Foreign aid: Are we helping the poor, or subsidising despotism?

President Robert Mugabe

President Robert Mugabe

Godfrey Bloom’s recent remarks on Foreign Aid caused a predictable storm of media froth over his choice of language.  But Godfrey has also started a heated debate around the substantive issue.  Just for the record: UKIP’s position is that we would support immediate and compassionate disaster relief in cases of tsunamis, floods and so on — tents, sleeping bags, emergency rations, medicines — but we cannot support general development aid as long as we face economic problems at home, and in any case we have serious doubts about the effectiveness of such aid.

Tim Montgomerie, formerly of ConHome and now with the Times, argues that the average British worker on £25k a year pays the equivalent of only 20p a day for foreign aid. Call that 25p gross, and multiply up, and it’s around £66 a year.  Many people will be willing to pay that.  But in these hard times, many will not.  Some already give more than that as private donations — which is how charitable spending ought to be done.

It’s all too easy to think of aid as the major financial input for poor countries, but it’s not.  Trade, and remittances from overseas nationals, are generally much larger, and generally much better targeted.  In fact if we wanted to help poor countries we’d be much better spending our time dismantling the EU’s protectionism, rather than sending money “from poor people in rich countries to rich people in poor countries” to repeat the cliché.

Justine Greening, described as “Secretary of State for International Development”, says that it is in our self-interest to keep giving aid, because by helping poor countries to become rich, we create our export customers of tomorrow.  But there is little evidence that foreign aid does in fact help poor countries become rich.  It is arguable that we merely subsidise bad governance, create dependency and make matters worse.  And it is an economic nonsense to suggest that we can prosper by giving our customers the money to buy our goods.  This is like pulling ourselves up by our bootstraps.  Germany is trying it now — selling Mercedes cars to Greece, and then finding that it must give Greece bail-outs so that Greece can pay Germany for the cars.  Bad business.

In an uncharacteristically churlish and discourteous piece, the Telegraph’s Matthew d’Ancona joins in the media’s Bloom-bashing (poor Godfrey — it seems to be Open Season).  He described Godfrey’s choice of words as “crass xenophobia”, which it clearly was not.  But he added something that really must be challenged.  He refers to “countries that receive aid — many of them scarred by famine and millennial poverty”.

The issue in many poor countries is not poverty and famine, but corruption and bad governance.  Take Southern Rhodesia, for example.  (OK, if you must, “Zimbabwe”).  It used to be a successful economy.  It used to be able not only to feed its people, but to export food as well.  It was “The Breadbasket of Africa”.  So what went wrong?  Quite simply, appalling governance.  Mugabe has no idea how to run a modern economy (or any economy).  He runs it as a personal fiefdom, to reward his cronies and to buy their loyalty, and he cares nothing for property rights, enforceable contracts or the rule of law.  And the results are entirely predictable.  Dire poverty and hunger.  So throwing foreign aid funds into this débâcle, without first putting in place reform measures, is simply a waste of resources.

Much the same could be said of North Korea.  Fifty years ago, North Korea’s per capita GDP was slightly ahead of South   Korea.  Since then, South Korea has pursued a (more or less) free market route, albeit with considerable government influence.  And it has been a great success.  It has moved beyond “developing country” status to take a respected place amongst the advanced nations of the world.  And its per capita GDP is now roughly twenty times that of the North.  Twenty times.  Not twenty percent higher.  Twenty times.

This gives us a stunning, head-to-head comparison of the victory of free markets over an eccentric post-Communist personality-cult dynasty, which apparently has no particular strategy or objective except to survive.  Of course the head-to-head rivalry between East and West Germany gave much the same outcome.

But North Korea has considerable natural resources, and could potentially be rich.  It could feed its people without relying on foreign charity.  All it needs is to sort out its governance, and to get a few basic economic decisions right.  But the régime is unable or unwilling to do so.  I wrote recently about foreign aid in North Korea (I was there myself a few weeks ago).

Recently Uganda, one of the world’s poorest countries and in receipt of £95 million annually from the UK, passed a law effectively outlawing political discourse and banning criticism of President Yoweri Museveni.  Yet we ignore the repressive law, and keep paying the money.

If you argue that Foreign Aid is a good thing, you must believe that it does some good (or at least what’s left of it after the spending on arms deals or Swiss bank accounts).  But there is a good case to be made that it does more harm than good.  It distracts us from trade, which is a far more promising route to prosperity.  And we may well, as in Zimbabwe and North Korea, simply be subsidising corruption, tyranny and despotism.  We are sustaining poverty and serfdom.  Not a lot to be proud of there.

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12 Responses to Foreign aid: Are we helping the poor, or subsidising despotism?

  1. Mike Stallard says:

    You aren’t the first to notice this – the Spectator, for instance, wrote a piece this week on the corruption of Charities. But you are, of court, spot on.

    But there is a veyr important point at stake here. What is needed in Africa especially is not more money, but a change of heart. I personally believe that only religious change can do that. That is why I am a Catholic. We have all sorts of real people out there in the field quietly working away spreading decency and love. Which includes, very often, schools, hospitals and honesty.

