Evaluating the Effectiveness of Aid

Overview

There have long been debates on the effectiveness of aid. It is hard to measure quantitatively, and even when this is accomplished, everyone has a different interpretation of those facts and figures. Most economists agree that aid can be beneficial and is needed; debate arises on how countries should give aid and how that aid should be used within the receiving country to maximize its impact. Most everyone also acknowledges that despite good intentions, aid has not been as effective as it could be and so far major goals have not been accomplished. Another difference of opinions rises here - if aid has not been effective so far, should donor countries continue to give aid in the same manner as before, or should a new course be charted?

William Easterly and Jeffrey Sachs are the two preeminent economists at the forefront of this debate. Easterly is an economics professor at New York University a non-resident senior fellow at the Center for Global Development in Washington, D.C. He was an economist at the World Bank for sixteen years and recently authored The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good. He argues that despite good intentions, the efforts of the West to aid developing countries have largely failed, and as such we need to commit to a new course of action, not just continue to pledge more money. Sachs, on the other hand, believes that although goals have not been meet, donor countries should increase their aid donation because with enough money, extreme poverty can be eliminated within our generation. He is currently an economics professor and director of The Earth Institute at Columbia University. He is the director of the United Nations Millennium Project and recently authored The End of Poverty: Economic Possibilities for Our Time.

Jeffrey Sachs

In his book The End of Poverty, Jeffrey Sachs outlines four economic possibilities of our time: "to meet the Millennium Development Goals (MDGs)by 2015, to end extreme poverty by 2025, to ensure well before 2025 that all of the world's poor countries can make reliable progress up the ladder of economic development and to accomplish all of this with modest financial help from the rich countries, more than is now provided, but within the bounds of what they have long promised" (25).

Sachs defines the end of poverty as ending the plight of people that live in extreme poverty and struggle for daily survival and to ensure that all of the worlds poor, including those in moderate poverty have a chance to "climb the ladder of development"(24). He states approximately one billion people live in extreme poverty, one-sixth of the world's population; these people have not even had a chance to rise on the development ladder, they are not even on it (19).

One of Sachs most important ideas is his poverty trap theory. He states that the extreme poor are caught in a poverty trap, unable to escape. Sachs argues "they are trapped by disease, physical isolation, climate stress, environmental degradation and by extreme poverty itself" (19). As a result, they do not have the means to lift themselves out of extreme poverty and onto the development ladder, and climbing the development ladder is the key to ultimately a better life. But because of these external factors, the extreme poor cannot even help themselves, they are too concerned with daily survival, which is where the need for foreign aid arises. The solutions to many of their problems, such as mosquito nets to prevent malaria and anti-retro viral therapy drugs to treat HIV/AIDS, exist, but many governments simply do not have the money to invest in such supplies, even ones this basic. As a result, people continue to die and are too focused on daily survival to contribute to society; it is enough trying to just survive. Without some type of market economy, these countries will not be able to increase their GDP and lift themselves out of this trap, but a higher GDP is necessary to be able to afford to provide basic social services such as mosquito nets. And hence many are stuck in this "poverty trap".

Sachs believes this foreign aid should be delivered as a "Big Push", which entails donating a lot of money at once with the hopes that it will provide the means to fix many basic problems, as well as helping to jump start the economy. In theory, if this is accomplished, the recipient country will be on its way to becoming self-sufficient and no longer depend on foreign aid. Sachs refers to this as "shock therapy".

The Millennium Development Goals

Sachs firmly believes that despite initial failures, the MDGs can be accomplished by 2015. As the director of the Millennium Project he obviously feels these are the important goals that foreign aid needs to focus on, and once accomplished countries will be out of extreme poverty. The eight MDGs, as stated in The End of Poverty include:

Eradicate extreme poverty and hunger
- Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day
- Halve, between 1990 and 2015, the proportion of people who suffer from hunger
Achieve universal primary education
- Ensure that by 2015 children everywhere, boys and girls alike, will be able to complete a full course of primary schooling
Promote gender equality and empower women
- Eliminate gender disparity in primary and secondary education, preferably by 2015, and to all levels of education no later than 2015
Reduce child mortality
- Reduce by two thirds, between 1990 and 2015, the under-five mortality rate
Improve maternal health
- Reduce by three quarters, between 1990 and 2015, the maternal mortality rate
Combat HIV/AIDS, malaria and other diseases
- Have halted 2015 and begun to reverse the spread of HIV/AIDS
- Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases
Ensure environmental sustainability
- Integrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources
- Halve by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation
- By 2020 to have achieved a significant improvement in lives of at least 100 million slum dwellers
Develop a global partnership for development
- Develop further an open, rule based, predictable, nondiscriminatory trading and financial system. Includes a commitment to good governance, development, and poverty reduction - both nationally and internationally
- Address the special needs of the least developed countries. This includes: tariff- and quota-free access for least developed countries' exports; an enhanced program of debt relief for HIPC and cancellation of official bilateral debt; and more generous Official Development Assistance (ODA) for countries committed to poverty reduction
- Address the special needs of landlocked countries and small island developing states (through the Program of Action for the Sustainable Development of Small Island Developing States and the outcome of the twenty-second special session of the General Assembly)
- Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term
- In cooperation with developing countries, develop and implement strategies for decent and productive work for youth
- In cooperation with pharmaceutical companies, provide access to affordable, essential drugs in developing countries
- In cooperation with the private sector, make available the benefits of new technologies, especially information and communications

Official Development Assistance

Sachs also argues that other democracies have voted significantly more aid as a share of their Gross National Product (GNP) than the United States, and many Americans believe the US donates much more aid than it actually does. The United Nations set a goal of 0.7% of a country's GNP to be donated as aid but the US falls well short of this objective, only donating around 0.22% of its GNP, although this is higher than in previous years. The global average is currently around 0.47%.

Sachs believes the richest of the rich individuals must step up and contribute monetary assistance to help countries meet the aid goal of 0.7%. He also thinks the US should divert funds from its overgrown military budget to the agenda of global security through economic development.