Suas
The Aid Industry
Carol Healy, DERN
Carol.healy@nuigalway.ie
www.nuigalway.ie/dern
Synopsis
► Definitions
and Statistics
► Current Aid Policy
► Issues in Aid
► Case Studies
► Discussion
Definitions and Statistics
ODA – official development assistance
► DAC: Development Assistance Committee
► 1950s- 1970s: the objectives of aid evolved from a focus
on industrialisation to a broader focus on poverty and
welfare
► 1980s: debt crises: aid strategies to induce economic
reforms through policy conditionalities (SAPs)
► In 2000, aid from DAC states was lower than at any time
since the 1940s.
► From 2001, huge increases in aid
► Irish Aid aiming to achieve 0.7% GNP by 2012
►
Irish Aid
► Irish
aid spends:
 54% of its budget on social sectors (above the 30%
DAC average)
 20% of its budget on health (DAC average 3.8%)
► Emergency
assistance has been increasing
► Funding for local government and civil society
organisations increasing: 2% in 1995 to 15% in
2005 (mostly on Irish-based NGOs: €1million in
1995 to 129million in 2005)
Aid Policy
► Driven
by the Monterrey Consensus 2002
► Paris Declaration in 2005
Reasons for aid
In pairs, think of as many reasons as possible as to why
people/countries give aid
► Guilt – a type of distributive justice
► Self interest – military or political
► Morality – Justice demands equitable resource distribution,
obligatory for rich to help poor
► Equality – to create equality among partners
► Charity – the benevolence of the rich – Recipients do not
receive as a right and donors do not give as a duty
► Empathetic altruism – uses emotional and rational
argument
►
Does aid work?
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US $1 trillion of foreign aid has been spent since the 1950s
Low income countries that had been receiving aid for half a
century are still experiencing deteriorating standards of
living, poverty, conflict and poor economic growth
Aid has failed to improve economic growth rates of lowincome countries. For the last 25 years, growth rates in
Africa have been less than the nearly 3% annual increase
in population
Between 1990 and 1998, the absolute number of people
living in extreme poverty around the world only fell from
1,276 million to 1, 175 million and the proportion of
people suffering from hunger is still at approx 826 million.
Does aid work?
► Ethiopia:
received more relief aid than any
other country.
► 9 million people still dependent on food aid
in Ethiopia
► 18 countries with a combined population of
460 million had a lower human development
index (HDI) in 2005 than in 1990; (Reality
of Aid 2006)
Issues in Aid
► Tied

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
aid
40% of global aid is tied
Increases the cost of purchased items
Skews development priorities
Undermines the development of the local
economy. EU: Italy, Austria and Spain give very
high proportions of tied aid.
Issues in Aid
► Technical
Assistance
 Constitutes 25% of global aid (consultants
working in the country, training and research).
Expat consultants more expensive than local
ones
Issues in Aid
► Poorly
coordinated aid
► Flag-wavers problem
► Parallel Funds
► Budget Support, Donor Harmonisation
► Short term
► Volatile Aid flows
► Aid Dependency
Issues in Aid
► Conditionality
 Since 1990s, aid has been conditional on good
governance and on countries carrying out
market reforms
 Harmonisation may lead donors to apply more
conditionality as they align themselves to IMF
and WB priorities
Issues in Aid
► Aid
not focused on Poverty Reduction
► Macro-micro paradox
► Military Spending
► Accountability
Debate around concepts and
definitions of Aid
► ‘Real
Aid’ – aid that is neither inflated, nor
phantom aid and therefore makes a difference.
Action Aid (2003): 39% of ODA is ‘real aid’.
► Inflated aid: debt cancellation, foreign student
costs, refugee spending in the donor country – do
not directly reduce poverty in the South.
► Phantom Aid: inflated aid + aid that reaches poor
countries, but is of bad quality EG tied aid,
technical assistance, poorly coordinated aid, aid
that is heavily conditional, aid that is not focused
on poverty reduction and military spending.
The Real Motives of Aid
► Moral
and humanitarian motives the ‘official’
reasons
► Reality: political, strategic and welfare
interests of donor countries are the driving
force behind the aid programs
Political Motives
► Aid
from the US during the Cold War was
based on considerations of national security
and preventing the spread of communism
► Collapse of SU – decline in US aid flows
► Post 9/11 environment: Bush increases
bilateral aid once again.
► EU explicitly expresses its commitment to
using aid to promote democracy
Economic Motives
► Privileged
access to resources and markets
► Opportunities through Trade
Should aid flows be increased?
Oxfam: Conflicts in Africa since the end of the Cold War
have cost the continent $US300 billion, equivalent to all the
foreign aid it has received over the same period
► Botswana, Indonesia, Bolivia and Uganda are some of the
countries that have gone from crisis to rapid development
over the last 50 years with the help of foreign aid.
► Need for more aid : Achieving the MD of halving the
proportion of people living in extreme poverty by 2015 is
estimated to require a doubling of world aid at a minimum
► Who are we asking – is aid working? Are we asking the
givers and the takers of aid? Are we asking those who
need the aid most?
►
Should aid flows be increased?
► Need
for “country ownership” of policies
and strong domestic commitment to change
► EU and Japan are the products of aid
► Issue of aid quality and the way it was given
► Aid is needed, but it should be structured to
focus on infrastructure and on human
capital
Should aid flows be increased?
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Need for better accountability?
Aid is a catalyst towards a country get on its own feet
Aid alone is insufficient. Also need domestic and
international investment, trade issues, more participation in
the global arena
Africa is changing – forecasts of 6-7% growth in the
coming years: is this because of aid?
Aid has a positive effect on growth but only when good
policies are present in the recipient country.
WB “Low income countries with bad policies should receive
ideas rather than money”
Criticisms: Shouldn’t focus on ‘good or bad’ policies, but
instead on stability of aid flows
Case Studies
► Scenario
1: The Ethics of Aid without Justice
► Scenario
2: The Ethics of Humanitarian
Disengagement
► Scenario
3: Truth Telling versus
Humanitarian Aid
Topics for debating
► Local
staff and international staff should be
paid the same salary
► There is no role for international staff in the
South
► Business and Trade, not aid is required for
developing countries
Useful Websites
► http://betteraid.org
► www.eurodad.org
► Reality
of aid: www.realityofaid.org
► www.oecd.org/dac
► www.dochas.ie
► www.irishaid.gov.ie