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Can Foreign Aid reduce poverty?

By Jeffrey Sachs, from the Earth Institute of Columbia University (YES)

& Georges Ayittey, from the American University (NO)

Congressional Quaterly, 2009

Presentation by Stéphanie Carret08.12.09

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The planning for today

1. Review of the paper: main ideas1. Jeffrey Sachs answers YES2. Georges B.N Ayittey answers NO

2. Analysis of illustrative graph3. What questions can we raise?

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The Debate

• Can foreign aid reduce poverty? 3 billion people live with less than $2/day Millions of children lack of lifesaving

immunizations 1 billion people lack access to adequate water

supplies Important improvements in East Asia…

• …but extreme poverty increased in Sub-Saharian Africa

The main question always asked:• How can extreme deprivation be seen next to material

excess?

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• Principal multilateral institutions: UNDP, the World Bank, IMF & OECD’s DAC aid

• US aid started with the Marshall Plan in 1947 & in the 1960’s, USAID was created Lately, this aid has been mainly used as an impediment to

terrorism (Afghanistan & Iraq)

• UN Dev.Millenium Goals set up in the 2000 Summit: goals have to be reached by 2015 One important commitment: wealthy nations have to

contribute with an aid = 0.7% of their GNI: not reached• 0.7%= for the UN MG + emergency relief & post-reconstruction

• Often, aid motivated by internal politics Disagreements on aid: just an instrument of foreign policy?

What type of aid are efficient? What are the other forms of economic activities providing development?

The Debate

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The UN Millenium Goals

1. Eradicate extreme poverty and hunger2. Achieve universal primery education3. Promote gender equality and empower

women4. Reduce child mortality5. Improve maternal health6. Combat HIV/AIDS, malaria and diseases7. Ensure environmental sustainability8. Develop a global partneship for

development

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• His answer is based mainly on the role of US Aid• For the past 50 years, reducing poverty with aid has been

successful, except in sub-Saharan Africa Green Revolution in the 1960’s Decrease in diseases burdens Family planning support: population decrease Manufacturing successes (Thailand, Korea, Malaysia…)

• Development Assistance: a tool for the promotion of economic development Formed of public and private contributions Aid from public sector: Official Development Assistance (ODA) Best successes came from Public-Private Parterships

(PPP’s)• Ex: Green Revolution in India

Aid as a complement and often as a precondition for market forces: International Trade and FDI inflows: « Aid for Trade »

Jeffrey D. Sachs: YES (1)

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• What works and doesn’t work with ODA Usual debate: where is the correlation between aid & growth 6 interventions points yield development successes

1. Based in powerful & low-cost technologies2. Easy to deliver3. Rightly adapted to the scale4. Reliably funded5. Multilateral6. Specific inputs, goals and strategies (+LT indirect goals)

• 21st Century: modernizing US D.A1. Goals: MDGs + focusing on the poorest regions2. Techologies: set of efficient core interventions3. Delivery systems: auditing against corruption4. Financing: donor aid should be half-half for bilateral and

multilateral initiatives: critical need in infrastructures

Jeffrey D. Sachs: YES (2)

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• Structure of US D.A Today, USAID part of Department of State

• Too focused on SR foreign policy emergencies More efficient: creation of DfISD

• Regrouping USAID, PEPFAR and other initiatives…• Regrouping goals and talents

• Financing of US D.A in next administration Worldwide official D.A = $100billion (1/4 for

Africa)• Not enough to achieve the MDGs: pledges not

fulfilled• CSQS: difficult for developing countries to count on

LT reliable aid in order to start investments Fragmented aid

Jeffrey D. Sachs: YES (3)

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• US recognized that aid must be organized as a multilateral effort with common goals

• In the US: 3 pillars of national security are Development ($22.7billion), Defense ($611billion) and Diplomacy ($9billion): 1st pb of disproportionnality

• US Aid allocated to bilateral and multilateral aid• 2d pb: 3/4 of the aid is devoted to emergencies

and US political aims• 3d pb: US has the lowest ODA contribution, as

a % of GNI

Jeffrey D. Sachs: YES (2)

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Graph Analysis (1)% of total population living on less than $1.08/day,

1981-2001

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Graph Analysis (2)Net official Development assistance given by OECD

Development Assistance Commitee (DAC), 1960-2000

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Graph Analysis (3)Net ODA in 2007 - amonts

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Graph Analysis (4)Net ODA in 2007 - in % of GNI

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Gerges B.Ayittey: NO (1)

• The authors focuses on the case of Africa• Africa remains a big paradox: huge potential

but weak economic progress Seems to be a 10-year-attention-deficit-cycle Pledges of erase part of the $350 billion debt $25 billion aid per year ($450 billion since 1960)

• The shape of aid for Africa has lost rationality in favor of post-colonial guilt

• Africa does not need aid: it already has the ressources and needs political and economic reforms

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• Africa’s leaky begging bowl « Aid in Africa is like pouring more water in a bucket that

leaks horribly »: FDI inflows and exports revenue effects are canceled by imports, corruption and civil wars

Need for Africa to look in its territory to build capital formation with a strong continental union

• Need for $50billion annually for capacity building Africa mustn’t rely on the outside Capital flight to foreign banks (usually illegal revenus &

corruptions & suspicious businessmen): $20billion/year• African leaders may have stolen $140billion during last decades• African Report: $148billion lost annually because of corruption

$15billion/year spent for arms purchase and army maintenance

• Losses with civil wars Difficulties for Africa to feed itself: huge imports

Gerges B.Ayittey: NO (2)

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• Monumental leadership failure Aid business as a massive fraud, known even by Western

governments: strong example of Nigeria Post-colonialism leaderships: dirigism and dictatorships

enhanced corruption and one-party states: governments were no more institutions, risk of « coconut republic »

• The richest: most powerful and corrupted, rarely judged

• Acrobatics on reform In African countries, reforming has a different meaning Out of 54 countries: 16 democratic, 8 economic successes

• Better ways of helping Africa Smart aid: empowering of civil society (aid monitoring i.e) Needed institutionnal tools: independent media, judiciary, electoral

commission, central bank; efficient civil service, neutral armed force : NEED FOR POLITICAL SPACE. Ex: Egyptian judge

NGO’s cannot always interfere: role of emigrated people (paper) Distinction between goverments and people: a new Solidarnosc?

Gerges B.Ayittey: NO (3)

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Table Analysis (1)Causes of Africa’s Loss of Money

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Debate

• Is the development improvement in Asia really due to aid Isn’t it more the cultural & geographical

particularities of the region that promoted economic & social development?

• To what extent can colonialism be blamed for Africa’s woes? (civil wars, corrupted elites, dictatorships, import dependency for food…)

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Questions?

Thank you.