Aid as a Political Tool

In an aid environment where national powers seek their own desired ends, aid is delivered without much oversight, without genuine interest in evaluating developmental impact, and with limited disclosure. The entrenched aid system has been manipulated to serve as a political tool. With respect to Donor governments that are using aid as a political tool to enforce change, there are two leading schools of though.

The first disposition believes that impoverished nations are in a poverty trap and in need of much more aid as a means to invest and promote economic growth. The other believes that the governments of impoverished nations are incapable of helping themselves and that aid should only be provided under certain conditions that are enforced by the donor government. Although these two schools of thought share the objective of democratization, both approaches prove to have negative affect on the rules and development of democracy, as opposed to promote democratic ideals.

Globalization empowers multilateral organizations; in return, individual nations will have to relinquish some of their control over international affairs for the sake of a global-community. However, today, aid assistance and interventions are, to a large extent, controlled by individual nations. Being that politics is a fight for resources, the decision-making power possessed by individual nations within the aid environment has given politicians the opportunity to manipulate the language of universal human rights as a means to justify their pursuit of personal or domestic gain. Politicians that represent a single nation ought not to be able to dictate who receives aid or under what conditions.

People must recognize that just like any other individual, the aid official has an incentive to seek personal gain and that an aid system that presents these officials with opportunities, time and time again, to act on behalf of themselves and not on behalf of the poor and unfree, must be restructured. The aid environment within which development agents operate must be transformed so as to limit inefficiency and corruption.

The Purpose of Aid

The purpose of aid is justified in the context of universal human rights. The Universal Declaration of Human Rights (1948) acknowledges that all humans have inalienable rights. These rights are indispensable to one’s dignity and to the development of one’s potential. We all possess potentialities which depend on the protection of basic rights as well as nurturing for development and actualization. Man is born into a world that is free to us by choice. One does not choose the environment or the culture within which one develops. The aid environment was established so as to promote basic human rights as a means to enable freedom for those who do not have a choice.

In regards to personal development, one of the most challenging thresholds to overcome is the elevation of one’s understanding beyond the egocentric to the embracing of a global-community. It is not unexpected that politicians, as much as others, act to preserve their status of power in the world. The more often people are presented with an opportunity to act on behalf of themselves at the cost of the collective, more often people will abide by egocentric reason and seek selfish ends. Therefore, the effort to secure and promote universal human rights should be controlled by representatives of the global-community, not individual nations.

The way in which the United States perceives foreign aid is perhaps best understood in the way in which the country acts when they are the recipient nation. When other countries offered the United States $854 million in cash and oil as foreign aid to help the areas devastated by Hurricane Katrina, they merely accepted 4.7% of the total offered, the rest went uncollected. There is no reason for not accepting the available resources, other than that aid is a political tool. The United States wanted to avoid the political influence aid has on the policies of the recipient nation.

According to Real Aid (2005) "Eighty-six cents in every dollar of American aid is phantom aid, largely because it is so heavily tied to the purchase of US goods and services, and because it is so badly targeted at poor countries." Too often, government officials have been accused of using foreign aid money for political gain rather than to help those in need. Their approach to international development is inextricably tied to a national diplomatic strategy to preserve, or gain more, international power and influence. Today, the environment within which they operate lacks transparency and methods that invoke the proper incentives, allowing rent-seeking and corrupt behavior to go unnoticed and unpunished.

The purpose of aid is to promote and secure basic human rights, to alleviate poverty and to reduce global inequality. However, the current aid system fails to efficiently accomplish these set objectives and it enables individual donor nations to dictate allocation in accordance with domestic preferences. This organization persists because the poor are not the real customers -- the rich-country politicians and voters are. The poor suffer on account of politics.

Aid Effectiveness

We live in a world that is evermore influenced by globalization. We, as people of the free world, have a moral obligation to promote and protect the basic rights of our fellow humans. Once the global-community agrees to provide aid on the basis of Human Rights, the question arises: what type of aid do we provide? The term ‘aid’ can be understood as any form of assistance. Given this loose interpretation, ‘aid’ may easily lend itself to misuse. Therefore, 'aid' has little or no value without an accompanying term to give it a definition.

