Why foreign aid does not reach the poor

Foreign aid from developed countries in the West has for long been touted as an important tool to help the poorest people in Asia and Africa lead better lives. Organisations such as the World Bank, in fact, have acted as agents, transferring aid from Western governments to the poor in other parts of the world. One of the many criticisms levelled against this policy of offering foreign aid to the underdeveloped world is that most of such aid fails to reach the poorest people who need it the most. “Does foreign aid target the poorest?”, a 2017 paper by Ryan C. Briggs published in the International Organization , tries to find out empirically whether foreign aid actually achieves its target of reaching the planet’s poorest people.

To find an answer, the author studies the flow of aid into a total of 195 regions spread across 17 countries in Africa and compares it to their economic status. Surprisingly, his analysis shows that foreign aid manages only to improve the lives of the richest people in the poorest countries of the world. In fact, after adjusting for population size, the amount of aid that flows to the richest people in Africa is found to be about three times higher than what flows to the poorest people. The study further suggests that there might be some political reasons why aid does not reach its intended targets in the recipient countries.

The findings of the study though may not be surprising to anyone who understands the reality of foreign aid. Generally speaking, foreign aid is not dispatched by a bunch of good people trying to do some good to the poor. Instead, it is bureaucrats and politicians who usually direct the flow of aid into the developing world. Their decisions, in turn, are driven mostly by political considerations rather than noble intentions. This naturally leads to various forms of corruption. A Western politician, for instance, might be more than happy to donate taxpayer funds to the president of a country in return for personal favours. The leader, who may be no less corrupt, might accept such funds for his own personal aggrandisement, albeit under the guise of helping the poor. The supporters of foreign aid have tried various technocratic solutions to improve the effectiveness of foreign aid. They are, however, yet to find a solution to the perverse incentives causing the misallocation of aid.

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