Bill Gates to Naysayers: Foreign Aid Works

Image Source: UK Department for International Development (Creative Commons)

 

Bill Gates is probably the most prominent name in philanthropy today, so when he has something to say, others listen. His latest annual letter has generated quite the buzz, with most people honing in on his audaciously optimistic declaration that there will be no more poor countries in the world by 2035.

While that’s quite the prediction (with many calling for a more tempered view of the future), I found myself most engaged in Gate’s discussion on whether foreign aid works. As someone whose job it is to keep tabs on philanthropy, the close cousin and frequent collaborator to foreign aid, I’m always interested in gaining a better understand of aid’s impact.

Gates begins his discussion with a summary refutation that aid is a “big waste.” In exemplary philanthrocapitalistic fashion, he observes that aid is far more cost-efficient than some would have you believe.

To get a rough figure, I added up all the money spent by donors on health-related aid since 1980. Then I divided by the number of children’s deaths that have been prevented in that same time. It comes to less than $5,000 per child saved (and that doesn’t include the improvements in health that go beyond saving the lives of young children). $5,000 may sound expensive, but keep in mind that U.S. government agencies typically value the life of an American at several million dollars. Also remember that healthy children do more than merely survive. They go to school and eventually work, and over time they make their countries more self-sufficient.

Gates then dives into the assertion that aid encourages corruption and dependency. Again with operations-minded rhetoric, Gates firsts re-casts corruption as an inefficiency rather a systemic or moral failure but makes it clear that he does not condone such behavior:

Small-scale corruption, such as a government official who puts in for phony travel expenses, is an inefficiency that amounts to a tax on aid. While we should try
to reduce it, there’s no way to eliminate it, any more than we could eliminate waste from every government program—or from every business, for that matter. Suppose small-scale corruption amounts to a 2 percent tax on the cost of saving a life. We should try to reduce that. But if we can’t, should we stop trying to save lives?

Dependency, on the other hand, is a murkier debate to wade in. Recent years have seen much backlash against foreign aid, with a number of intellectuals from aid-receiving countries lending their weight to the aid-hinders-economic-growth camp. But Gates notes that we have to distinguish between different forms of aid, pointing specifically to research funding as an example of aid with substantial positive yields.  He also names several aid recipients that have “graduated” to a higher development status—like Singapore and South Korea—but does acknowledge that it’s hard to directly correlate aid and growth:

Critics are right to say there is no definitive proof that aid drives economic growth. But you could say the same thing about almost any other factor in the economy. It is very hard to know exactly which investments will spark economic growth, especially in the near term. However, we do know that aid drives improvements in health, agriculture, and infrastructure that correlate strongly with growth in the long run. Health aid saves lives and allows children to develop mentally and physically, which will pay off within a generation. Studies show that these children become healthier adults who work more productively. If you’re arguing against that kind 
of aid, you’ve got to argue that saving lives doesn’t matter to economic growth, or that saving lives simply doesn’t matter.

Although not everyone will agree with Gates’s various positions, I think he puts up a compelling moral and economic case for foreign aid. It’s important that we try to include both counterfactuals and forethought in our understanding of aid, recognizing that aid is just one tool in poverty alleviation that works best in conjunction with policy and local involvement. Like Gates, I am inclined to think, “we can stop discussing whether aid works, and spend more time talking about how it can work better.” That sounds like a strong clarion call for a more strategic approach to aid and philanthropy to me. Are you convinced?