Good News for the Bad News about International Aid

By Bengt Nyman from Vaxholm, Sweden (810_5161 Angus Deaton, economics) [CC BY 2.0       (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

By Bengt Nyman from Vaxholm, Sweden (810_5161 Angus Deaton, economics) [CC BY 2.0       (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

© 2016 Robert Osburn

Nobel prize winner Angus Deaton sounds like your proverbial wise old grandfather in The Great Escape: Health, Wealth, and the Origins of Inequality (2013).  I am the son of a hard-working blue-collar worker from Michigan, and so I appreciate someone who hasn’t forgotten his working-class heritage in England’s Yorkshire region.  Professor Deaton writes without flourish, relentlessly drilling down on economic data about health and wealth across the globe, but you get the sense that he is trying to balance the good news (there is more of it than most of us realize) with the gentle warnings that everything could go wrong, and, yes, it might.  Grandfatherly advice.

He has some really bad news, especially so in this Christmas season of giving: Most international aid not only does not work, but it is harmful to countries who receive it.  Before you slam shut your checkbooks and stuff the credit cards back in your wallets and build an emotional moat around your Christmas-giving heart, let me explain why he is right but also what he misses (hint: The Good News).

He is not the first to bluntly declare that most international aid, the kind that flows from richer countries to poorer countries, does the opposite of what most of us think it does.  We picture aid (distinct from relief, which is designed to provide immediate help during crises) being used to build dams, schools, hospitals, electrical grids, and so forth.  But the reality is often very different: When outside “actors” (anyone who wants to solve the problems of other countries) bring their suitcases of money to poor countries, they are in essence giving big free passes to the leaders of those countries. 

Why? you ask.  Prof. Deaton drills home the point that citizens can make demands upon their leaders who are, thus, more incentivized to meet those demands. By contrast, international aid does an end-run, meaning that leaders are incentivized to satisfy international donors rather than the people they claim to govern.  That’s the best case.  In fact, more notoriously, political leaders find a way to get big personal cuts out of the aid dollars (“skimming”), leaving far less to actually build that road to Timbuktu.  To sum up his point: If citizens are taxed, they will insist on outcomes matching their taxes.  “It is the local people, not the [international] donors, who have direct experience of the projects on which aid is spent and who are in a position to form a judgment” (p. 299). Amen.

So, does giving money to private organizations (NGOs) get around this nasty problem?  Think again.  Political leaders know how to squeeze the NGOs, which are directly or indirectly taxed so as to enrich themselves, most certainly not the poor people the NGOs have come to help.  This is, in essence, why the Zambian economist Dambisa Mayo nearly screams in her book Dead Aid (2010): “Stop sending aid to Africa. You Westerners end up enriching our leaders who only buy bigger guns in order to more successfully oppress our poor!”  Economist William Easterly has also written some masterly volumes that draw very similar conclusions, and, in the Christian context, Brian Fikkert and Steve Corbett took the Christian aid community by storm with their brilliant and very useful book When Helping Hurts: How to Alleviate Poverty without Hurting the Poor and Yourself (2nd ed., 2014).  At the other, and very wrong, end of the spectrum is Professor Jeffrey Sachs, about whom I have written and who deeply believes in what Deaton calls the” hydraulic theory” of aid: intelligently pumping enough money and supports from rich countries to poor countries, creating scientifically designed aid projects, and---voila! ­---you are on your way to alleviating poverty.

Professor Deaton is not, however, an international aid Scrooge.  He does believe that some initiatives, like creating life-saving drugs and freer trade (which, unfortunately, will run into a buzz saw of opposition from President-elect Trump), can help alleviate some poverty.  He even sees the power of skills development and education, and, in a passage that I can’t help but celebrating (in view of our mission in the Wilberforce Academy), he writes on p. 324 that we should:

…provide undergraduate and graduate scholarship [for study in] the West, especially for Africans. With luck, these students will develop in a way independent of aid agencies or of their domestic regimes.  Even if they do not return home, at least at once, the African diaspora is a fertile (and internal) source of development projects at home.

Now, to what Prof. Deaton simply fails to see, as do most development economists: the role of personal virtue, especially among political leaders, in determining aid outcomes. Elsewhere in the book, he notes that Western countries, without any outside aid, developed healthy, thriving economies, and never asked for or got help. Today, these economies are accompanied by large middle classes where corruption is relatively minimal and political freedom is maximized. 

What could produce these conditions that promote human flourishing? Geography? Natural resources?  Colonialism?  There are problems with all three explanations, but what most miss is what German sociologist Max Weber saw so clearly: the virtue-producing power of the Gospel. His Protestant Ethic and the Spirit of Capitalism (1905) is certainly the most famous expression of this argument.  The late Harvard University economic historian David Landes also embraced it in his monumental The Wealth and Poverty of Nations: Why Some Are So Rich and Some Are So Poor (1998).  When honesty replaces lying, when you can trust someone else to honor their contract with you, and when respect for property replaces stealing, you have not only the product of Christian faith but also the recipe for a thriving economy.  We want our Wilberforce Academy mentees, many of whom were raised in societies only recently touched by the Gospel, to learn this and to teach it as redemptive change agents in their societies.

No, Santa, we don’t want to become Christmas Grinches.  But, we are opening our eyes about the harm of international aid, while simultaneously doubling down with generous support for initiatives that promote the virtue-producing Gospel of Jesus Christ.

We are, after all, celebrating the birth of the virtuous King of Kings. That’s Good News for the nations!

*Note: To those who know of the bloody narratives of Christians from opposing tribes who kill each other (e.g., in Northeast India’s Manipur state or in South Sudan), you can rightly question my claim that the Gospel is virtue-producing.  I will address that in a Winter 2017 blog.