Foreign aid in the 21st century

Last week Barack Obama and Mitt Romney shared the stage at a function organized by the Clinton Global Initiative. In his speech Mr. Romney, who might become the next President of the USA, laid out how he views foreign aid. “The aim of a much larger share of our aid must be the promotion of work and the fostering of free enterprise,” he said. Mr. Romney added that the “United States should make foreign aid conditional on countries’ lowering barriers to entrepreneurship and trade with the United States.”

This view of foreign aid is, at the very least, grossly outdated. Normally, Mr. Romney’s views on aid should not be of much concern to us except that I think that our government’s view on this matter is similar; “Trade, not aid” is the mantra. A key piece of evidence here is that New Zealand Aid, a body which is in charge of handling our foreign aid is part of the Ministry of Foreign Affairs and Trade.

Before I discuss why this is a misguided way to view foreign aid, let me disabuse readers of some often held misconceptions. Most rich counties in the world actually provide a very small fraction of their gross national product in foreign aid.

The governments of developed countries promised to spend 0.7% of their gross national product on development assistance in 1970, 42 years ago! They have consistently failed to reach this goal; the amount of aid has been around 0.2 to 0.4% on average. Among developed nations only USA, Italy and Japan donate less in percentage terms than New Zealand.

So no, we are not really spending that much of our hard-earned money to help out “victims” in poor third-world countries who fail to take responsibility for their own well-being. But then do we have any obligation to help out those people at all?

Usually, those who answer this question in the affirmative, do so by appealing to morality, compassion and fairness. Those are valid arguments and I agree with them. But there is a case to be made in favour of foreign aid purely on the grounds of national security and self-interest. And that is where we need to think of foreign aid in different and more strategic terms.

First, in today’s globalized world opening up markets for our country’s businesses is not a major concern anymore; at least it is not a predominant concern. Most countries around the world are now clamoring for foreign investment. There are few counties in the world with the possible exception of North Korea and Myanmar which hang on the old-school ideas of autarky and self-sufficiency. If there is one thing that we have learned from the rapid growth of countries like China, India, Singapore, Taiwan and others it is that international trade provides poor countries an escape out of poverty. India recently opened up its retail sector to foreign investment. This was one of the few remaining sectors of that vast market. Yes, there may be some sectors in some countries that may require opening up but that is a minor concern.

Let us talk about tuberculosis in New Zealand. According to a report issued by the Ministry of Health there were 626 cases of TB in New Zealand in 2011. “The most commonly reported risk factors among the cases were being born overseas and current or recent residence with a person born outside of New Zealand.  Based on country of birth, the highest TB disease rate was among those born in Asia (61.7 per 100,000, 155 cases), followed by those born in Sub-Saharan Africa (38.9 per 100, 000, 23 cases) and in the Pacific Islands (27.2 per 100 000, 37 cases).”

Given that the symptoms of TB can be dormant for many years, routine health-checks as part of the immigration process may not pick up on this.

Another serious medical problem facing us is the over-the-counter availability of potent antibiotics in third-world countries leading to their widespread abuse. This in turn is giving rise to numerous multi-drug-resistant diseases which are spreading rapidly around our globalized world.

Pandemics like SARS, swine-flu or bird-flu (or ones that may happen in the future) have enormous detrimental effects on our economy. 

Note: If you are inclined to dismiss these arguments as fear-mongering then, if nothing else, you need to borrow a copy of the DVD of Stephen Soderbergh’s film “Contagion” and watch it immediately!

This implies that any aid program that leads to greater immunization of children in third-world countries or prevents the widespread abuse of antibiotics has positive implications for our own well-being.

But a much bigger threat to our interests and security come not from disease but from failed states like Afghanistan, where a number of Kiwi soldiers have died recently.

The problems we face in Afghanistan, Iraq, Somalia, Congo, Angola, Haiti or Sudan is not of opening up their markets. There are no markets in those countries! Because there is no government to create functional markets in the first place. And the problems are the same: corruption, graft, terrorism, civil unrest, warfare, genocide.

And much of that unrest is washing up on our shores in the form of the smouldering ruins of cafeterias and bars and ships and yes, skyscrapers.

Here is the lesson from the Arab Spring. In order to improve the situation in poor countries the primary focus needs to be on only one thing: governance. This means reducing corruption, creating rule of law and transparency in the operations of the government, ensuring property rights and fostering democratic ideals.

Therefore aid that goes towards providing primary schooling or towards microfinance in helping people get out of poverty may not pay off in terms of business interests in the immediate present but has a far greater payoff for our security interests down the road. It is not easy to recruit “shahids” for “jihad” when the prospective shahid has a job and a wife and children who go to school; people who have middle-class dreams and aspirations and stability in their lives and things to look forward to.

The result of this will not always be to our liking; people whose viewpoints are radically different from ours will sometimes end up in power. But then we must have faith in the people of those countries to overthrow their own despots. The west has tried doing it at gun-point and yes, there are clearly times when military intervention is unavoidable. But military interventions are costly in terms of money and lives lost. In the wake of the current recession, few nations, if any, have the appetite for incurring those costs. This is mostly why we have all gone about business as usual in the face of the massive human calamity unfolding right now in Syria. 

It is time that the rich countries in the world began to wake up to the real threats facing us in our globalized world. Yes, some of the aid we provide will be stolen; some will go towards helping ultra-conservative religious zealots or despots who will stash the money in Swiss accounts. But if we are smart about it and direct our aid well then much of it can help bring about lasting change in poor countries. In the long run this will be a good investment in our own future and that of our businesses.