🎧 When Foreign Aid Fails 


Foreign aid is meant to alleviate suffering and help poor countries develop. But according to William Easterly, a professor of Economics at NYU, it often does the opposite. Instead of helping countries develop, it wastes resources or makes it harder for them to make economic progress. And far from advancing democracy and human rights, it often helps autocrats to stay in power.

In this week's episode of The Good Fight podcast, Yascha Mounk and William Easterly discuss how political considerations misdirect foreign aid, whether the “development industrial complex” ignores the human rights of the poor, and why foreign aid so often gives a lifeline to authoritarian leaders around the globe. 

This transcript has been condensed and lightly edited for clarity.

Yascha Mounk: What do you think is wrong with, or naive about, the basic picture of people who say we owe it to the poor around the world to send aid to them? Why is that often not the right thing to do?

Bill Easterly: Well, I agree very much with the objective of reducing global poverty and the material suffering of the poor from malaria and infant mortality, starvation, et cetera. But I think human wellbeing is not only about material development. Human beings worldwide have very similar aspirations for having their own human rights respected, their political and economic rights respected, to have the dignity of self-determination. Where aid has had real blinders on is this lack of appreciation for the global battle for these values for democracy and human rights. Aid has too often been very willing to support brutal, autocratic rulers, when it seems convenient to do so, or to help some kind of material development agenda.

Mounk: Development aid, which is supposed to help make societies more affluent and empower citizens can often stabilize autocratic regimes. The idea of modernization theory, which dominated for much of the 20th century was, broadly speaking, that as people become more affluent, as they become more educated, they're more open to democratic values. So why is it that sending money to some of these societies should have these negative effects? 

Easterly: Well, it was very much a part of the rationale for British colonial rule. They felt that what should come first was material development. As a colonial official named Lord Hailey said during World War II, “Africans don't really care about being independent from us, they just want our development aid.” That was a very convenient rationale for perpetuating colonial rule for decades, if not centuries: poor people don’t care about their rights, they just want these supposedly wonderful material benefits. It wasn’t until after World War II that [colonial authorities] found out how wrong that was. The most popular cause in Africa for the last few generations has not been about development, but about independence and having equal rights with the rest of the world.

Mounk: But why do you believe that there is this tension at all? What is the empirical evidence? 

Easterly: There is a trade-off there: you are helping anti-democratic authoritarians stay in power longer. In this, you're hurting the democratic rights of the people that you're supposed to be helping. This is even worse when you might have some other agenda, as the US and UK and Western donors have had during the War on Terror. In fact, the biggest increases in Western aid since 2001 have gone to the quarter of the world's countries that are the least free, measured in terms of political and economic rights according to a metric developed by the World Bank.

Mounk: I'm trying to think through how it is that this development aid supposedly helps these autocratic forces stay in power. The closest analogy I can think of is the “resource curse.” For example, one of the most plausible explanations for why the Middle East has struggled to develop democratic regimes is that a number of these countries have a lot of oil, and that this creates a very bad dynamic between the government and its citizens. Instead of having to raise a lot of tax revenues, the government simply has control over these oil fields, and so it doesn’t rely on the cooperation of its citizens. Is development aid, basically, a form of resource curse? If development aid does not come from citizens themselves - coming instead from an outside force and being put directly into the hands of the government - it short-circuits the basic accountability mechanisms you need for a healthy development path?

Easterly: Yes, it is analogous. The external support is a lifeline. Now, I think the other thing we should introduce into the conversation is the role of the “war of ideas,” or the clash of visions worldwide. Bill Gates, one of the big actors in development with the Gates Foundation, was making laudatory statements about [autocratic ruler] Meles Zenawi. They thought they needed to do that to get the sanction to operate the development aid-business inside of those countries. The unintentional effect that has is that development people end up on the wrong side of the global battle of ideas between democracy and autocracy.

This idea of the benevolent autocrat - the idea that there ever are benevolent autocrats - has very limited, even nonexistent, evidence in favor of it. We usually don't know who they really are until long after the fact and have enough data to calculate what their supposedly positive effect might have been. And yet, the benevolent autocrat idea is used as justification in almost every authoritarian country.

Mounk: What I'm skeptical of is that people are in fact looking to countries like China and thinking that that is a model they can emulate. Even if I go to Italy - which is a country I know well, obviously a developed country - if I ask people, “Hey, would you be willing to give up some of your democratic freedoms and rights in order to have a hyper competent government and 6-7% economic growth every year?” I think a good number of people might say, “Yes.” If you ask them, “Do you want to try to implement something like the Singaporean or the Chinese system in Italy in order to get there?” They would say, “Of course not! Our leaders aren’t going to be like that; they're not going to be benevolent or competent.”

