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. The goal of putting a lot of money into an economy at once is to fix many problems at once, and 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", and it should be financed by the West.
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: (211)
- 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.
Future Steps
Sachs offers nine steps towards accomplishing the goal:
- Commit to Ending Poverty
- Adopt a Plan of Action
- Raise the Voice of the Poor
- Redeem the Role of the United States in the World
- Rescue the IMF and the World Bank
- Strengthen the United Nations
- Harness Global Science
- Promote Sustainable Development
- Make a Personal Commitment
According to Sachs these are the basic steps, and if followed, will help put us back on track to end extreme poverty by 2025.
William Easterly
In his book The White Man's Burden, William Easterly argues that the West's current aid program is not effective and needs a change of direction. He states that while over the last 50 years the West has spent $2.3 trillion in foreign aid, look at all that still needs to be done. Children are still starving, AIDS is epidemic, one sixth of the world lives in extreme poverty, the list goes on. If there is still so much left to do after spending $2.3 trillion, something needs to be done differently.
Easterly divides the aid community into two categories: Planners and Searchers. Planners "announce good intentions but don't motivate anyone to carry them out" (5). The Searchers, on the other hand, focus on a constructive approach to aid by designing bottom up programs - deciding on a program based the individual village. Planners usually take a top-down approach, which is deciding on one program and implementing it on a large scale and assuming it will work everywhere.
Easterly argues one of the biggest changes in aid distribution needs to be the goal. Organizations need to create an attainable goal based on available means at a reasonable cost (11). All too often aid agencies set big grandiose goals of ending world hunger in on swoop, when this is not a reasonable or practical goal. Instead agencies should create numerous smaller goals, like increasing primary school enrollment rates in a village. Agencies should then evaluate the most effective program for accomplishing this goal by doing on-the-ground field work to make sure their idea is actually feasible. They should then get together with local village leaders and decide how to implement this program. During and after the program, the agency should ask for feedback from local villagers on the actual effectiveness of the program. If it is effective it can be implemented on a larger scale and so on.
Aid programs cannot be effective unless the program has local feedback, and the designers of the program are held accountable for any failures. All too often while programs have good intentions, they
Popular Services International
One of Easterly's most striking examples was the distribution of mosquito nets in Malawi. Mosquito nets only cost several cents yet they are crucial in the reduction of malaria transmission. Unfortunately, because mosquito nets are so valuable, they are often sold on the black market for an impressive sum. As such, the nets do not get to the people that actually need them because they cannot afford to buy one on the black market. Furthermore, they are often not in stock at hospitals and among those who do receive one, they are also commonly used as fishing nets and wedding veils.
Popular Services International (PSI) is a Washington, D.C. nonprofit organization that is rewarded based on the success of its programs. As such, they are constantly seeking new, more effective ways to distribute aid so it reaches the maximum population and has the maximum impact, and it goes to those really in need. PSI found a way to distribute mosquito nets in Malawi through prenatal clinics. They sell the nets for fifty cents to mothers at prenatal clinics across the country , and because pregnant women and children under five are at the highest risk for malaria, the nets are going to those in need. The nurse who distributes the nets at the clinic gets nine cents per net to keep for herself, which ensures the hospital shelves stay stocked. Nets are also sold to richer people through private sector channels for five dollars, which makes up for selling the nets for only fifty cents at the prenatal clinics.
PSI's mosquito net program "increased the nationwide average of children under five sleeping under nets from 8 percent in 2000 to 55 percent in 2004, with a similar increase for pregnant women" (14). A follow-up survey found that of the people who paid for the nets, nearly all used them. On the other hand, the results of a study of a mosquito net program in Zambia in which nets were given out for free found that 70 percent of recipients did not use them.
The important lesson to draw from this is when there is some incentive for doing things well, or a reward for a successful program, people will likely put more time into developing that program to make sure it actually works. As such, the program is more successful, which is everyone's end goal. Furthermore, if a program is not successful, the developers will not get the reward and so they probably will not run that program again. It is very hard to evaluate the effectiveness and success rate of global aid programs, but because there is not an easy way many ineffective programs continue to operate, which is a waste of resources. This goes back to Easterly's idea of feedback and accountability - on-the-ground feedback is imperative for evaluating the effectiveness and impact of a program; persons removed from the actual situation cannot fairly asses such things. And if things are not working, someone has to be held accountable for their mistake, otherwise it is likely to happen again and we will continue making the same mistakes, which again is a waste of resources.
Aid Growth
Easterly also directly attacks Jeffrey Sachs theory of a poverty trap by using graphs and data, some of which is below, to prove that a large amount of aid at once actually does not necessarily pull countries out of poverty. Easterly argues that an increase in aid does not translate into an increase in per capita income. In fact, as the graph supports, over the past thirty-five years, as aid to Africa has increased and become more of countries GDP, per capita income has actually declined significantly; it is almost a direct inverse relationship.
This is another example that per capita growth rates are not tied to the amount of aid a country receives. As the chart shows, the larger the percentage of aid is of their GDP, in most cases, the lower the per capita growth rate. According to this chart, the increase in per capita growth was negative, which means it was actually decreasing.
