Mark Florman: When 1.4 billion human beings live on less than $1.50 a day we can afford to donate 0.7% of our own wealth
Foreign Aid is getting a bad press. The latest assault is contained in Jonathan Foreman’s book Aiding and Abetting published by think-tank Civitas, which follows a slew of media criticism of David Cameron’s decision to raise UK spending to 0.7 per cent of GDP this year.
Yet there is only one aid mystery – why our support for efforts to tackle global poverty is so misunderstood.
We have all heard the well-worn criticisms of aid. That it is at best ineffective, and at worst pernicious, flowing to “kleptocratic third-world rulers”. That aid is a “middle and upper-class enthusiasm”, and that aid workers themselves are workshy rich-kids. That aid is simply a political tool which politicians use to prove their credentials as caring international statesmen at taxpayer expense.
The notion that aid is a bourgeois concern is demonstrably untrue. In a ComRes poll in September a majority of those in the ‘DE’ socio-economic group thought Aid spending was either about right or too low. Crucial C1 voters were less likely to think aid was too high than those in the AB social group. This reflects a general respect for philanthropy throughout the British population. As the Centre for Charitable Giving and Philanthropy has shown, among households which give to charity lower income households give more as a proportion of their income than those on large budgets, with those in the bottom decile donating approximately 3% of their budget compared with those in the top decile donating roughly 1%.
On the substance of aid policies, there is of course always room for improvement. Yet, as the House of Lords select committee found, there is no evidence demonstrating Aid creates worse outcomes. Evidence for quite the reverse can be found in two of the ‘Asian Tigers’, Taiwan and South Korea.
The US offered about $60bn in grants and loans to South Korea between 1946 and 1978. In the same period, the total amount of aid provided by the US to the entire African continent was $69bn. Indeed Seoul’s position as a vital piece in America’s global strategy against the USSR allowed them to negotiate far better terms, building up large economic champions, or chaebols.
Taiwan received $1.4 billion between 1949 and 1963, an amount which equalled 43% of gross investment and 90% of the flow of external capital and donations. The presence of large numbers of American troops in these countries has also contributed to peace, preventing the warlordism that has so hampered capitalist democracy taking shape in many poorer nations. This is not in any way to diminish the achievements of the Korean and Taiwanese governments, but to recognise that the enlightened self-interest of the United States, through aid spending, was a key contributor to encouraging growth and private investment.
Britain has its own success story in this regard with India, the beneficiary of the bulk of British aid in the 1960s and 1970s. While the world’s biggest democracy still has many desperately poor people, it has also created economic giants such as Tata and Arcelor-Mittal which have in turn invested in and secured many British jobs in the 21st century.
It is this catalytic effect of aid that is its real power. When governments invest, this creates a security that encourages private donors and investors. According to the OECD, private giving made up 75% of total donor flows from the rich-world nations on the Development Assistance Committee, while private creditor flows to developing countries amounted to $775bn in 2012, around 6 times that given by governments in aid. Far from throwing taxpayer money at basket-case economies, aid paves the way for far greater influxes of investment and economic returns we all benefit from. For aid isn’t just about preventing harm, but doing good. It costs £2.20 to inoculate a child against polio. Yet that inoculation doesn’t just save a child and their family from the medical costs of treatment, but adds all the economic value that person will create over their lifetime. The costs are known and tiny. The returns are infinite. For an enlightened investor, targeted aid is the ultimate put option.
This economic potential is of course improved by education, and here my own experiences with the Build a School programme contrast with the caricature. There are no Chelsea teenagers in Land Rovers, who perhaps would lack the skill-set for making and hefting bricks in the African sun. Rather there were local people using the money to build assets they treasured, to give their children skills to work themselves out of poverty. The jobs of building and teaching create further ripples in the local economy, and the creation of this new asset helps not only with the poverty of materials, but with the poverty of aspiration that can afflict isolated and forgotten communities. The security that government aid funding brings in terms of paid employment allows for specialisation, investment and security, as people have the economic breathing space to move away from subsistence farming to creating greater value. The way local people, particularly women, seize these opportunities at once dismisses any notion of paternalism. This is a partnership.
Nations worldwide have been built on the progressive development of agriculture, education and towns. Just like individuals, aid catalyses them to move from receivers of help, to self-sufficiency, to contributors to the global economy. 16 European countries have committed to spending 0.7% of GNI by 2015 on aid to the very poor, and 5 have already reached that target. This isn’t much when we still have 1.4 billion of our fellow world citizens living on less than $1.50 a day. 25,000 die every night from starvation. Solving this cannot be beyond the ken of humanity. Britain’s role as an outward facing nation with unmatched internationalist credentials presents an opportunity to be a world leader in helping developing nations, and forging the links which will, in turn secure our own future as these economies grow and prosper.Austerity cannot be an excuse to retreat to fortress Europe, or even worse fortress Britain. This second age of globalisation cannot end as the first did, in economic stagnation and isolationism. Aid is not a soothing salve for our consciences, it is the spark which ignites the inner potential of people in the developing and developed worlds.