fbpx
01 / 05
It's Time to Rethink Foreign Aid Initiatives

Blog Post | Economic Growth

It's Time to Rethink Foreign Aid Initiatives

Foreign aid hasn't helped Africa develop. Nor has it boosted democracy.

Last week on CapX I explained why the theoretical case for foreign aid is, at best, questionable, and why aid’s practical impact on some of the world’s poorest economies may well have been harmful. The case against aid doesn’t stop there. There are also problems with aid delivery and the negative impact of foreign aid on the spread of democracy. 

Official aid is disbursed in a plethora of ways. The European Union, for example, gives aid through the European Commissioner for Development and Humanitarian Aid. But individual EU member-states also have their own aid agencies. Europeans also have a strong voice on the governing boards of the World Bank and IMF, which also disburse aid. In addition to those official agencies, there has been a massive increase in the number of aid-promoting non-governmental organizations (NGOs), which also receive and disburse the money of Western taxpayers. 

The “aid industry” provides employment for many thousands of people. Consequently, a large percentage of the money spent on foreign aid goes to cover overhead costs, including administration, travel and accommodation. Michael Maren, a former aid worker, writes that the money spent on aid bureaucracies creates perverse incentives. “We have to take advantage of this famine to expand our regular program,” argued one aid official that Maren encountered in Africa. She saw hunger and poverty as “a growth opportunity”. “Whatever the original intentions,” Maren notes, “aid programs had become an end in themselves.” 

Dealing with swarms of donors and aid agencies, all of whom require some degree of attention, puts an enormous strain on African bureaucracies. The time and effort spent on dealing with the needs of foreign donors rather than concentrating on the population has further distanced African governments from their electorates. Working with aid organizations operating in Kenya, for example, became such a problem that the “government and donors… agreed on some principles of partnership that included a ‘quiet time’ between May 1 and June 30 each year.” 

Moreover, effective and efficient delivery of aid by a multitude of actors has proved to be an insurmountable challenge. Often, it has resulted in “duplication” of their efforts. Thus, “monitoring surveys indicate that limited progress has been made toward coordination goals by the United States or donors in general.” In Ethiopia, for instance, government officials spend “half to one-third of their time” participating in “coordination meetings” with a multitude of NGOs, international aid agencies and bilateral donors. 

Also, many foreign donors have their own agendas that may be detrimental to the welfare of the very people they are supposed to be there to help. Like the 19th-century European missionaries who went to Africa to spread their idea of a “good life”, modern day aid missionaries have found in Africa a fertile ground for social experiments that would never be accepted in their home countries. Tanzania, for example, is still recovering from an attempt to centrally plan the economy, the so-called “Ujaama” policy of collectivization that was bankrolled to the tune of $10 billion by socialist governments in Scandinavian countries in the 1970s and 1980s. Similarly, some Western NGOs, like Oxfam, have urged African countries not to liberalise their trade regimes even though there is a general consensus among academics that free trade is an important source of economic growth and prosperity. 

Research also suggests that some aid ends up in the pockets of government bureaucrats instead of reaching the intended beneficiaries. During a 2012 panel on economic and social policy, then World Bank President Ban Ki-moon claimed that 30 per cent of development aid “failed to reach its final destination”. A leaked 2009 cable from the U.S. embassy in Nairobi revealed that $1.3 million in aid for schools was “misappropriated” and another $17.3 million worth of textbooks purchased with aid dollars was “lost” by government officials.

Aid also encourages rent-seeking in recipient countries. Special interest groups and individuals focus their efforts not on being productive, but on lobbying government officials in order to get access to aid. In that way, aid reduces potential economic output and encourages corruption and political conflict. 

Moreover, by transferring resources to the favored projects of government officials, competition among domestic producers is undermined. As a result of government favoritism, parts of the domestic consumer base may become captive to firms that provide shoddy and expensive goods and services. 

