Tag Archives: Aid

Jeffry Sachs – The Case for International Development Aid

This is a brief summary of the case Jeffry Sachs made for International Development Aid in his 2005 book ‘The End of Poverty’. Taken mainly from chapters 12-16

(1) Why is Aid needed?

Sachs argues that injections of aid are needed to break the poverty trap –because there is no where else money is going to come from when there is insufficient income to tax or save.

Sachs uses a description of a visit to Sauri village in Western Kenya to describe the poverty trap – the villagers face a range of poverty related problems including poor food yields due to lack of fertilisers and nitrogen-fixing trees, the fallout from diseases such as AIDS and malaria and the fact that children cannot concentrate in school because of malnutrition. All energies and money are basically spent on combating disease and staying alive.

As a result of the poverty trap the village faces under investment in the following five areas

  1. Agriculture
  2. Health
  3. Education
  4. Power, transport and communications infrastructure
  5. Sanitation and water.

 

Aid needs to be spent boosting whichever of these areas are undeveloped (and all of them, all at once, if necessary) because a weakness in one can mean money is wasted on another (it’s pointless spending billions on education if disease means kids can’t concentrate in school, or lack of roads means they can’t get to school.). This should be based on what Sachs calls a ‘clinical diagnoses‘ of a countries requirements.

(2) How much aid is needed?

There’s a number of ways of looking at this>

$70 per person per year for at least 5 years would being sufficient to provide suitable investment in these five areas for the poorest regions on earth (basically the bottom billion who are stuck in the poverty trap). After an initial 5 year period, Sachs believes that this figure should reduce considerably and that 10 years should be sufficient for a country to be self-sustaining financially.

Looked at globally The World Bank estimates that meeting basic needs costs $1.08 per person per day – 1.1 billion people lived below this with an average income of 77 cents. Making up the short fall would mean $124bn/ year, or 0.7% of rich world GNP.

(3) Arguements for providing International Development Aid

Firstly, using aid to eradicate poverty will make the world a more secure place

The US spends 30 times as much on its military as it does on aid (for the UK it’s about 8 times as much, 2002 figures), but spending money on military solutions is not going to make an insecure world more secure.

A CIA task force examined 113 cases of state failure between 1957 and 1994 and found that three explanatory variables are the most common:

  1. High infant mortality rates (which indicate low levels of material well-being)
  2. Openeness of the economy – the more open, the less stable
  3. Democracy – the more democratic, the more stable.

Sachs rounds off by listing 25 countries which America has intervened in following State Failure since 1962. His point is that state failure typically leads to US intervention, which is more costly than the price of providing aid which would prevent such interventions.

Secondly, Official Development Aid  is crucial to provide health, education and infrastructure, and because it makes up a significant part of the total income of many countries.

Thirdly,The  public will support a massive increase in aid if there’s leadership on the issue – nearly 90% of the US public support food aid (it depends how you frame the question). Also, broad support was garnered for The Marshall Plan, The Jubilee Drop the Debt Campaign and The Emergency AIDS campaign.

Fourthly – There is evidence that Aid can work:

Besides the usual green revolution and eradication of smallpox examples Sachs also cites…

  • The Global Alliance for Vaccines and Immunisation
  • The Campaign against Malaria
  • The Eradication of Polio
  • The spread of family planning
  • Export Processing Zones in East Asia
  • The Mobile Phone Revolution in Bangladesh

Five – the West can easily afford it 

Sachs points out that the richest 400 individuals incomes stand at just under $70 billion dollars, and the first two years of the Iraq War, which was an unexpected cost, was $60 bn a year, so basically yes. He also recommends a 10% additional tax on the richest for the purposes of development.

(4) Sach’s view of why Aid Doesn’t Always Work – Poor Countries Aren’t Getting Enough Aid! (**This can be used to criticise Dambisa Moyo”s views on aid. )

Poor countries are receiving no where need enough aid to make a difference to development – To demonstrate this he uses the West African Water initiative as an example – Worth $4.4 million over 3 years, but this only worked out at less than a penny per person per year, no where near enough to make a difference.

He also cites the case of Ethiopia – in 2003 it would have needed approx $70 billion to kick start development – half for health and most of the rest split between food productivity and infrastructure. It was then receiving $14 per head per year which was well short of the money needed. At the time the IMF acknowledged in private that this was not sufficient but in public made no mention of this.

Another way of outlining how limited current ODA is lies in the following:

in 2002 of $76 billion total assistance….only $12 billion amounted to what might be called development support to the poorest countries (most of the rest was emergency aid, with $6 billion being debt relief and $16 billion going to middle income countries.

