Michael Womick
GLBL 210
December 8, 2017
Debating Trade v. Aid
As governments and civil society exert ever-increasing energy towards the biggest goal of our time, ending poverty, debates and discussions have spurred surrounding how to best utilize energy and resources to promote global “development”. In this essay, I will demonstrate the advantages and disadvantages of trade- and aid-oriented approaches to economic development, namely opposing views of their effectiveness in increasing and sustaining well-being, and I will argue that both strategies offer unique long- and short-term benefits that can be used together to optimize an effective and humane system to eradicate poverty.
In 2009, Ethiopia’s parliament passed legislation severely restricting the amount of funding non-governmental organizations (NGOs) could receive from foreign sources. Though controversial, this marked a pivotal moment in the international discussion on aid. Notably, it reignited a discussion of the disjoint between NGO’s intentions and their actual execution of those intentions. The criticisms of NGO aid resounded: critics lambasted NGOs for their distanced agenda-setting influence, their ensnaring debt policies, and their historical demand for harsh austerity measures (Anderson). It was obvious that the effective NGO aid of the past was no longer working and had somehow transformed into a counterproductive frenzy. With little success to show, NGOs and other aid providers had some explaining to do.
“We’ve spent trillions of dollars on these problems and we have damn near nothing to show for it,” exclaimed a frustrated US Secretary of Treasury Paul O’Neill who, like many others, was annoyed by the lack of apparent progress in poverty alleviation efforts. Attributed to corruption, a lack of civilized morals, or ideological inefficiencies, the lack of progress was more than disappointing; it was outrageous.
In his book, The End of Poverty, one of the most vocal proponents of aid, Jeffrey Sachs, who is an economist at Columbia University and adviser to the United Nations Secretary-General, explains that the lack of results cannot be attributed to error on the beneficiaries’ end, rather to an ignorance and overestimation of the magnitude of our generosity. According to Sachs, a failure to realistically resource and direct an effort with the capacity to “end the poverty trap” is at fault for the failure of aid initiatives. To illustrate the amount of aid given by the United States in 2002, Sachs explains that the United States gave as little as $3 per sub-Saharan African, amounting to a mere six cents after logistical costs were accounted for. “It is no surprise that there is so little to show for the aid to Africa, because there has in fact been so little aid to Africa!” quips Sachs. Comparing government corruption in Africa and elsewhere, Sachs finds that corruption levels are no different than other equally-poor countries, making the case that the government is not to blame, rather the meager amount of aid the countries receive.
Some aren’t convinced. Dambisa Moyo, one of Sachs’s ex-students and author of Dead Aid, argues that an aid-based strategy hurts more than it helps by serving only as a temporary “Band-Aid” relief to the symptoms of poverty, neglecting to address the complex economic problems that underlie and allowing them to fester less noticeably. She claims that aid interventions are “merely band aid solutions that do nothing to lift Africa out of the mire—leaving the continent alive but half drowning, still unable to climb out on its own”. Although she recognizes her strictly no-aid approach is radical and harsh—going so far to claim that even aid to provide cheap anti-malaria nets to Africans should be nixed —she claims that it is ultimately necessary and that only partnership between entrepreneurial Africans and the rest of the world can “lift Africa from the mire” (Moyo).
In an attempt to refute Moyo, Sachs points out that U.S. aid was responsible for subsidizing India’s Green Revolution and claims that World Bank opposition to similar aid to Africa cost the continent greatly. He also acknowledges that cutting off aid would cause devastation to millions and deprive them of urgent needs. While recognizing that aid may not the be most efficient approach to ending poverty, he suggests that Moyo’s approach is impractical and ethically inhuman. By addressing urgent needs such as rural poverty, tropical diseases, illiteracy, and lack of infrastructure through “transparent and targeted public and private investment”, Sachs believes that more aid and market financing will provide the framework for Africa’s sustained economic success (Sachs and McArthur). According to this view, Sachs implies that a complementary approach between aid and trade is necessary to stimulate the economy.
Others, such as the founders of GiveDirectly, the brainchild of four Harvard and MIT graduate students with the behemoth aspiration of building the world’s most economically efficient charity, believe that direct unconditional cash transfers (UCTs) may be the most effective model for aid. The foundations of this belief are that: (1) individuals know best what they need for themselves and (2) people in need will use the transfers wisely, though they are hypothetically allowed to use them in any way they want. Although this strategy is proven significantly efficient in increasing individual quality of life, the founders recognize the caveat that it has little impact on tackling the underlying problems of poverty (Goldstein). Nevertheless, this is not an indication that this strategy should be avoided or discouraged. In terms of Sachs’s view, initiatives such as these could be useful in offering realistic alleviation of individual poverty while other initiatives orient themselves towards economic development.
