Does foreign aid really work?

Written by Roger C. Riddell

Roger Riddell presenting at the 2014 Australasian Aid and Development WorkshopThis blog post is based on Roger Riddell’s keynote address to the 2014 Australasian Aid and International Development Policy Workshop.

I have worked on aid and development issues for some 40 years, and have tried to engage as a “critical friend” of aid, perhaps–inevitably–drawing fire from both aid’s supporters and critics. In 2008, I wrote a book titled Does Foreign Aid Really Work? In my address [pdf],  and the new paper on which it is based, I revisit the evidence and the question itself.

Some might say that the fact that we are still asking this most basic question shows how little we know about aid’s impact. Robust information certainly remains a problem. However, there are two other reasons why we continue to ask this question.

The first is that aid is constantly changing: it has been provided in different forms to address a succession of different problems. In the 1950s, it was physical infrastructure and technical skills; in the 1960s, it was the savings and investment gaps; in the 1970s, meeting basic needs; in the 1980s, the productive sector; in the 1990s, governance, human rights and human development; and today (not unlike the 1970s), assistance is targeted at the achievement of key Millennium Development Goals.

The second reason is that the question has been understood differently at different periods of time. Broadly speaking, there are three ways that the question has been interpreted:

  • 30 years ago, when most people asked whether aid works, they principally wanted to know if different aid projects met their objectives–were the schools that aid funded actually constructed, the children immunised, the roads paved and the teachers trained?
  • More recently, people have wanted answers to the broader question of whether aid makes a lasting difference to the incomes and well-being of poor people, and if it helps to lift them out of poverty.
  • Today, a significant and growing number of people have begun to raise an even more challenging question: whether poor country economies are better off with the aid they receive than they would be without it.

In my paper, I answer the first two questions in the affirmative: surveying the vast range of evidence now available, it seems that on balance the vast majority of aid projects “work”, in the sense of achieving their immediate objectives; and, though the evidence is far less robust, that aid has probably made a positive contribution to poverty reduction and broader development.

That leaves the third question, on which I focus in particular due to its growing importance. A large and expanding literature now shows that aid-giving and the aid relationship–the interaction between donors and recipients–is characterised by a range of problems that when taken together seriously undermine the development impact of aid, and create a very significant gap between what aid currently achieves and what it could do if changes to the aid relationship were implemented.

I am particularly concerned that the priority given to short-term, tangible and measurable results has meant paying less attention to using aid to help address long-term development problems. It has meant channelling less aid to support more complex initiatives that take longer to achieve their intended results, and whose outcomes are uncertain and more difficult to predict; and it has resulted in less attention being paid to addressing the array of systemic problems of aid-giving, to which the Paris Declaration drew attention.

Evidence from a succession of recent studies–some commissioned by the donor community and others emanating from the aid-research community–suggests that aid focused on short-term and visible interventions is not merely resulting in less aid being used “transformationally”, but that it is adding to a recipient’s systemic problems and holding back long-term poverty reduction. For example, a recent World Bank study argues that when donors rely on their own systems to deliver aid, the effect is to undermine recipient-country systems. Research from the London-based Overseas Development Institute suggests that unless and until recipient countries have acquired development leadership, aid tends to have “fairly powerful perverse effects”. For example, there is widespread evidence of donors continuing to recruit public servants to implement their projects, which undermines national capacities, especially in contexts where they are particularly weak.

Based in part on the findings of such studies, aid’s traditional critics have been joined by some of aid’s traditional supporters to argue that the systemic problems caused directly and indirectly by aid and aid donors are so significant that they eclipse all the immediate and tangible benefits that aid undoubtedly brings, so that on balance aid doesn’t work. An example of this is Angus Deaton’s discussion of aid in his book, The Great Escape, published last year.

My own view is that the issues raised by these studies, and by what might be termed aid’s “new critics”, are extremely important. However, to draw the general conclusion that the harm done and the systemic problems that arise from or are caused by aid wipe-out the short-term good that aid usually produces is premature for three reasons.

First, the judgements made are not based on an overall and rigorous assessment. As with earlier debates on whether aid works, this new wave of criticism is based on partial and often poor data.

Second, too sharp a distinction between short-term focused and transformational aid is misleading because some “short-term” aid, such as expanding school places for girls, can potentially play an important role in long-term transformational change within recipient country societies.

Third, there is a growing awareness of aid’s short-comings and more knowledge about what to do to make it work better. Indeed, not only are proposals for working in new and different ways being put forward for donors to adopt, but a number of key donors are adopting approaches that are more in line with transformational aid. There is also evidence that significant national development successes are occurring because, notwithstanding the lurch towards the short-term, donors have by no means abandoned a long-term time horizon and are participating with governments in initiatives that blend service delivery and capacity support.

So does foreign aid really work? Not as well as it could, and not as well as it should. But against often far too high expectations of what it might achieve, much aid has had a positive impact.

I believe there is still an important role for aid to play. Donors need to learn and do far more to address some of the more systemic problems that aid risks creating or perpetuating, and which they have only recently begun to start more fully appreciating. They also need to encourage and give more space to developing country assessments of aid’s impact–as uncomfortable as this might sometimes be–to obtain a more complete view of aid’s benefits and limitations.

You can find Roger’s full address here [pdf], and the paper on which it is based here [pdf].