As a result of this countries often don’t get anywhere near what they need – Sachs cites Ghana as an example – it requested $8 billion over 5 years in 2002 and got $2 billion. His point is that $2 billion is no where near enough to kick-start development.

(5)) Myths about why aid doesn’t work (**these could be used to criticise Dambisa Moyo)

He actually lists 10, but I’ve only included the first three!

Myth One – Giving aid is ‘money down the drain’

It is common to hear Americans bemoaning the fact that there is nothing to show for the amount of aid given to Africa. This is, however, unsurprising. The total amount of aid per Africa works out at $30 per head, but of this $5 goes to consultants, $4 was for food aid, $4 went to servicing debts and $5 for debt relief, leaving $12 per African.

Of the $3 of US aid to Africa, approximately 6 cents makes it on the ground African projects.

Myth Two – Aid programmes would fail in Africa because of backward cultural norms

Sachs points out that he frequently encounters prejudiced views based on African stereotypes even among those in senior positions in the aid industry – Such as the idea that Africans don’t understand western concepts of time. He dispels this by simply drawing on his own experiences telling him different things.

Myth 3 – Aid won’t work because of corruption

Nearly all low income level countries have poor levels of governance. However, corruption is not a reason to not invest in a country because the causal relationship runs in the direction of wealth reduces corruption. This is because when incomes increase people have more of an interest in keeping governments in check and there is more money to invest in good governance through better communication systems and a more educated civil service for example.

Looking at cross national comparisons reveals two things – Firstly that African countries governance levels are similar to similarly poor countries. That is to say that governance is not especially poor in Africa, and secondly there must be something else going which results in poverty other than poor governance – there are still some very poor countries in Africa with good governance yet high poverty, he cites Ghana as one such example.

Statistical indicators reveal that African countries grew at 3% percentage points slower than countries with similar levels of governance and income between 1980 and 2000. The reason for their low growth is geography and poorly developed infrastructure.

(6) A more ambitious approach to Development Aid

Ultimately Sachs believes we should be spending more on aid rather than less!

Sachs outlines ‘a needs assessment approach’ to development which basically involves identifying a package of basic needs, figuring out the investments required,, figuring out what poor countries can pay and then working out the finance gap which is what rich countries should meet. The list of basic needs includes such things as:

  • Primary education for all children, including teacher pupil ratios
  • universal access to antimalarial bednets
  • I kilometre of paved road per person
  • nutrition programmes for all vulnerable populations
  • access to modern cooking fuels
  • Access to clean water and sanitation.

To establish these poor countries would need $110 per person per year for 10 years (calculated by the UN for five countries – Bangladesh, Ghana, Cambodia, Tanzania and Uganda.

Of this Sachs believes that households and poor country governments could pay $10 and $35 dollars respectively meaning that $65 per person per year is the finance gap

Who should pay? Basically it breaks down like this…

USA – 50%
Japan – 20%
UK, Germany, France, Italy – 20%.

Related Posts (contains criticisms at the end )

Summary of chapters 1-4 of Sach’s End of Poverty

Does Aid Work? The Aid Audit

Does Aid Work? The Aid Audit:

Below is a summary of this World Service Podcast from 2015

Intro

‘Fifteen years ago, German journalist, Ulli Schauen helped compile a book of the top 500 global aid programmes… they ranged from schools for Maasai nomads to support for organic farming to training for volunteer sexual health workers.

The question is did they succeed or fail? Ulli travels to Kenya to see how the projects in that country fared. Ulli sets out to find if Aid really does make a difference.’

(These projects were all related to the original Millennium Development Goals and the folllow ups are here – one author’s blog – The Aid Audit: Development Projects Revisited After Fifteen Years

International Aid money has helped all of the projects below….

Kenya
Kenya

Project One – OSIGILI

in 1995 the Laikipiak Maasai formed an organization called OSILIGI (which means ‘Hope’.)

In one of the first projects OSILIGI organized reading and writing courses geared to the nomadic life. In April, August and December, when the nomadic herdsmen are settled, a teacher comes to the village. During these weeks children have concentrated lessons. This made-to-measure education is considerably cheaper than state elementary school. In 4 years, OSILIGI has reached 380 children with this programme, mainly from poor families.

Eco-Tourism - Marginalising the Maasai?
Eco-Tourism – Marginalising the Maasai?

