals to most of the people
in the Third World and many whistle blowers and
to people who are weary of big organizations like
the World Bank, the IMF and the UN. The latter
makes sense to most of the people in the Western
world. Perhaps like many other debates this one
is also too metaphysical to reach one true conclusion
– perhaps the final answer lies in the eyes
of the beholder.
