Foreign Aid: An Oxymoron?

Consider this:

Throughout the next ten days, I will be studying the processes of economic and political development in developing nations at Northwestern University’s Chicago campus with a clear focus on the past and current state of Uganda. With this training and background knowledge, our efforts will be better informed and prepared to have a direct, immediate and positive impact on the people of Ugandan during out seven week stay. Since we will be working at the grassroots level, our work will focus on developing community, local institutions and infrastructure, meaning that my posts will tend to be micro examples of the role of either single individuals or small groups with the support of larger NGO’s on international development. I expect to have little experience with governmental influence, despite the tremendous role foreign aid currently plays in the Ugandan economy and political structure. Therefore, I would like to take at least this post to discuss the role of the international-state community in international development.

In the course of my preparation, I read “Foreign Aid and the Weakening of Democratic Accountability in Uganda” by Andrew Mwenda, originally a Ugandan citizen, currently serving as a John Knight Fellow at Stanford University. The article critiques the conceptual role of foreign aid in all African nations with Uganda as the case study.

Using a vast variety of statistics and intuitive reasoning, Mwenda concludes that in order to “promote democracy and accountability, the West should discontinue aid flows.” While this is a polemic statement, the notion firmly asserts the issue of Africa’s Western dependence created through the international community’s, the IMF’s and the World Bank’s good natured policies of debt forgiveness and governmental aid packages. Foreign aid ought to be renamed foreign relief to indicate the temporality of its presence. “Aid” creates dependence and destroys government’s accountability to its citizenry, derailing the democratic process.

In order to understand how drying up foreign aid might induce stronger and more sustainable growth, let us look at a few key statistics.

Foreign aid currently makes up “50 percent of the Ugandan government’s budget.” 12.5 percent of that same budget is spent on “political patronage” i.e. corruption. And with the 2005 G8 agreement to cut Africa’s debt and double foreign aid, erasing “80 percent of Uganda’s total debt,” administrative districts increased from “56 to 80” while public administration expenditures increased by “$120 million” out of a $8.5 billion GDP. These statistics combine to demonstrate that when large components of the national budget come from “unearned” sources, the government can rely on those external sources for purely political practices such as increasing the bureaucracy through fragmentation and creating more political positions for further patronage, meanwhile eschewing the needs of the citizenry.

While neither I nor Mwenda would argue that aid cannot have some significant short term benefits, such as providing “free primary education, basic health care, infrastructure rehabilitation and maintenance,” we assert that it simultaneously undermines the democratic process by attributing unearned development and accomplishments to the party in power, thereby distorting the political system. In Uganda, foreign aid disincentivizes important internal reforms in tax code, crucial to long term development, by forcing politicians to avoid losing elite patronage. Debt forgiveness only leads to future borrowing, like lax parenting of whiny children encourages further whining.

Overall, the argument against foreign aid draws strong parallels to the popular arguments against the American welfare system. It creates dependence by disincentivizing stricter self-governance and allowing individuals and governments to avoid personally and politically difficult issues.

I will return to this topic in next week’s posting, hopefully with some concrete answers into how governments, NGO’s and concerned individuals can continue humanitarian efforts but focus them towards more productive results.

Think about it.

- Aaron J.