Similarly, aid can undermine the international competitiveness of African exports by artificially strengthening the local currency. As researchers at the IMF found, “aid inflows have systematic adverse effects on a [recipient] country’s competitiveness, as reflected in a decline in the share of labor intensive and tradable industries in the manufacturing sector. We… [found] evidence suggesting that these effects stem from the real exchange rate overvaluation caused by aid inflows.” 

Making these matters worse is the lack of accountability and feedback in the aid industry. Very few aid agencies and virtually no individuals are directly responsible for specific outcomes. Independent evaluations of the effectiveness of donor efforts to alleviate poverty or to arrest the spread of disease, for example, are very rare. Moreover, the donors often determine what they will supply without much regard for what is actually needed. This top-down approach has most spectacularly failed to alleviate poverty in Africa where government accountability is weak and institutional deficiencies extensive. 

But does aid, in spite of the many problems with its delivery, promote democracy? Many people, including former UN secretary general Kofi Annan, have argued that it does. Researchers from the World Bank, however, found no evidence that aid promoted democracy between 1975 and 2000. In fact, the aid agencies have repeatedly bankrolled some of the world’s most unsavory regimes. According to one study, “The world’s 25 most undemocratic government rulers (out of 199 countries the World Bank rated on democracy) got a sum of $9 billion in foreign aid in 2002. Similarly, the world’s 25 most-corrupt countries got $9.4 billion in foreign aid in 2002.” 

Other research goes further, suggesting that aid may hurt democratic development in developing countries. That may be the case for several reasons. Aid helps to undermine democratic accountability in Africa, because African governments find themselves increasingly answerable to the donors, not to the public. Government spending proposals, for example, allocate funds in accordance with the advice of foreign experts rather than the wishes of the electorate. 

Aid encourages military spending. Since aid is fungible, it helps some recipient governments free up resources for military purchases that would otherwise be spent on roads and education, for example. Consider the World Bank’s recent contribution of $180 million toward the building of the Chad-Cameroon oil pipeline. Fearing that the oil revenue would be misspent, the World Bank got the Chadian government to commit to spending it on education, health, and infrastructure. What was the result? “The first $4.5 million received as a signing bonus from the oil companies was used to buy weapons—and it is estimated that as much as $12 million may be diverted to buy arms.”

In fact, Professor Paul Collier of Oxford University found that “something around 40 per cent of Africa’s military spending is inadvertently financed by aid.” Aid may also fuel armed competition for resources. There is some evidence, for example, that Somalia’s civil war was prolonged by the competition between different factions for the large amounts of food aid that the country was receiving. 

A growing number of Africans question the effects of foreign aid on economic growth and democracy in Africa. President Paul Kagame of Rwanda, for example, has urged Africans “to be honest about the consequences of aid dependence,” for “what really matters most for socio-economic transformation is private capital.” He has called on African governments to create policy environments in which entrepreneurs can flourish. Others, like Ugandan journalist Andrew Mwenda, have pointed to the negative political impact of aid. According to Mwenda, “foreign aid… is providing the government with an independent source of ‘unearned’ revenue. That allows the government to avoid accountability to Uganda’s citizens.” Unfortunately, when Mwenda spoke out against further aid at the 2007 TED Conference, the enraged Irish musician Bono heckled Mwenda with shouts of “Bollocks!” and “That’s bullshit.” 

Not only has aid failed to deliver growth in Africa. It hasn’t helped democracy either. Western donors, including the United Kingdom, should re-evaluate their commitment to further disbursements of aid to the continent.

This first appeared on CapX.

The Guardian | Charity & Aid

Acts of Kindness 10 Percent Higher than Before 2020

“The world experienced a ‘benevolence bump’ of kindness during the Covid-19 pandemic that has remained, with generous acts more than 10% above pre-pandemic levels.

The annual World Happiness Report found that in 2024, acts such as donating and volunteering were more frequent than in 2017–19 in all generations and almost all global regions, although they had fallen from 2023.

