Why Foreign Aid Doesn't Work

When I raised this topic in the past I noted how I oppose foreign aid to governments. In general, it is used to foster corruption. Salon has an interesting interview with the author of a recent book on the topic.

"In aid, 95 percent is implementation. Five percent is raising enough money from rich-country donors. Bob Geldof and Bono are talking about solving the 5 percent. The 95 percent has a long chain of poorly motivated and sometimes corrupt actors in between money and poor people. Donor bureaucracies like the World Bank or IMF are even less accountable than Blair and Bush because they don't have to face election. They're operating in a place that's hidden from view. I don't want to be too cynical. I think there are a lot of well-meaning professionals at these places. I am more cynical about the management, who I think just like to make a big splash in the media. The donor bureaucracies only have incentives to move the money. If it isn't spent, that will be a scandal, but what happens far away is never known."

"Of course, there are tons of problems on the receiving end. These are fragile states with often-poisonous political situations, conflicts, corruption, patronage politics. Health workers, for example, are appointed for political reasons and don't have much incentive to get medicine to children. Drugs disappear on black markets."

Closer to home, given my stance on foreign aid, I have no problem with the U.S. and Europe withholding foreign aid to the Palestinian Authority. The foreign aid was used to build the corrupt patronage machine of Fatah. Does Hamas need the money to do the same? Foreign aid should have never have gone to the governments to begin with. But to be consistent, the U.S. and Europe should cut off all foreign aid to Israel, as well.

The arguments used against giving aid to Hamas led PA, apply with equal force, if not more so, to Israel. If there is a rogue nation out there, it certainly is Israel. Just one example: Israel's withholding tax revenues it collects for the Palestinian Authority is out and out theft and a clear violation of treaties it signed. But as always, Israel can break international law with impunity, since it has the unequivocal backing of the U.S., another rogue nation that does whatever it pleases, and has the muscle to get away with it.

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