Since the early 1990s, many have analyzed, criticized, lamented, and protested five decades of large-scale development aid gone disastrously wrong. They have made two main arguments. First, many low-income countries are hobbled by corrupt governance and uncompetitive markets. Under these circumstances, development aid mostly benefits the rich and not the poor. Second, for various unfortunate reasons, donor agencies tend to favor development projects that are overly expensive and not sustainable. These profound critiques have come from both the political right and the left, from people and organizations in the South and the North, from academics and street protesters, and from people within and without the international donor community.
Yet as if nothing had been learned, large-scale financial assistance for poor countries has suddenly resurfaced on political agendas everywhere. Indeed, in recent years, government leaders around the world have been calling for a tripling of development aid. In our view, these plans should be abandoned as they suffer from the same weaknesses as the much-maligned aid efforts of yesteryear. Implementation of these plans would wreak havoc on poor countries.
The Latest Plans to Save the World
In signing the 2002 Monterrey Consensus, governments around the globe pledged to achieve the Millennium Development Goals. These entail that by 2015, the number of people who live in extreme poverty--the 1.1 billion people with less than US$1 per day--must be halved. How this should be achieved is detailed in three new publications: Investing in Development by the United Nations Millennium Project (headed by Columbia University economist Jeffrey Sachs), Sachs's latest book The End of Poverty, and Action for a Strong and Prosperous Africa by the Commission for Africa (established by British Prime Minister Tony Blair). According to these publications, the government of each poor country should draw up a National Poverty Reduction Strategy, which spells out the investments in hospitals, roads, schools, canals, housing, water supply, fertilizers, and so forth needed to reach the Millennium Goals. Rich countries should then foot the difference between what is required and what poor countries can afford.
Though few strategies have been finalized, the UN Millennium Project and the Commission for Africa claim to know what will be necessary. They prophesize that, in the next decade, poor countries need to invest US$110 per person per year to halve extreme poverty. They also foresee that households in these countries can afford to invest US$10 per person per year and that their governments will have US$35 per capita at their disposal from domestic coffers. The difference, US$65 per person, will therefore have to come from rich countries, whose donations are to be channeled through the World Bank and various UN agencies. Thus, Sachs and colleagues, as well as the Commissioners for Africa, are calling for affluent countries to nearly triple the governmental budgets of destitute countries. According to their calculations, this would entail a similar threefold increase of the development aid given by rich countries over the next 10 years. By 2015 developed countries should have increased their development assistance from the current average of 0.25 percent of Gross National Income (GNI) to 0.7 percent of GNI.
These are not calls from the political wilderness. Many governmental and opinion leaders have lent their voices to these plans, including President Jacques Chirac of France, former Chancellor Gerhard Schroder of Germany, UN Secretary-General Kofi Annan, rock stars Bono and Sir Bob Geldof, and Nobel Peace Laureate Nelson Mandela. It looks as if they will put their countries' money where their mouths are. At the G8 meeting in Scotland in July 2005, as well as at the UN World Summit in New York in September, the governments of many developed countries pledged to double their development assistance over the next five years. …