The effectiveness of aid, in its various forms, is poorly documented and largely misunderstood. The knowledge that exists regarding how to best provide aid assistance is very limited. This lack of understanding stems from the inability to properly evaluate aid’s effectiveness and it is indicative of the aid system’s incoherency and the overdue need for a transformation of the aid environment. The Center for Global Development has criticized the failure of donor aid initiatives to take monitoring and evaluation seriously as a recurrent weakness.

The measurement of effectiveness for any action depends on its objective. One could argue that if the objective of the aid system is to secure the advantage that one nation has over other nations, then aid could be perceived as effective because the system enables the use of aid as a political tool. However, the international community has established that based on the recognition of universal human rights the objective of the aid system is to secure and promote basic human rights.

Today, because of the limited knowledge of aid allocations, aid has been measured as a single variable within a larger context to determine the overall affect on the economy. The taken approach is to evaluate what effect the total sum of aid, as a variable fraction of the national budget may have had on a nation’s overall economic growth (or performance). Not to measure how particular projects affected the local community. The taken approach fails to distinguish between the affects of aid and other factors that may affect economic growth and has rendered almost all studies on aid effectiveness inconclusive. The failure to reach a definitive conclusion indicates an inherent flaw in the aid environment. Therefore, considering the huge amount of funds involved, it is suspicious when decision-makers are unwilling to adapt alternative approaches that would help to improve aid’s effectiveness. Some aid officials wish to avoid operating in economic transparency and deliberately fail to support independent evaluations that would disclose their actions to the public, it seems clear that they should not have a choice on this matter.

A study produced by the Cato Institute in 2006 "Does Foreign Aid Help?" explored various forms of how aid was delivered and found that “the empirical evidence on the effectiveness of foreign aid is discouraging." The study concluded that "increasing the responsibility of recipient countries (by providing loans instead of grants in a credible policy environment), reducing the cost of remittance to developing countries, and improving the coordination of donors seems to be reasonable goals to improve the effectiveness of foreign aid."

In respect to Donor governments, there have been attempts to 'impose good behavior' by recipient governments through the means of conditionalities. When the Donor is a politically associated official, then the particular conditionalities often favor the donor nation. Some Donors oppose the use of conditionalities and avoid stepping on the sovereignty of nations; they simply insist that governments 'choose to behave.' This particular approach has ignited a debate on stricter selectivity and the capability of recipient governments to effectively absorb and properly use donated funds. Given recent studies, this report contends that Donors should cut through the red tape and support apolitical Agents.

According to NYU professor William Easterly, "the evidence suggests dropping the obsession with always working through the government." When aid funds are channeled through an official route and allocated by politicians, a smaller percentage of those funds reach the poor. The criteria for stricter selectivity standards are, for the most part, about the political policy environment in the recipient nation. There is a need to decrease the transaction, administration, and implementation cost of aid projects as a means to improve efficiency. Funds that are channeled through governments are utilized less efficiently and, as you can see on the right, there are examples of how politics can negatively affect aid effectiveness.

Matters of benevolent aid and international development are much too important to be handled by politicians because the purpose of aid is to accomplish a universal basic standard of living, not to preserve a nation’s hegemonic grip on the world. If the negative affects of political influence on aid does not encourage the global-community to transform the aid environment, then perhaps the positive affect of the private sector will. Does Foreign Aid Help? (2006) concluded that the "larger the ratio Private-to-Private, the larger is the positive direct effect on economic growth." Their results "also indicate that private flows may be a better instrument for development than foreign aid.” Therefore, Donors should ‘select’ apolitical recipients for the sake of greater efficiency.

Transforming the Aid Environment

The proposed solution is a transparent aid market where donations can be tracked and their utilization evaluated: an online platform where Donors and Agents connect with one another, creating a global network of direct involvement between philanthropists and projects. Agents propose and attract funding for piecemeal aid projects. Donors allocate donations to particular projects and are able to visually monitor productivity as well as end results. The incorporation of an appraisal system will improve (arguably establish) basic evaluation of development projects and install incentives that promote better performance. It will improve monitoring and make the most needed aid projects more visible, thereby ensure that the particular problem is more likely to be addressed.


This article is based on excerpts from “Transforming the Aid Environment (2007)”
Available for download and discussion on http://aidmarket.info
-- Thorsteinn H. Gestsson
http://aidmarket.org

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