    That is why I want to control my own charity, please. And that is why I would like Atheists, Socialists, Communists, Muslims and everyone else to have the right to support the causes that they wish to support. Mr Cameron will not get any brownie points for sloshing our private money at his chummies’ Mercedes fleet.

  2. George Morley says:

    When the British government see fit to deprive their own citizens of their rightful indexed pension just because they are in a country not favored by them and consequently receive no increases ever to their paid for pension then there is a serious question about giving aid because the government say that they cannot afford it ! I am not against giving aid but when a fully paid up pensioner retires to another country and finds himself eventually in poverty there is no excuse that is acceptable. A pensioner today receiving less than 20 GBP a week when it should be well over 100 GBP is theft and a disgraceful situation that the politicians know is wrong and discriminative and this policy affects just 4% of all pensioners worldwide. A pensioner in the USA gets the indexing while the pensioner in Canada does not ! Totally illogical, immoral and unnecessary. Uprated in the Philippines but not in the Falklands. You really could not make this up could you ? It is having a serious affect on many pensioners abroad myself included. This is brought in by a regulation (regulation 3) when the Annual Benefits Uprating is voted on in parliament. They vote to pass the increase for 96% and freeze the 4% hidden in the small print. Diabolical !
    What’s more the new Pensions bill contains clause 20 which is a carbon copy of regulation 3 and so this will continue if the bill is passed without being changed to accomodate ALL Pensioners worldwide in the way that it should.
    Please see : http://pensionjustice.org/
    Your comment would be welcome Roger !

  3. neilfutureboy says:

    Just short of £12 billion a year divided by 62 million in the country comes to £195 each. If we limit it to employed workers that will be about £600. To maximise the effect for an (unpublished) newspaper letter I divided it between the 15 million employed heads of families and came up with £66 per month. My figure was selected to maximise but is true. Tim Montgomery doesn’t seem to be so limited.

    I agree with you that quitting the EU’s tariff barriers would do more for the developing world than we do now, as well as cutting our own food costs (such is the miracle of free trade). This seems to me to be an unanswerable argument and am not surprised it seems to have gone unmentioned in BBC/Guardian coverage.

  4. In my humble opinion, there should be an immediate moratorium on foreign aid for 5 years.
    That should allow enough time to dig the country out of the Socialist instigated mess.
    After that all aid should be scrutinised more closely.

  5. Excellent letter Roger, and found nothing to argue with. Just like Godfrey Bloom’s comments, you are simply saying what many thinking people believe.

  6. David says:

    I cannot find anything here to dispute Roger, we are feeding a very deep hole, since sometime in the 60,s we have seen kids in these places drinking filthy water, and when I see these ads today showing the same situation I ask, are the Leaders of these lands drinking this same filth, walking 100 miles to see a doctor, dying very young, I think not. And have you noticed their immaculate suits? How many nurses and doctors has our NHS taken from lands desperately short of them? In what way does that Aid them?

    We are being taken for mugs, and it does not seem to be any better after 60 years of not just our aid, USA aid etc. What AID do the other 26 members of this “Equality Union”, give?

    So well done Roger for keeping the debate going, and regards to you and Godders.

  7. cosmic says:

    As far as I can see, developmental aid is dished out because it makes some people in authority in the UK feel good. It’s been increased as an attempt on the part of the Tories to detoxify the brand. OK so it’s changed the brand identity from ‘nasty’ to ‘stupid and wasteful’. Whether it achieves (or ever has achieved) anything, or is counter productive, is hardly a consideration; the important thing is that a lot of money is chucked at it. There’s ample evidence that it is definitely counter productive. It promotes bad government and corruption and creates dependency. Paying to make things worse.

    As for increasing to an arbitrary UN target of 0.7% of GDP when it’s fairly clear existing monies are not spent properly, end up in Switzerland etc., this is completely ridiculous.

    Emergency aid has always been a fairly small proportion of the aid budget.

  8. Eric Worrall says:

    In the old days the CIA and other intelligence agencies used to “support” nauseous dictatorships because such support helped advance geopolitical goals.

    That became unpopular – America was paying for weapons which were killing people! America had blood on its hands.

    So the geopolitical manipulation was rebranded as “foreign aid”. It doesn’t matter then if bloodthirsty dictators divert aid money to buying weapons of repression, because thats their fault – America and other donor countries have clean hands, their intentions were good.

    Just a theory

  9. Ian Hills says:

    I wonder how much aid money finds its way back to the offshore bank accounts of ministers and civil servants, as a token of gratitude from their friends in Bongo-Bongo Land?

    • neilfutureboy says:

      That would imply that it is possible for British politicians to be as corrupt as those from countries full of tinted folk. Isn’t that racist or something😉

      Anyway it is perfectly lawful for rich foreigners to pay consultancy fees, speechmaking fees, directorships etc etc to former prime ministers and the like. Nothing illegal in expressing gratitude that way as Blair has proven.

      • cosmic says:

        Yes, it’s more subtle I’d say.

        Jobs in the aid industry for fellow travellers, contracts for particular companies, expressions of gratitude which can’t easily be put down as bungs, consultancies etc.

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