*We have provided an outline and analysis on this question earlier here: https://generalpaper.sg/2019/02/12/foreign-aid-does-not-solve-long-term-problems-to-what-extent-is-this-a-fair-viewpoint-a-levels-2018/
As the saying goes, “If you can solve a problem with money, it’s not really a problem.” According to Economics scholar William Easterly, the West had spent a staggering $2.3 trillion on foreign aid in the past five decades, and yet, many of the countries which received aid did not seem to have made significant economic progress. This should not be a surprise as the root of the problem is very often far more complex than a mere lack of financial resources. While the injection of foreign funds can sometimes provide temporary relief, it usually serves nothing more than a band-aid. Long-term problems like corruption, lack of expertise and political instability are tough to crack without the right support. Like any real world problem, there is no single magic pill solution.
Given the complexity of many long-term problems, it is fair to say that foreign aid alone will not be able to solve them. This is especially true for corruption, which is a rampant problem in many poor countries. In fact, giving aid to a country steeped in corruption will only fatten the pockets of the thieving elites. The 2010 Kabul bank scandal that saw $850 million lost to fraud at Afghanistan’s biggest bank was a case in point – if the shareholders, made up of many government officials, have no qualms about siphoning money from its own people, providing monetary aid to a country like this is as good pouring money down the drain. More than $35 billion of foreign aid had been granted to Afghanistan in the last twenty years, but Oxfam still classifies the country as extremely poor and highly dependent on foreign aid. It is clear that without first eliminating the problem of corruption, giving foreign aid is futile.
Many poor countries also lack the right expertise to progress to the next stage of development. In such cases, the recipients are unable to harness the full potential of the gift of foreign aid, and end up most of the time no better than before eventually. Many African countries are in this plight where, despite receiving multiple rounds of cash injections, they are still stuck at a low level of economic development. They are unable to reap better gains because most of their industrial output come mainly from exporting raw materials. If they had utilised funds in developing the right education and industrialising the economy, they might have been able to build more secondary and tertiary industries that can generate higher-yield returns. Sadly, most of these African countries can only watch others get richer as they export their raw materials to more developed countries which will then transform them into higher value products for handsome profits. Giving monetary aid alone to these countries is simply not targeting the cause of the problem.
To tackle the lack of technical know-how, it appears then that foreign aid can be given in tandem with expertise support. The reasoning is akin to teaching a man to fish and not merely giving him a fish. In this regard, there are some success stories. South Korea is an example of how foreign aid, together with assistance in social and economic reforms, lifted a nation from being a third world country to a thriving developed country. Nevertheless, the same success is rarely seen in other parts of the world. This is perhaps because the “teaching” of technical expertise is not a straightforward one. Every country’s circumstances are unique and the Western-centric model may not always work for all. In fact, the economic policies that the IMF and World Bank had recommended for many of the African countries, including opening up their markets etc., had not worked well. While hard skills can be easily taught, such specialised expertise support require great amount of historical understanding, contextualisation and sometimes luck in order to succeed. These African countries may have received some degree of skill and technological transfer from the “experts”, but eventually struggled severely when their local industries were overwhelmed by foreign competition once they adopted the recommended free trade policies. Hence, while foreign aid can theoretically be made more effective if it is coupled with expertise support, it is usually not the case in reality. The effectiveness of such technical expertise is usually limited by the unique circumstances in different countries.
Political instability is another long-term problem that cannot be solved by foreign aid. As the former is usually a result of the interplay of multivariate factors ranging from socio-cultural to economic, foreign aid can do little to cushion the impacts of political turmoil. Political turmoil is not always a bad thing, if it is a part of the democratic process that a country is undergoing. It may take several rounds of change in government before the country reaches a certain level of stability. When a country is still struggling to put things in order domestically, it is not wise to offer foreign aid. Doing so will likely draw suspicion and be interpreted as an attempt to interfere with another country’s sovereignty. Unfortunately, there is little another country can do about a country’s political instability. It is the inevitable birth pangs that one has to go through that cannot and should not be eased with foreign intervention, in the form of monetary aid or otherwise.
However, foreign aid can sometimes be the final piece to the puzzle that helps bring a country’s plans into fruition. If the necessary infrastructure and support are already in place, timely foreign aid can provide the clout needed to solve the country’s long-term economic problem. The Mekong River project, largely funded by China, was intended to help Cambodia build hydroelectric power plants to solve her power needs. As a less developed country, it would be unthinkable to be able to carry out the project without external help. Hence, foreign aid can be very useful, if the problem is purely a financial one.
Foreign aid cannot be always seen as the silver bullet for a country’s problems. Most of these problems are deep-seated and multi-faceted. Giving foreign aid alone is rarely ineffective; foreign aid coupled with other assistance, such as providing expertise and infrastructure development, may sound feasible, but have only achieved limited success in reality. Foreign aid is most effective when the problem is unequivocally a monetary one, which perhaps mean that it is not really a problem to begin with.