Helping strangers was still up by an average of 18% from the pre-pandemic era.

Prof Lara Aknin, a Canadian professor of social psychology and one of the report’s editors, said the number of people who reported helping strangers sharply increased in 2020 and the numbers had been sustained.”

From The Guardian.

NBC News | Health & Medical Care

Donating a Kidney Is Safer than Ever, Reassuring Research Finds

“For the new study, published in JAMA, doctors looked at data on people who died within 90 days after a kidney transplant surgery from 1993 to 2022. Data came from both the Scientific Registry of Transplant Recipients and the Organ Procurement and Transplantation Network, a nonprofit organization that administers the nation’s only transplant network authorized by the U.S. Congress.

In total, there were 164,593 kidney donors included in the study. Thirty-six died within 90 days after donation. 

From 1993 to 2002, there 13 total deaths after the procedure for a mortality rate of 3 per 10,000 people; from 2003 to 2012, there were 18 deaths, a mortality rate of 2.9 per 10,000. 

Deaths dropped significantly from 2013 to 2022, to just five, or a mortality rate of 0.9 per 10,000. 

During this time, laparoscopic surgery — a minimally invasive technique where surgeons use small incisions and specialized instruments to remove the kidney — became the standard of care, Segev said. Previously, patients underwent open donor nephrectomy, which required a much larger incision that needed longer recovery time and more risk of complications.”

From NBC News.

Blog Post | Politics & Freedom

Underrated Industrialist, Josiah Wedgwood

Josiah Wedgwood was an entrepreneur, abolitionist, inventor, and in many respects the first modern philanthropist.

Summary: Josiah Wedgwood challenged the prevailing perspective on entrepreneurship, rising from humble beginnings to become an esteemed industrialists and advocates of Enlightenment ideals. Wedgwood’s story exemplifies the transformative power of entrepreneurship, philanthropy, and innovation, reshaping not only the economy but also societal perceptions of wealth and social responsibility.


This article was published at Libertarianism.org on 12/18/2023.

We use and encounter the word “entrepreneur” constantly in our daily lives. Entrepreneurs are an indispensable part of the modern economy, but for much of the Western world’s history, aristocratic elites looked down on merchants as crass money-​makers. A long tradition stretching back to antiquity enforced the aristocratic view of property ownership and agriculture as the only honorable ways of making money. But in the 18th century, things started to change dramatically.

At the forefront of change was Josiah Wedgwood, a man born the child of a potter, who ended his life as an esteemed industrialist, a trendsetter for English society, and an advocate of Enlightenment ideals. He is also one of first examples of the entrepreneurial philanthropist in the modern sense, using his profits to build schools, homes, and improve the working conditions of his employees. Most famously, he was a staunch advocate for the abolition of slavery.

Wedgwood’s Upbringing

Josiah Wedgwood was born on the 12th of July 1730 in Burslem, Staffordshire. He was the eleventh child of Thomas and Mary Wedgwood. Wedgwood’s family, while not poor, was not particularly rich either.

Wedgwood’s father and his father’s father had both been potters. According to all conventional wisdom, Wedgwood would follow in his ancestors’ footsteps and earn a similarly modest living. Though there were many potters in his hometown of Staffordshire, potters only sold their wares locally. To sell to London was rare; to sell abroad was unheard of. Staffordshire was not the cosmopolitan center of the United Kingdom. By the end of Wedgwood’s life, this all radically changed.

From a young age, Wedgwood showed great promise as a potter, but at the age of nine he contracted smallpox, permanently weakening his knee, meaning he could not use the foot pedal on a potter’s wheel. But Wedgwood took this tragedy in stride despite his young age. While healing, he used his spare time to read, research, and most importantly, experiment. Instead of making the same pots his family had always crafted, he dedicated himself to innovating.

