[2] In public discussions of aid effectiveness, the general aim is usually assumed to be boosting the development of recipient countries and, hence, the well-being of people living in them.
[5] Such motives – which may involve strategic alliances, diplomatic trade-offs, commercial advantages and other political benefits[6] – are nowadays usually discussed as obstacles to aid effectiveness rather than alternative aims.
[8] When US economic aid shifted from Europe to poorer countries – as initially signalled by President Truman in Point Four of his 1949 inauguration speech – the strategic framework was one of building a "free world" in the face of communist threat.
[9] A 1957 Senate Special Committee report admitted it was impossible to prove how effective US aid since World War II had been, but considered that, without it, several countries might have been lost to the Soviet Union's sphere of influence.
It further suggested that this economic transformation, channeled properly, could produce a free and democratic type of society by providing: a constructive outlet for nationalism; a social solvent by interesting the urban elites in a dynamic agricultural sector; a stimulus for the emergence of authentic leaders; incentives for the attitudes of political responsibility needed to support democratisation; and feelings of international solidarity.
At this time Chenery and Strout pointed to the Philippines, Taiwan, Greece and Israel as examples of countries that seemed to have achieved self-sustaining growth rates with the help of aid.
Widespread famine in Biafra during the Nigerian Civil War (1967–1970) led to greater NGO involvement in events like the Biafran airlift being attempted for the first time.
[25] The main harmful effect was that aid channelled resources through governments, enabling inefficient state planning and producing a general "politicization of life" in which the population shifted its activities to the political sphere rather than the economic one.
[26] On the other side, Bauer saw aid's benefits as being limited to the avoidance of commercial loan costs, which he did not consider to be a significant factor in countries' development (pp. 47–49).
Noted Zambian economist Dambisa Moyo has been a fierce opponent to development aid, and calls it “the single worst decision of modern developmental politics”.
[28] Moyo also makes a case for micro-financing schemes, as popularized by the widespread success of Grameen Bank, to spark entrepreneurship within the continent on the ground level, thus building from the bottom-up as opposed to the top-down approach aid takes.
[30] Roodman (2007), for instance, discovered that the results of seven previous econometric studies – including the very influential one by Burnside and Dollar (1997, 2000) – could not survive defining key terms in other plausible ways.
[32][33] Econometric studies frequently show more pessimistic results than might be expected from the accumulation of successes reported by donor and implementing agencies in their projects and programs.
Paul Mosley termed this the micro-macro paradox and offered three potential explanations: inaccurate measurement, fungibility, and "backwash" or negative side-effects of component aid projects.
[67] Information, at the donors' as well at the recipients' level, is often poor, incomplete and difficult to compare with other data, and beneficiaries' feedback and formal project evaluations are rare.
Not being predictable has a cost: one study assessed the deadweight loss associated with volatility at an average of 10% to 20% of a developing country's programmable aid from the European Union in recent years.
States that rely on higher percentages of aid for government revenue are less accountable to their citizens by avoiding the state-citizen relationships that taxation builds and face fewer incentives to develop public institutions.
[70] The limited government capacity resulting from subpar institutional presence and effectiveness leads to: “ubiquitous corruption of state officials, large gaps between the law and actual practice in business regulation, workers who do not even show up, doctors that do not doctor, teachers who do not teach.”[71] In the view of James Shikwati, aid in Africa sustains political elites who implement a colonial or neo-colonial agenda of subsidy and distortion of markets which holds African countries back.
[76] Eritrea discovered that it would be cheaper to build its network of railways with local expertise and resources rather than to spend aid money on foreign consultants and engineers.
For example, the World Bank presses poor nations to eliminate subsidies for fertilizer even while many farmers cannot afford them at market prices.
[81] In the former Soviet states, the reconfiguration of public financing in their transition to a market economy called for reduced spending on health and education, sharply increasing poverty.
[88] Evidence shows that cash can be more transparent, more accountable, more cost effective, help support local markets and economies, and increase financial inclusion and give people more dignity and choice.
[89] Unconditional cash transfers, for example, appear to be an effective intervention for reducing extreme poverty, while at the same time also improving health and education outcomes.
Donors lack the understanding that effort should be focused on broader measures that affect general well-being of the population, and substantial change will take generations to achieve.
For example, a report composed by the World Bank in 2006 stated that an estimated half of the funds donated towards health programs in sub-Saharan Africa did not reach the clinics and hospitals.
Although aid was flown in rapidly, regional belief systems, cultural backgrounds and even language seemed to have been omitted as a source of concern.
[99] According to Laurie Garrett, for health aid to be maximized efficiently and most optimally, donations need to be directed to areas such as local industries, franchises, or profit centers in developing countries.
Where they are weak, there may be a role for aid in analysis, consensus-building and technical assistance to improve them, and meanwhile other "insulated" projects might go ahead if they do not harm the prospects for developing sound governmental institutions.
[110] Mutual accountability can only work if there is a global culture of transparency that demands provision of information through a set of rules and behavioral norms, which are difficult to enforce in the case of official development cooperation.
In fact, at the international level, when the enforcement of mandatory rules is difficult, the solution could be to provide and make available transparent, relevant, accurate and reliable information, which can be used to reward or sanction individual aid agencies according to their performances.