Tuesday, July 24, 2012

"Foreign Aid Is A Waste Of Money" - IQ2 Debate review

Article written for Right Now, and appears on the website with other human rights reviews here.

Foreign aid is a waste of money.

That was the proposition put forward at the IQ2 Debate, hosted by the Wheeler Centre, at the Melbourne Town Hall on Wednesday 4 July.

Arguing for the proposition were The Australian’s Foreign Editor, Greg Sheridan, member of the Management Committee of Aid/Watch, James Goodman, and Director of the Intellectual Property and Free Trade Unit at the Institute of Public Affairs, Tim Wilson.

Defending the use of foreign aid were World Vision Australia’s Head of Public Affairs and External Relations, Martin Thomas, National Director of the Global Povety Project, Samah Hadid, and Executive Director of Oxfam Australia, Andrew Hewett.

Firstly, a summary of the arguments put forward in support of the proposition.

Greg Sheridan opened by acknowledging the difficulty that lay ahead: “Ladies and gentlemen, I stand before you a man in desperate need of aid, foreign or domestic, for I fear I am destined to lose this debate,” he said.

He didn’t know it yet, but a pre-poll of the audience revealed that just ten per cent supported the proposition, while 67 per cent opposed it and 23 per cent were undecided.

While acknowledging that most who enter the aid industry are motivated by “altruism and a desire to better the lot of humanity”, he implored the audience to extend the same sense of goodwill to critics – people who simply believe there are better ways to alleviate poverty that don’t waste billions of dollars.

Sheridan conceded that aid is not entirely unworkable, expressing support in situations such as natural disaster or where a society is attempting to recover from civil or international conflict.

But in general, he believes aid merely takes money from one nation’s taxpayers and puts it into the hands of another’s corrupt officials. After 35 years working as a journalist in the field in many poor nations, his conclusion is that aid is “next to useless in combating poverty, and infinitely less effective than foreign investment or free trade.”

He cited US aid in Afghanistan being paid to members of the Taliban to provide security for aid workers; the US$3.5 trillion the Chinese government holds in international currency reserves while Australian taxpayers still provide it with aid; and the “massive imbalance” of Australia’s foreign affairs and trade budget, where $800 million is spent per year on our diplomatic network and $5.2 billion on aid.

James Goodman may have been a little out of step with Sheridan and Wilson’s free-market ideology, but he outlined many problems with aid, which backed up Sheridan’s claim that foreign aid needs much greater outside scrutiny. He did so through the context of what he says are the three main causes of poverty: debt, the cost of food and climate change.

Goodman believes that aid simply deepens the problem of debt. It is loaned, via agencies like the World Bank, for projects that fit their agenda rather than the developing country’s needs, and when the project fails the developing country is left with the debt.

The developing world produces two-thirds of the world’s food and prices are rising because it cannot keep up with demand. Goodman was critical of free trade moves in agriculture by the World Trade Organisation that have enriched agribusiness while decimating small farms. He argues that this has been compounded by programs like Aid for Trade have, which have locked developing countries into agreements that are not necessarily in their interests, and can leave them more reliant on agribusiness and less able to feed themselves.

Climate change is a problem largely caused by the developed world but felt most severely by the world’s poor – ninety per cent of people displaced by climate change live in developing countries. Goodman said that, in this regard, rich countries owe a debt that is not being repaid. Rather, many continue polluting while using aid to finance projects that produce carbon credits.

While Goodman listed many legitimate problems with aid, he failed to offer solutions or alternatives.

Tim Wilson did, if from a different ideological perspective. He believes that to promote development institutional problems in developing countries need to be fixed – problems perpetuated by foreign aid’s largely top-down approach.

He also acknowledged that aid can play a role, but believes it is mostly a waste of money and misallocation of resources that has “almost universally failed as a policy mechanism to promote development. No country on earth has foreign-aided its way out of poverty, but hundreds of millions of people have traded their way out of poverty,” he said.

After all, the countries with the most economic freedom are also the wealthiest.

Wilson promoted the role migration can play in alleviating poverty, saying that working migrants send home around $440 billion each year. But he thinks the enormous potential of this policy is being missed because unions oppose it, though it would cut out aid agencies, allowing money to go directly to where it’s needed.

We should be giving people opportunities, not foreign aid, Wilson summed up.

But the question is whether these opportunities are available without aid?

The first speaker in support of foreign aid, Martin Thomas, suggested that, having been born in a land of plenty in a world that spends three times more money on diet products and services than it does on foreign aid for the hungry, we have a moral obligation to help those born into extreme poverty.

Despite many grim statistics, he believes “we are winning the war on poverty.” For example, 12,000 less children under five die each day compared to 1990 thanks to the provision of vaccinations, vitamin supplements and mosquito nets.

Thomas said that aid should not take the place of improved trade and other policy measures, but that it “has a role in reaching the very poorest.”

Samah Hadid picked up on this theme, saying: “Aid is a crucial part of a set of measures that help people escape poverty … so that they don’t need aid in the future.” Combined with things like trade, good governance and debt forgiveness, it can offer people born into broken systems the opportunity to escape extreme poverty.

Without basic literacy and numeracy skills, for example, a person’s ability to work and participate in the market is limited. Aid can foster trade by facilitating a better-educated, healthier population, and help guard against corruption by educating citizens, allowing them to hold government to account.

“Aid helps create the crucial pre-conditions for communities escaping poverty,” Hadid said, “it is not a silver bullet, but there is no simple solution to such a complex issue.”

Andrew Hewett was a fitting final speaker, summing up the issues through a discussion of good and bad aid.

“Essentially, bad aid is that aid which is motivated by the interests of the donor, rather than that of people living in poverty,” he said.

Good programs are accountable and owned by the people they are directed at. They strengthen the capacity of individuals and organisations, locally and nationally, as well as the capacity for communities to hold their governments accountable for delivery of basic services and the impacts of their decisions.

Hewett agreed that foreign investment and fair trade are important but, like bad aid, bad quality foreign investment and bad trade policies hurt people. What really makes a difference, he argued, is good quality investment and trade, side-by-side with aid policies.

The result of the vote after the debate was, predictably, a resounding defeat of the proposition. Though there was a small, but not insignificant, shift in voting, with 27 per cent now supporting the proposition (up 17 per cent), 60 per cent opposing it (down seven per cent) and 13 per cent still undecided (down ten per cent).

In the end the numbers matter little, and don’t offer much insight into the general view of the audience. Such a complex issue cannot be easily framed around a simple, and absolute, proposition, but that is the nature of debates.

Andrew Hewett perhaps summed it up best: “Aid is important, but it’s not sufficient.”