Does foreign aid help global poverty?

BA (Hons) Sociology and Criminology student Alexandra Quantick explores the complex relationship between global poverty and foreign aid. 

‘Poverty’ was not considered a global issue until after the Second World War, where it can be seen to take the form of a statistical measurement which looks at an individuals per-capita income (New Internationalist, 1992). It is hard to pinpoint exactly who poverty affected first because of the lack of research within certain areas of the world. However, due to Great Britain’s economy achieving such persistent economic growth, it became the economy which historians studied in the most depth (Hasell & Roser, 2019). Today, extreme poverty can be seen to affect 689 million people across the world, meaning that they must survive on less than $1.90 a day (World Vision, 2020). Out of the world’s poor, half live within two countries - India and China - whilst another quarter live within sub-Saharan Africa (Fields, 2015).

In order to be classified as living in poverty, you are generally unable to meet the costs needed to pay for essentials such as heating and rent. Foreign aid includes any resources which are given from one country to another; this could be a straight monetary donation, or it could involve commodities or different resources such as training. Therefore, aid can be used to help in various ways, from helping with a humanitarian emergency, or rebuilding a society after a conflict.

One of the main uses of aid is for poverty reduction (Collier & Dollar, 2002). Results from certain statistical inquiries would suggest that foreign aid influences the decline in poverty, which is measured by the poverty rate, poverty gap index and the squared poverty gap index (Alvi & Senbeta, 2011). There are two types of aid which a country can receive: multilateral and bilateral. Multilateral aid is where the aid is given to a country from an international organisation (such as the European Union or the World Bank), whereas bilateral aid is where a country will give aid directly to a country (although sometimes this can be a purely political move). Aid or grants in the form of multilateral aid tend to do better in reducing poverty, rather than bilateral aids and loans. A good quality of policy can then ensure that the aid has a maximum effect on poverty. It is important to further consider how aid affects poverty and whether this is a direct affect.

It can be argued that poverty is only reduced because of the follow up effect, where incomes are seen to rise purely based on the aid given. This is known as the ‘filter down’ effect of aid. However, this argument does not prove that whether direct or indirect aid is having a beneficial effect on the rate of poverty.

One of the main critiques of aid is due to the sceptical nature of its ‘productivity’. Some argue that growth is detrimental because of displacement within monetary situations (Alvi & Senbeta, 2011), meaning that money is being placed in a way that is ineffective. The donor country may want their aid to be used in a specific way, yet the recipient country may not always fulfil this wish.

In the US, there are voters who believe that the country has been wasting billions of dollars on foreign aid without the sufficient appreciation from the respective countries (Mehta & Hennessey, 2012). However, this critique doesn’t disprove that aid has the ability to cure poverty, but instead, suggests that certain members of the US population believe the current use of aid is a waste. By reallocating aid, its effectiveness may improve, and in turn give it a better opportunity to cure poverty. This suggestion could be backed up by the Collier & Dollar argument which states that there has been a large amount of research conducted on the allocation of aid, and that the impact on poverty could be roughly doubled if donors were to make full use of this available research. By taking these findings on board, the effectiveness of aid could be greatly increased, and within this process members of the US population may begin to feel more satisfied with the use and allocation of aid.

The final critique discussed by Pack and Pack (1993) and Feyzioglu et al. (1998) states that certain research has shown that some aid resources can be mutually exchanged. This means that it can be difficult for donors to have the ability to target their aid to a particular group or be able to change the current distribution of income (Collier & Dollar, 2002). From a donor’s perspective, they seem to lack control over where their respective aid is going, and if they could change it to what they believe to be a more effective use, then they may have a higher chance to cure poverty.

There are problems with how aid is used. An example which shows the lack of effectiveness of foreign aid being so blatantly obvious is within the context of Sub-Saharan Africa. There, the use of aid is synonymous with the promotion of corruption and dependence. We are unaware of the exact figures as it is so hard to measure, but when aid is going towards a specific use (for example, vaccines) and the number of doses given doesn’t match up to the cost, the likelihood is that corruption has taken place and certain funds have been stolen (Kenny, 2017). Africa as a continent is the largest recipient of aid, yet also the world’s lowest ranked continent for many areas of governance, and especially in terms of corruption. Countries such as Somalia and Sudan are heavily affected by corruption. When examining how these African countries are distributing aid, it is obvious that it is not done so evenly; instead it is used to buy more military equipment, on white elephant projects or on dishonest procurements (Lyons, 2014).

The way that foreign aid is used within today’s society is not the most effective, and if this was to change, there is the possibility that one day poverty could be cured. However, the chances of all the required changes being made are very slim. It is likely that foreign aid alone will never make enough of a difference to cure poverty, so we must investigate other ways to help those who are suffering in order to eradicate this global issue fully. The critiques of foreign aid seem to outweigh other perspectives, confirming that it is not in fact likely to cure poverty.

We need new solutions to run alongside the use of aid which can then work together to be a more effective solution for eradicating poverty. For example, creating job opportunities in areas facing poverty will allow individuals to break through the poverty cycle. We should be putting time and resources into programs such as Medicaid and the work of Oxfam (just to name a couple) as these organisations work relentlessly to help those in poverty. I believe that even by using a combination of all these semi-solutions, poverty will not be able to be fully cured, but instead we will be able to greatly alleviate and reduce the issue.

Alexandra Quantick is a second year BA (Hons) Sociology & Criminology student who moved to Birmingham for university from a town in Surrey. She hopes to pursue a career which enables her to be able to help spark necessary changes within society to create a more equal environment amongst all, and also has a keen interest in the legal and criminal investigative sector.