There are many aid pessimists, like me, who would much rather be aid optimists. However, the empirical evidence on the effectiveness of foreign aid is depressing, especially in poor countries where aid constitutes a significant share of GDP, as in Bolivia and Nicaragua (1).
Any particular aid project is unlikely to actually hurt the poor – at worst it may be ineffective and a waste of time and money. However, a continuous series of thousands of aid projects have the capacity to change the behavior of both individuals and government, and often in unanticipated and undesirable ways.
A government artificially inflated by foreign aid have the resources to hire more skilled people and pay them relatively attractive salaries, which in itself may be good, since the country needs good doctors, inspiring teachers, and non-corrupt public administrators. However, the unintended side effects are more inequality (because the relatively rich skilled workers benefit much more than the uneducated poor who are mostly self-employed) as well as a brain drain from the private productive sector.
If the public sector, including the foreign aid sector, pays far more attractive salaries, provides better benefits, and requires shorter working hours, then the private productive sector will be systematically starved for critical skilled workers. Skilled people will spend their efforts chasing coveted public sector positions and short term consulting contracts rather than setting up sustainable, productive enterprises that could help the country grow (2).
Once the skilled people have fallen into that trap, it is difficult to get out of again, as both their education and their work experience are targeted at managing aid projects and writing reports, rather than producing actual goods.
The poor are unlikely to fall into the same trap, as they don’t have the skills to get hired by the public sector/aid community. However, in areas with a heavy presence of aid projects, the poor have an incentive to lay back and just participate in whatever project comes along, instead of actively looking for ways to improve their lives.
Even the projects designed to empower the poor, often have the opposite effect. Due to the promise of a free lunch (literally), the poor attend a lot of workshops where they are told everything from how to shit to how dangerous it is for the planet if they fell a few trees to grow crops to feed their family.
They are told a lot about their rights, but little about the corresponding responsibilities. They get the impression that they have a right to receive free education, health services, electricity, water, land titles, roads, and safe jobs without having to contribute anything in return because there are plenty of “free” resources available from rich countries and from the sale of natural gas.
The usual responsibility, creativity, cooperation and mature behavior generally necessary to live and progress may easily be suppressed if there is an easier route of a life in a child-like state, where everything is provided for you and nothing is expected of you. If people are treated like ignorant children, they start behaving like ignorant children. If bad, irresponsible behavior is tolerated, such behavior will continue. Bolivia, it seems, is full of spoiled children – most of them adults – who have not overcome the stage of stubborn demands on their overpampering, overprotective, rich parents (the aid community as well as mother nature).
Of course, real children should be treated as children, receiving adequate nourishment, stimulating education, treatment when sick, and an ample spectrum of challenges and opportunities to develop responsibility, creativity, and social behavior. Aid projects targeted at children generally do not have the same adverse and distorting effects as aid projects targeted at adults, since children have the right to a child-like life without having to work hard to cover basic necessities.
So, back to the title question. Does your aid help the children in Bolivia grow up to be healthy, responsible, creative, dynamic, and socially responsible individuals? Or does it degrade the adults to the state of a spoiled child who only demands and receives and never contributes to the sustainable development of the country?
Know of any other examples of ways aid projects can have negative impacts on poor populations? Leave a reply below.
(*) Director, Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail: email@example.com.
(1) See, for example, the aid effectiveness studies of INESAD.
(2) See “Labor Mobility in Bolivia: On-the-job Search Behavior of Private and Public Sector Employees.”