Overseas Aid? No. Overseas Trade

One of the more trenchant criticisms levelled at David Cameron’s so-called “austerity” (if only….) policies is that, despite cuts visited on functions like defence and law-and-order, the three areas of public spending which appear immune from reined-in spending are the unreconstructed NHS, the even more unreconstructed EU, and overseas aid.

 The latter has always appeared to bear a charmed life under the Cameroons, but this seems mainly because of the political message and brand detoxification potential that’s assumed to lie in it than any hard-headed assessment of its benefits to the recipients. Because it’s increasingly questionable, not merely whether government-distributed largesse is justifiable in the current economic climate, but whether it’s the effective means of achieving its stated objectives in any event.

 Firstly, there’s the iniquity of maintaining a commitment to the UN-designated target of turning over 0.7% of GDP, when we are making spending sacrifices in so many other areas. We have cuts to child benefit, defence and disability entitlements, but the foreign aid budget is ballooning, from £7.8bn in 2010 to £11.5bn by 2015. Anecdotal evidence from DfID suggests, not only that officials are struggling to give it away fast enough, but that up to £0.7m has been spent on consultants’ fees for advice in deciding where and to whom it should be directed. The House of Lords recently, noting that when a similar scale of budget increase was applied to the NHS in the early 2000s much of the increased spend went on doctors’ salaries, raised legitimate concerns about whether proper accounting controls were followed when budgets were rising so fast.

Secondly, when even Lord Lipsey, former chairman of the Fabian Society, claims that vast increases in aid threaten to backfire by encouraging corruption and inefficient spending, he’s correct: the greater the amount of aid channelled via government or NGO/quango bureaucracies, the greater the risk that aid goes astray, and ceases to reach the intended beneficiaries to the greatest effect. Governments, for example, are responsible for providing healthcare in much of Asia, yet many have been showered with aid and the quality is still atrocious: The Lancet has reported how dozens of less-developed countries lie about vaccination rates, to extract more funds from the UN.

As former World Bank official Prof William Easterly suggested in “The White Man’s Burden”, the current aid model, whereby governments of affluent democracies hand over large sums of money to the governments of dictatorships or one-party states, in the hope they will spend the money on their populations (rather than limousines or warfare) has run its course. Anyone who disputes that should read Dambisa Moyo’s seminal work “Dead Aid” and ponder this fact: if the amount of aid directed at less-developed countries was the key factor in ensuring their move away from poverty, then the countries of sub-Saharan Africa should by now be among the richest and most prosperous on the planet. Clearly the model has not worked.

Thirdly, forcing aid-giving via an extractive tax system carries the risk of discouraging private, voluntary charitable giving by more than the equivalent of the aid raised in tax. We saw an example of the Coalition’s muddled thinking on this earlier this year in the proposal to end the tax exemption for gift aid and charitable giving, the rationale for which was quoted – bizarrely in the circumstances – as a need to maximise revenue in order to meet overseas aid commitments. The storm of protest from charities that this would severely restrict their donation revenue suggests that the risk of forced aid via tax curtailing charitable giving is a very real one. Apart from which, penalising voluntary charitable donations to recipients of the donor’s choosing, so as to facilitate tax-funded aid to recipients of government’s choosing, is something from which anyone even slightly inclined towards limited government and individual freedom should recoil.

The most effective way of distributing lasting benefit to the poor of less-developed countries isn’t, in fact, aid but trade. The current recipients of aid are no different to the rest of us: they want, not to remain merely at, or just above, current or subsistence level, but to get richer: and the way to ensure that is open markets and free trade, backed by property rights, enforceable contracts, good governance and the rule of law.

The most effective single thing the UK government could do to promote its professed aid objectives is to bring about the collapse of the European Union’s Common Agricultural Policy. Few policies of the developed world have as malign, poverty-perpetuating effects on third world producers, especially in Africa: not only does the protectionist CAP close off European markets to Africa’s produce exporters by imposing external tariffs or denying them access outright, but it then compounds the injury by dumping its own production surpluses on those same countries, undercutting producers’ local markets. Instead of shutting out Africa’s green beans from our markets, we need to welcome them: that’s the way to make African growers richer, and spread prosperity around so that it grows, like their produce, ground-up: not reliant on the arbitrariness and capriciousness of bureaucratic distribution, top-down.


  1. The UN target is an absolute farce. Not one country is getting a fraction of the way towards it except our stupid Government and they persist desipite evidence it is diapearing into the pockets of Dictators, funding wars, space programmes, arms purchases (from foreign governments-not us), projects advertising the EU and even building luxury hotels and theme parks.After the calamitous Mitchell, Greening has made a start. She should be allowed to cut none essential spending without having to find somewhere else to spend the money

  2. Fair enough. I largely agree with this, but, and it is a big but, what if they do not have anything to trade. What if they can give nothing of value? Is there a case for this?


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