Easterly: The other interesting thing going on worldwide is that there's this great project called the Varieties of Democracy Project that collects data on how many political protests are going on around the world. They've collected this data for countries and territories all the way back to the 1900s, and in 2019, a number of the world's countries were having active political protests, which they define as being about corruption or autocracy. 44% of the world's countries were having these protests in 2019. That was the highest it had ever been in the history of that series, going back to 1900. So, the idea that poor people don't care about their rights and are really willing to give them away for some extremely dubious process of high growth through a brutal autocrat - I just don't see that that makes much sense, in theory or on the evidence.

Mounk: Let's speak about economic growth. Why should anybody believe that all these efforts we've gone to, all this money we've spent [on developmental aid] has either been largely ineffective, or perhaps even counterproductive in terms of economic growth, and in terms of democratic values, and so on?

Easterly: The countries that received lots and lots of aid have continued to stagnate. In Sub-Saharan Africa, some of them recently started to have pretty good economic growth. And that's very encouraging. But that, again, was unrelated to aid. So, the promise that a big inflow of aid would have this transformational effect to launch countries into very high economic growth and escape poverty… that hasn’t worked out.

Mounk: What are some of the mechanisms by which aid stands in its own way, or fails?

Easterly: I think it goes back to a theme that's related very much to our topics, today, of democracy and human rights: the lack of accountability of a donor for benefiting the intended beneficiaries. There's no way in which official aid donors are rewarded for good results or penalized for bad results, or for even negative results. And that lack of accountability makes the aid donors themselves like an authoritarian regime that can do whatever it wants without being accountable to the citizens of the aid world. One example that really motivated me a lot on this work was in Uganda, in 2010. The World Bank was pursuing a forestry project in Mubende by just taking people's land away from them, destroying their homes and cattle and crops, and marching them away at gunpoint. That is doing such direct harm to people that you would think there would be some sort of accountability, but the World Bank correctly calculated that if they just did nothing people would forget about it. 

Mounk: Presumably somebody is sitting in Washington DC, in the offices of the World Bank, deciding that this land would be more productively used for forestry than for its current uses. And you worry that a lot can go wrong, just in the process of that kind of planning.

Easterly: The planning suffers from a knowledge problem and an accountability problem. 

Mounk: How much has changed over the last 20 years as a result of your critiques or just as a result of developments in general?

Easterly: If you think of some of the older horror stories, they are worse than today's horror stories. So, the way that aid supported forced sterilization in India in the 1970s, or the brutal one child policy in China, because they thought that was desirable to control population growth. But I think a lot of us are disappointed that no matter how much criticism there is, it just looks like they keep on doing many of the same things. There's a spending mandate - that agencies will go out of business unless they spend all of their funds. And they often find it very difficult to spend all of their funds without doing a lot of projects that are either dumb or counterproductive, or actually harmful, or supporting autocrats. And that mandate, sadly, undermines any hope of constructive change.

Mounk: What's the opposite of all of this? Is there something we can do? Or do we just need to own our discomfort and say, it's not our role?

Easterly: Well, one upshot is when the aid and development system is doing harmful things, then doing nothing becomes an improvement. If the US is supporting brutal autocrats, only because they're convenient in the War on Terror, then they shouldn’t pretend that it’s about development, because it’s really harming development. 

And there are some more modest positive things that can be done, such as sending out cash grants to poor people, or making health services more available. Health is an area where foreign aid works better, such as funding vaccinations and antibiotics. Funding COVID vaccines for poor countries is an obvious one. 

I think aid proponents are remarkably, ludicrously optimistic about the role of a small group of Western rich people can play in transforming the rest of the world. And they're very pessimistic about the ability of poor people themselves to achieve entrepreneurship, and political and economic reforms, in a way that will have really wonderful lasting effects on poverty. I think there's something about this that is very condescending and paternalistic, and that I find very objectionable.

Mounk: We're just not willing to lean into optimism at the moment, we're not willing to see the good things in the world. And in fact, as I understand it, for example, Africa, which obviously remains the poorest continent, has grown at a much higher rate over the last decades than it did in much of the 20th century.

Easterly: Exactly. There has been the spread of democracy in Africa, and economic reforms that did away with some of the worst abuses of authoritarian rulers, like when rulers in Ghana forced cocoa producers to turn out their cocoa at a pathetic price that was less than 6% of the world price. And that was really destroying the rights and economic livelihood of cocoa producers. The Ghanaian autocratic government of that era had the death penalty for cocoa smugglers. Since that regime, which lasted up to about the mid 1980s, Ghana has had both political and economic reforms, and those brutal economic controls have been removed. The Ghanaian economy has been doing much better, with positive growth, compared to the very negative growth of before. And with a great expansion of human and political rights, Ghana is a functioning democracy now, as well. That's the kind of hopeful story that I think we're neglecting to stress enough.