Much has been written about the unintended consequences of foreign aid flowing from the West to developing countries. Economists such as Dambisa Moyo, William Easterly, and Angus Deaton have all commented on the downright pernicious effects of government-to-government aid. Not too long ago, a new voice joined this distinguished chorus of foreign aid critics: Pope Francis. During his recent visit to the East African nation of Mozambique, Pope Francis made striking comments which suggested a link between foreign aid and corruption. The pope stated:
At times it seems that those who approach with the alleged desire to help have other interests. Sadly, this happens with brothers and sisters of the same land, who let themselves be corrupted. It is very dangerous to think that this is the price to be paid for foreign aid.
In other words, the pope lamented that the hundreds of millions (and sometimes, billions) of dollars that flood an impoverished nation in the form of aid have had the caustic effect of breeding corruption. Why would aid have this effect? Simply put, foreign aid enables governments to act free of accountability. How does this happen?
Governments of developed countries rely primarily on businesses, a bustling middle class, and other economic actors for their revenue. In return, those members and institutions of a country’s civil society expect that their government will provide various public goods, like national defense, roads, and a functioning and fair judicial system. Likewise, those in civil society expect government transparency and accountability.
This is not the case when a government receives foreign aid. The total amount of aid funds provided to developing countries can make up an enormous percentage of their GDP and their governments’ resources. For example, the World Bank states that official net development aid to Mozambique in 2017 equaled roughly 76 percent of its government’s total expenses – a staggering percentage.
With that amount of money coming from outside its borders, rather than from its citizens, the government can afford to ignore its people and behave corruptly. Moyo put it well in her best-selling book, Dead Aid: “Foreign aid short-circuits this link [between a government and its people]. Because the government’s financial dependence on its citizens has been reduced, it owes its people nothing.”
In the same spirit Deaton, the Yale economist and Nobel Laureate, stated:
I worry a lot about African countries where almost all government expenditure is coming from external sources. And that, to me, is the really crazy thing. And those governments have no incentives at all to respond to their people, because the only incentives they have are to deal with the aid agencies and to work with the aid agencies.
However foreign governments, the World Bank, the International Monetary Fund, and other development agencies may try to make sure their funds are used properly, this is difficult due to the fungible nature of money, public sentiment, and other factors.
Aid not only renders governments immune to their people’s cry for accountability and competency, it utterly discourages them from forming the very institutions necessary for a flourishing economy in the first place. These include a functioning and just court system, a secure property rights apparatus, and a business-friendly regulation and tax structure.
Why would those who prosper from the foreign aid status quo do anything to divest themselves of power? Developing those institutions would result in the formation of a rival, prosperous, and politically powerful civil society. Suddenly, those who had long enjoyed perennial windfalls free of accountability would see their economic and political power wane. Such an incentive structure surely discourages reform.
Large sums of money flying around can cause government corruption to rear its ugly head anywhere, including in the West. However, large sums of money in the form of aid have a particularly damaging impact on the overall health of developing countries.
Perhaps Pope Francis’ words will cause both critics and proponents of foreign aid alike to think harder about the unintended consequences of a seemingly benevolent government program. We all need to strive to provide the most effective and sustainable assistance to those most in need.
Image credit: Oxfam East Africa. This image has been cropped. (CC BY 2.0).