Admittedly foreign aid has its shortcomings and it cannot and should not serve as a long-term and only solution. However, ignoring the immense benefits for both the recipient and donor countries of supporting developing nations could have disastrous consequences. A recent report on foreign aid by the Project for Modern Democracy provides ample evidence that foreign aid is a major factor in reducing levels of poverty, contributing to a 1-1.5 percent growth rate over the long term. The question that should be asked, therefore, is whether foreign aid can be made to work better and more efficiently for those who are in need, not whether it is necessary at all. Foreign aid is a relatively new phenomenon, starting with British legislation in the 1920s to assist its colonies. The Colonial Development and Welfare Act of 1945 allocated the rather large sum of £120m (the equivalent of about $4bn today) to these colonies over 10 years. It represented the first time a longer-term commitment was made to improve the standard of living in countries that were about to gain self-determination and, even more importantly, it was a recognition that this should be done by consultation with representatives of the local population.
Even for the ardent critics of foreign aid, it would be hard to argue for instance that the US’ 1947 Marshall Plan for Western Europe, or the reconstruction of Japan after World War II didn’t pay enormous dividends. They were comprehensive and successful foreign aid projects, without which Western Europe and Japan would not have been rebuilt and the world economy would never have reached the levels of prosperity it has enjoyed since then.
In President Harry S. Truman’s inaugural address, which was followed by the Point Four Program, he called for a “bold new program for making the benefits of our scientific advances and industrial progress available for the improvement and growth of underdeveloped nations”. Since then, and up until recent times, the debate continues as to whether foreign aid achieves its aims of eradicating poverty and advancing good governance, or if it conversely creates a culture of dependency, distorts free markets and encourages corruption.
Economically advanced countries responded to the need to support poorer nations on their march to development with various levels of commitment. In 1970, the UN General Assembly adopted a resolution that set a goal for the wealthiest world economies to allocate 0.7 percent of their gross national product (GNP) to assist developing countries. Thus far, only Sweden, Norway, Luxembourg, Denmark and the Netherlands have met this target consistently, while France and the UK joined them in recent years. The US is by far the biggest donor of foreign aid, with $51bn, which amounts to less than 0.2 percent of its GNP and, more worryingly, the Trump administration is threatening to cut this by 30 percent as part of its “America First” policy.
Aid payments may have their shortcomings but ignoring the immense benefits for both the recipient and donor countries could have disastrous consequences.
This approach embodies, to a more or lesser degree, the ill-thought-out argument that foreign aid is a type of charity that deprives the donor countries of resources in return for no benefits. There is, of course, a strong moral argument to be made for assisting less fortunate countries, especially considering that many of the hardships in these countries can either be attributed to their colonial legacy, or to the structure of modern capitalism that exploits cheap labour and natural resources in those places, and enriches the elite and fuels corruption.
However, there is a strong, if not stronger, self-interest argument for foreign aid. Improving economic conditions creates new markets, deprives extremist movements of vulnerable potential recruits, mainly young males, and hence leads to increased security. Development also reduces the motivation of people to immigrate, a topic that many in the more affluent countries are so obsessed with; health programmes stop the spread of epidemics and save many lives; and better education reduces dependency on state resources and increases the chances of generating wealth. These are only a few examples of the paybacks of development that, in many cases, are generated by foreign aid and which benefit global society, not only the recipient countries.
Poverty has been reduced worldwide from 35 percent of the world population in 1990 to around 10 percent today. By improving access to good schools, healthcare, electricity, safe water and other essential services, socio-economic mobility for traditionally marginalised segments of society, such as women and ethnic minorities, is enhanced too. Foreign aid is not a magic formula to remedy all the ills of poorer countries, and it doesn’t always attain its objectives, but without it the world is a poorer and more dangerous place.
• Yossi Mekelberg is professor of international relations at Regent’s University London, where he is head of the International Relations and Social Sciences Program. He is also an associate fellow of the MENA Program at Chatham House. He is a regular contributor to the international written and electronic media. Twitter: @YMekelberg