Combining Science and Faith

After his father’s death, Wedgwood’s mother took charge of educating her son imparting to him a deep appreciation for curiosity. Wedgwood came from a family of English dissenters, Protestants who broke off from the English state-​supported Anglican church to start their own religious establishments. Specifically, Wedgwood and his family were Unitarian: they emphasized the importance of humans using reason to interpret scripture. Unlike many of their contemporaries, Unitarians did not see science and religion as conflicting ways of viewing the world but complementary. Because of this attitude, Unitarians were often found defending freedom of speech and conscience as indispensable rights for political and religious life.

Where Unitarians split most noticeably from the established Anglican church was their view of Original Sin. Growing up, Wedgwood was taught that the world could be made a better place through human effort. A modern observer views progress and making the world a better place as a common aspiration, however, few of our ancestors believed there was such a thing as consistent material or moral progress. It is easy to see why, given that belief system, most people were content to work the same job their father had using the same tools that had been used for hundreds if not thousands of years.

The Beginnings of a Business

At the age of 30, Wedgwood began his own business in Staffordshire at his Ivy House factory. Because of England’s vast colonial territories, tea and coffee were making their way to England in larger quantities. The emerging middle class began to frequent coffee and tea houses to converse with their peers, dramatically increasing the demand for pottery. Wedgwood observed an increased demand for pottery, but also an increased demand for beauty and style in everyday items.

In Wedgwood’s early days of business, elaborate designs were not popular; what was demanded was the pure simplicity of materials like porcelain. Porcelain, however, was in short supply and extremely fragile. To remedy this, Wedgwood began developing cream glaze that would give earthenware the appearance of porcelain with none of the downsides. After conducting over 5,000 painstaking tests, Wedgwood perfected what came to be known as creamware, something few of his competitors replicated.

Increasingly known for his high-​quality products, Wedgwood was invited to participate in a competition with all the potteries of Staffordshire to provide a tea service or set for Queen Charlotte. Knowing this was a crucial opportunity, Wedgwood went all-​in on creating a creamware set, even painstakingly using honey to help stick 22-​karat gold to his pure white creamware. Wedgwood won the competition and was made the Queen’s potter. Wedgwood was light years ahead of his competition when it came to marketing and branding, and from this point onwards, all of the company’s paperwork and stationery boasted the royal association.

Wedgwood and the Consumer Experience

Wedgwood established showrooms in London to sell his wares. In the 18th century, most stores were cramped and dingy places. Wedgwood also pioneered a range of services we expect as standard today, including money-​back guarantees, free delivery, illustrated catalogs, and even an early form of self-​checkout. More than any of his contemporaries, Wedgwood focused on perfecting the retail experience. His showrooms were immediately popular, establishing his reputation throughout London, Bath, Liverpool, Dublin, and Westminster. Some showrooms were so popular they caused traffic jams with long-​winding lines stretching through the street.

The Division of Labor and International Markets

The increasing demand led to Wedgwood being so successful he founded a new factory in 1769 named “Etruria” after the Etruscans of ancient Italy. Here Wedgwood dreamed of becoming “Vase Maker General to the Universe.” Despite being named after an ancient land, it was arguably at the time the most modern industrial space in the world. To minimize mistakes, Wedgwood broke down the process of making earthenware into a series of smaller tasks. Like the contemporaneous Adam Smith, Wedgwood observed that the division of labor dramatically increases productivity. As an employer, Wedgwood was an exemplar of humane business. Knowing the hot conditions of factories, he attempted to develop a form of air conditioning. He paid his employees well and provided cottages for his workers around Etruria.

With his modernizing practices, Wedgwood brought artistic perfection to an industrial scale. Though many of his popular products were initially purchased by the aristocracy, he eventually reduced the prices to appeal to an increasingly broader market. Wedgwood noticed that a high price was necessary to make the vases esteemed ornaments for palaces, but once aristocrats popularized his products, he would then reduce the price accordingly. Everyday people began to drink from mugs and decorate their homes with vases that for centuries had been exclusively owned by aristocrats.