Vandana Shiva, a prominent Indian environmental activist, criticizes the idea of economic development altogether, claiming that a one-sided swelling of economic activity is responsible for the problems which cause poverty and ecological destruction. “[Sachs] simply doesn’t understand where poverty comes from”, she claims. Suggesting that Western biases against sustenance living are culturally insensitive, Shiva challenges the idea that economic activity is a proxy for quality of life. Furthermore, she criticizes economic growth for destroying the commons and depriving the people it claims to help of access to naturally abundant resources. “If we are serious about ending poverty, we have to be serious about ending the systems that create poverty by robbing the poor of their common wealth, livelihoods and incomes”, she continues, “It’s not about how much wealthy nations can give, so much as how much less they can take” (Shiva). Sachs disagrees, citing impressive accounts of NGOs in China and India boosting livelihoods (Anderson).
Another caution against strategies of economic development is William Easterly’s criticism of aid-dispensing bureaucracies which he terms the “cartel of good intentions”. While Easterly does not claim that aid or trade strategies should be avoided like Shiva suggests, he argues for reform, insisting that the current conditions under which these organizations operate are not productive and claiming that a higher degree of accountability should be held to international entities that want to be impactful. Arguing that these bureaucracies seldom demonstrate legitimate learning from their mistakes and fail to make considerable effort to amend their proven inefficiencies, Easterly claims that the key to an effective implementation of these aid and trade strategies is experimentation with decentralized markets to connect donors with those in need, taking into consideration the opinions of those who they intend to help. With the idea that these bureaucracies can make adjustments to how they operate and put greater focus on achieving the outcomes they desire, Sachs’s stance that more aid is needed could be modified: there needs to be more aid and it needs to be used more wisely.
A recent article from The Africa Report provides a more recent input to the debate. The article suggests that the key to effective implementation of economic development strategies is tight collaboration between aid agencies and the people they intend to benefit. Praising the relocation of Oxfam International, an anti-poverty organization, from Oxford, UK, to Nairobi as a sign of progress against both (1) the often-infringing nature of such organizations which restrict states’ power and social services and (2) the neglect of these organizations to represent the people they help, the article quotes Sachs in Foreign Policy in 2014, saying “The issue is not ‘yes’ or ‘no’ to aid…Aid is needed, and can be highly successful. The issue is how to deliver high-quality aid to the world’s poorest and most vulnerable people” (Anderson). The article concludes with a discussion with humanitarian agency CARE International’s Wolfgang Jamann, saying that aid-dispensing entities have made the realization that significant changes over the past decade require (1) “much more engagement with local partners [and] community-based organizations” and (2) measures to prevent agenda-setting tendencies, ending with the claim “In order for NGOs to retain their relevance in the years ahead, a new funding model is needed.”
While there are certainly ways in which economic development strategies can be used, not only ineffectively, but counterproductively, there are also evidence-based methods for implementing such programs effectively. Different strategies of economic development have different goals and niches: you should not rely on direct aid to invigorate the economy just as you should not rely on trade to effectively increase individual well-being. Therefore, if poverty is, as Sachs and Moyo believe, a phenomenon to be treated, it is not a dichotomous argument between “trade versus aid” that we should focus on; rather, it is an argument of how we can best use these different strategies harmoniously to bring about alleviation of the symptoms while we treat the underlying causes. After all, a surgeon knows to anesthetize her patient before performing the curing operation.
Works Cited
Anderson, Mark. “NGOs: Bessing or Curse?” NGOs: Blessing or Curse? | East & Horn Africa ,
The Africa Report, 29 Nov. 2017, www.theafricareport.com/East-Horn-Africa/ngos-
blessing-or-curse.html.
Easterly, William. “The Cartel of Good Intentions.” Foreign Policy, no. 131, 2002, p. 40.,
doi:10.2307/3183416.
Goldstein, Dana. “Can 4 Economists Build the Most Economically Efficient Charity Ever?” The
Atlantic, Atlantic Media Company, 21 Dec. 2012,
www.theatlantic.com/business/archive/2012/12/can-4-economists-build-the-most-economically-efficient-charity-ever/266510/.
Moyo, Dambisa. “Aid Ironies: A Response to Jeffrey Sachs.” The Huffington Post,
TheHuffingtonPost.com, 26 May 2009, www.huffingtonpost.com/dambisa-moyo/aid-ironies-a-response-to_b_207772.html.
Sachs, Jeffrey, and John W. McArthur. “Moyo's Confused Attack on Aid for Africa.” The
Huffington Post, TheHuffingtonPost.com, 27 May 2009,
www.huffingtonpost.com/jeffrey-sachs/moyos-confused-attack-on_b_208222.html.
Sachs, Jeffrey. “Myths and Magic Bullets.” The End of Poverty: Growing The World's Wealth In
An Age Of Extremes, Penguin Press, 2005.
Shiva, Vandana. “Two Myths That Keep the World Poor.” Ode Magazine, 2005,
www.odemagazine.com/article.php?aID=4192.