Understanding Foreign Aid

Posted by Tonali Windslor on

Over the years, many developed nations have sent vast sums of money to poor and developing nations with the goal of alleviating poverty, improving health and education, and promoting economic development. Although the act of one nation giving another nation financial aid in order to help that nation is an admirable cause, and has been met with some success, in many cases this aid has been improperly administered, and has even caused unintended, counterproductive consequences. Trillions of dollars in foreign aid has been sent to poor and developing nations over the years to help them improve their situations. However, this large infusion of cash has simply not helped these nations; in many cases, poverty, corruption, and violence have all gotten much worse (there may be some cases in where aid has been effective, but ultimately this has been due to its implementation). This is especially true for the continent of Africa, which has been the recipient of billions of dollars in foreign aid for several decades, with poor results to show for it. In many cases, the money that was sent to help the people in need was mismanaged by the recipient countries’ own authoritarian leaders. This generally encouraged corruption, as much of this foreign aid money was wasted in bureaucracy or used to benefit the authoritarian leadership’s personal interests. Here are two examples: Haiti, a recipient of many foreign aid projects over the years where progress was ruined due to corrupt political leadership and natural disasters; the Oil for Food program in Iraq after the Gulf War also involved much corruption regarding the foreign aid that was involved. In other cases, aid money was attached with too many conditions upon those receiving it, thus making it ineffective, as well as infringing upon the recipient nation’s sovereignty.

Foreign aid has also created an unhealthy dependency of many developing nations on developed nations. Recipient governments of foreign aid have a greater incentive to appease certain foreign interests as opposed to those of their own people, especially if corruption and bribery is involved. For example, if the majority of a nation’s income comes from outside funds instead of domestic taxation, then these governments do not need to provide much, if any accountability to their own citizens since they are using outside money instead of their own people’s. This allows for corrupt leaders to stay in power without support in their own country, but instead with support from their foreign donors. This was the case with the South Vietnam leadership during the Vietnam War, who were heavily backed by the American government. Additionally, the emoluments clause was included in the U.S. Constitution to prevent leaders from receiving gifts or bribes from foreign governments to prevent these kinds of situations.

Additionally, foreign aid can create an entitlement mentality, where these countries expect other nations to take care of their problems instead of them taking responsibility themselves. The foreign assistance can even displace or hinder local efforts to take responsibility (whether this be intentional, unintentional, or both). This ends up hindering other activities, such as growing entrepreneurship, which is vital for creating new businesses, jobs, and industries, all of which can help end poverty and lead to national wealth creation. Large loans have also been given to many of these developing nations by international institutions such as the World Bank and International Monetary Fund. Many of these loans have just ended up increasing the amount of debt that these countries held, thus making it harder for them to develop their economies over the long-term. It must also be noted that many of the governments and relief agencies that have administered the distribution of aid have historically taken a top-down approach when it came to how these funds were used, though this has been changing in recent years. With corrupt and ineffective governments especially, the top-down approach has contributed to a lack of development and can even make matters worse. This is generally not an effective strategy when seeking to help nations with longtime economic challenges. The bureaucrats who manage the giving of these funds do not necessarily have the proper understanding of the people and culture of the nation to which they are sending the aid. A much better strategy is the bottom-up approach, which provides needed skills, knowledge, and training directly to the people. This will allow them to develop their economies for long-term stability, instead of just sending a large infusion of cash, improperly administered, which may never end up improving the lives of the people it was intended to help. This can be compared to the quote, “Give the person a fishing pole, not the fish.” Thankfully, the bottom-up approaches are now a major focus of international aid programs. This more holistic approach certainly has a better chance of being successful than the far narrower approaches of the past. Now, aid and development organizations are prioritizing hiring locals, training locals, empowering entrepreneurs, and putting an overall small-business emphasis that embraces a grassroots approach. This is an approach that Isolation Moderation can support.

In general, there are two types of foreign aid: financial assistance and technical assistance, both of which have been widely implemented. Financial assistance involves the giving of money or debt relief to specific countries with the objective of helping them with aid and development. Technical assistance is aid that does not involve direct financial support. It can include providing expert skills and advice, conducting training, and the passing on of specialized knowledge. So, then which of these types of foreign aid should be pursued for the greatest effectiveness? While financial assistance should hardly be discontinued, it should be reduced significantly, with technical assistance receiving a much greater portion of overall aid. Financial assistance is probably best conducted by NGOs, private foundations, charities, individuals, and for-profit corporations. Nations and international institutions can still be involved in financial assistance, but on a much more balanced scale. Technical assistance, on the other hand, is much better for creating a bottom-up approach for the long-term benefit. It is for reasons such as these that direct financial assistance should not be prioritized by developed nations, but a better and more effective approach focusing on technical assistance should be taken instead.

So then what is the best solution?

Instead of simply just sending financial aid to struggling countries, the best alternative is to send trained and skilled workers to these countries to help the people directly. This will serve as a form of technical assistance, as was just discussed previously. This shall be called the Foreign Charity Service, a government-run program at the national level that trains and sends its citizens to poor and developing nations to provide immediate and direct humanitarian assistance. It will be very similar to the United States federal program, called the Peace Corps, except that this will be administered on a much larger scale, almost like a military force. These trained workers can use their skills in a variety of ways, such as providing medical care, disaster relief response, entrepreneurial training, community works projects, and education. Joining the Foreign Charity Service can be a viable alternative for those who would prefer to avoid military service, especially in nations that have mandatory conscription. The Foreign Charity Service would be ideal for young adults who would like to make a positive difference in the world, while also giving them valuable training and real world experience. It would also be good for retired adults as well, who may have more time on their hands and seek to use their life experiences for practical use.

If you are interested in learning more about these ideas, please order your own copy of Isolation Moderation.

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