Wedgwood had transformed Staffordshire from a town that nearly always sold their produce locally to a place that supplied goods for the whole nation. But Wedgwood saw the potential for further expansion abroad. Wedgwood began to ship to Europe but then rapidly expanded across the globe to places like Mexico, the United States, Turkey, and China. By the 1780s, Wedgwood was exporting most of his products abroad. Though during this period of his life business was booming, Wedgwood’s smallpox afflicted knee worsened, resulting in his leg being amputated without anesthetic and replaced with a wooden prosthetic. Seemingly unbothered, Wedgwood Christened the event “St. Amputation Day” and resumed work.

Business for a Good Cause

As Wedgwood shipped more goods abroad, he increasingly frequented London’s port, the largest slave-​trading port in the world at the time. Wedgwood saw the whip-​scarred bodies of enslaved people being shipped in from abroad. Wedgwood abhorred slavery, not only because it was immoral, but because for Wedgwood, it was not befitting of the national character and the esteem Britain ought to hold as a free nation. At its inception, in 1787 Wedgwood joined the Society for Effecting the Abolition of the Slave Trade.

He campaigned against slavery by using his craft to create mass-​produced cameos of a black man in chains on his knees against a white background with an inscription beneath reading “Am I Not a Man and a Brother?” Wedgwood gave away these medallions free of charge to abolitionist groups, even sending medallions to Benjamin Franklin, then to the president of the Pennsylvania Abolition Society. Franklin praised his medallions, saying their effectiveness was equal to the best written works against slavery. Gentlemen had this image inlaid in their snuff boxes, and ladies wore it on bracelets and hairpins.

A friend of Wedgwood and fellow abolitionist wrote of Wedgwood’s medallions, “the taste for wearing them became general, and thus fashion, which usually confines itself to worthless things, was seen for once in the honorable office of promoting the cause of justice, humanity and freedom.” Wedgwood saw how fashion could be a vehicle for political change. His medallions perfectly captured the message of the abolitionist cause, two hundred years before the advent of the t-​shirt, today’s preferred method of displaying one’s political affections.

Wedgwood was not only a master craftsman, an industrialist, and an activist: he was also a scientist. In 1765, he joined the Lunar Society of Birmingham, a group of industrialists, scientists, and philosophers who met during the full moon because the light made the journey at night easier. Members included people such as Joseph Priestly and Matthew Bolton. In 1783, Wedgwood was elected to The Royal Society of London for Improving Natural Knowledge by inventing the pyrometer, a device used to measure the high temperatures of kilns while firing pottery.

Death and Legacy

After a life dedicated to his work and the betterment of the world, Wedgwood passed away on the 3rd of January 1795 at the age of 64. The name Wedgwood became synonymous with excellence in pottery, and remains so today.

Throughout Western history, aristocrats, nobles, and other elites often peddled a narrative that prosperity was achieved through familial ties of property ownership and military prowess. People like Josiah Wedgwood challenged this narrative by showing a new path for the Enlightened industrialist and philanthropist. Instead of making his fortune from familial connections and war, Wedgwood showed the peaceful path to wealth by simply fulfilling consumers’ desires. His marketing practices were light years ahead of his time, and his penchant for building a distinct brand through advertising and high-​quality goods was an unprecedentedly modern strategy at a time when the wealthy still wore powdered wigs.

Wedgwood used his wealth to benefit the world by treating his workers with dignity while advocating for humane causes like the abolition of slavery. Stories like Wedgwood’s counter the anti-​capitalist narrative of the corrupting tendencies of private enterprise, showing how business can be humane, cosmopolitan, and most importantly, for Wedgwood, beautiful.

The Human Progress Podcast | Ep. 25

Maria Chaplia: An Update on Ukraine

Ukrainian lawyer and economist Maria Chaplia joins Chelsea Follett to discuss the ongoing war in Ukraine.