However, the broader issue OSILIGI campaigns for is to establish land rights – to pasture and watering holes, and here they appear to have lost. The Maasai still have no formal rights and their land, and thus way of life, is under threat from agribusinesses and eco-tourism and in the programme we discover that the Maasai live amongst miles and miles of fences – which fence off private farms – one farm being as large as the island of Malta, which houses shipped-in Rhinos for eco-tourism, but this leaves little room for the Maasai.

Osigili seems now to be focussing on the education aspect, but the land rights issue has been taken up by another organisation – IMPACT. It is possible that more progress will be made in this area in the future.

Project Two – A Voucher System for Health Care

In the far West of Kenya the German Government Trained volunteer health advisers – 20 000 community health workers for 10 years. Unfortunately this terminated in 2006 and so no evaluation or final report can be found, the argument here, however, is that a lasting legacy

The German government now funds a voucher programme for the poor where they can use vouchers to receive free or subsidised contraception, maternal health services and HIV treatment.

Through the voucher programme local (privately run) hospitals receive $50 for maternal treatments and $12 for AIDs screenings (from the German Aid fund, they don’t get state funding) – 3/4s of the money goes on medicine and food, but the rest is available to allow for hospital expansion.

To give an example of how it works – one woman is interviewed who is HIV positive, and giving birth in the hospital meant that the infection was not passed on to her two children.

Despite the above, Kenya still failed to reach two of its MDGs -reducing infant mortality and improving maternal health.

But German Government trying to influence Kenyan health policy into the bargain. Germans wand to promote health insurance, Americans want to promote other issues – donors don’t co-ordinate their programmes.

Project Three – The Matinyani Business Cooperative

mat

This is a cooperative of 4000 women, who initially set up a library, primary school and a health centre. They also established a range of small businesses devoted to weaving, water, candlemaking, bakery.

However, all of this stopped working years ago… 75% of the initial money went into other people’s pockets – so they couldn’t pay workers or for materials to keep the projects going.

However, what these women learnt in the early days of this project allowed them to establish their own businesses, many of which are today successful and export to other countries.

Project Four – Environmental Protection on Lake Victoria

darwins-nightmare1

Lake Victoria is heavily overfished and polluted.

This projects aims were to build water treatment plants and limiting the spread of the water hyacinth. There are laws in place about catch size (enforced by the mesh size of nets). However, it seems that everyone is happy about breaking the law and the aid-funded environmental organisation doesn’t seem to be enforcing the rules.

The World Bank Project labelled this one as unsatisfactory.

Project Five – A Foot Pump for Water

An Australian company called Kick Start (originally known as Aprotec ) which focussed on developing just one product – a small, foot operated water pump, claims to have lifted almost one million people out of poverty. Aid has been essential in this. The CEO says that it is not profitable to develop such products for people – it’s high risk, low return, and high cost – so it’s a market failure – thus subsidies in the form of International Aid, with this money going mainly into Research and Development and marketing (radio ads).

The pumps themselves are sold for $130 – and they have sold 250 000, which means about 900 000 will have been lifted out of poverty. We visit a tree nursery to see how this works – where an employee is using the foot pump (like a step machine) to pump water to water the young trees – this has allowed the company to grow a lot more trees and it is now much bigger than it used to be.

Question – Has development aid worked in the above five cases?

The programme finishes off by noting that we see all of the classic problems associated with Aid in the above examples, but it is the positive impacts which stick in his mind, especially the fact that when official projects collapse, the people who have gained skills carry on campaigning in different ways.

Find Out More…. There are another two episodes in the series if you wish to listen further!

Why I’m running a half marathon to raise money for Water Aid

Water Aid works in 23 countries in Asia and Sub-Saharan Africa, with a total of 606 staff. Its mission is to ‘transform lives by improving access to safe water, hygiene and sanitation in the world’s poorest communities’

To give you an idea of what water aid does – watch this video

According to this 2010-11 annual review – Last year they spent about £50 million – of which £32 million went to water and sanitation delivery service, £11 million on fundraising and £6 million on governance. You might criticise the £11 million on fundraising, but given that nearly 3/4 of their income comes from donations (the rest mainly from grants – which still need to be chased) – one imagines that without this, they’d have considerably less to work with…

The stats really add up – Last year Water Aid  helped 1.5 million people gain access to clean water, and improved sanitation for 1.6 million people.

I think this type of aid is crucial – the UN recognises the importance of aid for clean water and to improve sanitation – A few facts to further convince you….

Incidentally, I’m raising money for water aid by running a half marathon this coming Sunday – You should sponsor me – £15 saves a life!