Is foreign aid on way out?

Almost since it began, foreign aid in its usual forms had started being branded as a self-serving “racket” by its most strident critics. Kinder ones point out its often-negative effects, or at least unclear benefits, on recipient nations. At the other end are people like economist Jeffrey Sachs who argue that aid levels have been too low, and large increases are needed if world poverty is to be effectively reduced.

The election of Donald Trump as US president is seen by many to lead to a reduction, if not elimination, of official American assistance to other countries, which traces its beginnings to the post-World War II “Marshall Plan” to help rebuild Europe. In his “America first” campaign spiel, Trump argued: “It is necessary that we invest in our infrastructure, stop sending foreign aid to countries that hate us and use that money to rebuild our tunnels, roads, bridges and schools….” One would thus expect a Trump presidency and a Republican-controlled Congress to cut government spending on foreign aid. The extreme scenario would be abolition of the US Agency for International Development (USAID), or its absorption into the Department of State, an idea that Republicans have been proposing over the years. Conservative governments had already done the same in Canada and Australia, whose specialized aid agencies were folded into their Department of Foreign Affairs, Trade and Development and Department of Foreign Affairs and Trade, respectively.

Since the early days of official development assistance (ODA), with the establishment of the United Nations, World Bank and International Monetary Fund, aid was seen as a means to help poorer countries catch up with the rich ones. Industrialization and modernization following the example of western countries were the professed goal of aid for many years since its colonial roots. The underlying premise seemed to be that with more roads, ports, irrigation and schools, people’s lives will improve. It may have had logical appeal, but was not necessarily realized in practice, especially since governance and corruption were not issues of interest to aid donors back then. In the 1960s, donors began to use aid to more directly target improvement in the human condition, with programs focused on health, education and supporting other basic needs. While studies on aid effectiveness had shown that weak governance or policies could render aid ineffective, it was not until the 1990s that donors began to address mutual accountability between donor and recipient, ownership by recipients of aid programs, anticorruption and transparency, and good governance. In 2005, the Paris Declaration signed by more than 100 countries, donors and donees alike, formally resolved to address these issues. The Accra Agenda for Action in 2008 brought in civil society organizations in the effort to pursue aid effectiveness.

Without a doubt, aid can improve lives, especially in a calamity-prone country like the Philippines. Even so, aid has also been an effective political and commercial tool that encourages allegiance and sells ideologies, not to mention products and services. Indeed, this was why good governance had not figured strongly in the donors’ agenda at the outset, and donor countries were accused of supporting authoritarian regimes to push their own strategic interests. Studies also show that the financial backflows to donor countries from aid funds have been substantial, especially where aid is “tied” (i.e., to the products and services of the donor country), as is typically the case with grants. Donors make no pretenses about how aid is a door opener for wider strategic commercial interests. If China is being criticized now for its “neocolonialist” (and corruption-blind) generosity to poor countries in Africa and elsewhere, it is because the Chinese have also discovered the tremendous strategic payback of aid.

Aid is, in other words, a win-win proposition, and it’s up to either side to make sure the win-win is not a lopsided one.

So, given all that’s been happening, is foreign aid on the way out? I doubt it.

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