Roger Riddell is an Associate of Oxford Policy Management (OPM) and a Principal of The Policy Practice, in the UK. 

Roger C. Riddell

Roger Riddell is a development and aid specialist with some 40 years’ experience including senior consulting, government, non-government and think-tank positions. He is currently an Associate of Oxford Policy Management (OPM) and a Principal of The Policy Practice, in the UK.

7 Comments

  • I agree with Ludwing that the economic woes in the third world countries will not be alleviated by foreign aid but economically empowering the people.

  • Dear Roger,

    It’s strange when you look at the 50+ years of ODA, that we are back where it started. Aid was crowdsourced / crowdfunded mostly through religious missions and some economic development. Other initial forms of aid were really “tied” to a colonizing countries benefit. When the hat was passed on to the Private DAC club….it became a “us” and “them” – did it have an impact?? sure…through money at anything it will have an impact!! The question is = Was it strategic and effective?? the answer would be NO.

    As we return to the previous hyper-individual model, there is a sense that it will be more effective but still without any mechanism to measure collective impact. The private sector think they could do better – the new faces of development are “Lifebuoy”, Coca Cola, SAB MIller, etc! As if they can’t produce soap locally and drink fresh juices! I have nothing against corporate participation but again…it sucks money out of the local economy. It doesn’t really create a meaningful impact.

    The new discussion at the OECD to potentially go from ODA to ODE from “aid” to “efforts” still discounts the value of local efforts — what are the real Official Development Efforts? International or locals?

    All this to say that — ODA or ODE will have a real impact when it will be implemented in a more collective context of private. local, and international efforts. Until then…it’s throwing good money at something that needed to be reformed 50 years ago!

  • “there is widespread evidence of donors continuing to recruit public servants to implement their projects, which undermines national capacities, especially in contexts where they are particularly weak.”

    This depends on your viewpoint, of course. If you think that a govt dept is the place for highly educated professionally qualified people, mired in bureaucracy and political influence peddling, then you would take this view.

    From my perspective I would say that taking this demographic cohort out of that context and introducing it to the private sector context of projects, deadlines, measured outputs etc. is a valuable life skill training intervention. The national capability is not just public servants – the broader economy of that country benefits from autonomous professionals who can be mobilised into all sorts of useful activities, rather than attending interminable meetings and industrial tourism visits to irrelevant work environments, as is frequently the case for tenure protected bureaucrats.

    • Another perspective on the same point. A donor responsible for the implementation of a project which is public sector based, for example, one involving policy or regulatory reform, will be dependent on having senior project staff who are familiar with the way the public sector works and the key people within it. Such people are not likely to be found in the private sector. While it is true that extracting competent civil servants from their role within the public sector diminishes the capability of that sector, the issue should be judged as one of net benefit, not just whether any costs are incurred. And it is reasonable to argue that, if those civil servants who are hired for project implementation work alongside expatriate staff with appropriate international experience, they will return to their public sector careers with enhanced skills and knowledge.

      • I have been working on projects that foster community empowerment/participation for the past 15+ years. I can see that aid is effective for all three questions raised by Mr. Ridell. In 90% of cases, in community-based projects people have their immediate needs met, they are upskilled and empowered through the process, and have the ability to move on to their next endeavours once a project ends. They are better off for the experience, new skills and the benefits it brings. I think more focus needs to be on supporting community based projects throughout the life cycle of a project, having better baseline information as well as helping groups monitor/document their own change-management processes and results. Overall, the relatively small amounts of money invested in people helps them not only build their own ongoing support mechanisms with government, NGOS and the private sector, more often than not these projects result in a range of diversified livelihood and on-going community activities that are beneficial for themselves and their area. It’s a ‘one step at a time’ process. Investing in communities is a long-term transformational approach. Particularly if you help them understand how the broader policy and climate context is affecting them, and give them the opportunity to feed into pertinent policy processes.

        So, at the community/area level I think aid can be very effective. What I often struggle with is how much money goes into developing enormous reports no one reads or uses – or my pet peeve, government and international agency staff attending endless inter/national meetings. There is then the subsequent twists and turns that the groups implementing projects need to make to plan for, or report on, the latest agency objective/trend or international convention. It is exhausting and time-consuming. And I won’t even mention the satire that is ‘donor harmonisation’ and the Paris Declaration. I wonder how much that meeting cost? What has that done to reduce the silo mentality within organisations let alone between different agencies?

        I have also seen many government officers and others use aid projects to further their own careers and move on to get more lucrative employment elsewhere. You can’t blame them when pay and conditions are uninspiring in their national context. This is a really serious issue for the Pacific Islands. Have you ever tried to meet a Minister of Finance from the Pacific? Only to find they travel to meetings about 200 days a year? Or have recently left to do further their studies or career in Australia? I am being over-dramatic – but the change-over in personnel is a real problem. Within a year you can meet with several different people as they change roles and organisations and countries. There is no long term commitment.

        I think the private sector has an important role to play, but the trickle down effect still doesn’t work for the most vulnerable. We should have learnt that much at least over the past 50 years. We don’t need to look further than our own back yard to see the effects of a market-led economy. The gap between the rich and poor just grows.

        There is a fine balance to be had to keep aid effective. There are very good reasons to help other countries with transport, health, food security, energy, environmental management, education and breaking cycles of poverty. I often think if there was more common sense and less ego it would go a long way in helping make aid more effective.

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