We Need a Radical Reform of International Aid
We Need a Radical Reform of International Aid
If we really want to help develop and transform the future prospects of countries overseas then DFID must encourage enterprise, trade and autonomy – not dependency; and that takes more than the legalistic and arbitrary 0.7% of gross national income.
I’m passionate about international support and overseas aid. But because there is so much emotion and ideological noise around the subject, it is often easier and more effective to come at it from a business-like perspective. That way the focus can be on free-market principles which help develop innovative, common sense solutions. And that’s what I’d like DFID to do.
The UK must help to lead world development
If we really care about alleviating poverty then we must lead the world by exporting our business ideals rather than just handing out cash left right and centre; some of which unavoidably ends up in the pockets of warlords and corrupt government officials. We must concentrate on empowering people to take control of their lives wherever possible by giving them access to the finance they need to create small businesses through repayable microfinance and other business-focused initiatives.
I believe the problem we have is that we approach overseas development from the wrong angle: it’s not the amount of money spent by DFID that counts – the 0.7%; it’s about how that money is spent. We need to start investing rather than gifting. We must not create dependency but self-dependency abroad – that should be the goal; trade rather than aid whenever possible in every circumstance.
Unfortunately, it is only now – through the successive reforms of Andrew Mitchell and Justine Greening– that the insights of market liberalism have begun to penetrate DFID’s approach to international aid. I particularly admire Justine Greening’s commitment to the health and empowerment of women and girls in under-developed countries. But we must focus relentlessly on enabling development from within each nation we assist.
Clearly, we must respond to cases of emergency like famines, health epidemics and natural disasters and we obviously do have a role to play in helping innocents in war torn areas and stateless regions. But that doesn’t necessarily mean that we should throw money around in every circumstance.
DFID must encourage self-dependency not welfare
Even in these very difficult situations we must be strong enough to ask ourselves if it is better to treat the money as a loan to the individuals, regions or governments. Otherwise we are in danger of perpetuating the debilitating dependency culture we are so desperately trying to rid ourselves of in the UK welfare system. The last thing on earth we want to export is welfare dependency.
DFID is the department for ‘International Development’ not merely aid. This means incentivising the emergence of stable democracies, the rule of law, free press, enterprise and business, competitive markets and international trade. And of course we must help them to develop education, sanitation and healthcare, but it is more sensible to enable countries to do this through their own resources so that they are ready – or better able to cope – in crisis situations.
The understanding of a free press is vital part of development
DIFD should also have an explicit role in educating newer democracies in the concept of a free and pluralistic press. There are countless examples of conflicts perpetuated and prolonged by a lack of a free press, places where if people had access to a plurality of views the results may not have been so catastrophic.
Invest in jobs and people
I believe the best gift that UK aid and support can provide is to help create jobs so people can take care of themselves – and it’s even better if we can support the creation of new enterprises so that people are able to build their own way out of poverty. In every family – no matter what nationality, culture and skin tone – there will be an entrepreneur just desperate to support their own relatives and community.
Hand-outs are bad for local entrepreneurs. An effective aid system must kick-starts local growth and gets villages and neighbourhoods to the position where they can stand on their own two feet. There will always be a place for hand-outs; indeed sometimes this is the best option. Aid given directly to mothers to feed their children in a crisis will always be money well spent. But parcelling out non-lifesaving hand-outs may be undercutting local entrepreneurs who would compete with each other to supply what people demand, and it is undermining potential economic growth and jobs. In the end, hand-outs capture communities in a welfare trap. There will always be a place for emergency lifesaving hand-outs but it should not be the first reaction to need on every occasion.
In my view the way forward is for Britain to stop solely focusing on obtaining the UN’s 0.7% target and to start acting in a more business-like way when it comes to overseas aid and development. Even though I accept that much of our current aid money goes via the EU over which we have little control, in order to make our overseas aid work harder and smarter I suggest we look more carefully at the following five areas:
§ Measuring the return on our investments
Alongside the short-term monitoring of the number of lives saved in emergency situations, DFID must fully take on board the concept of investment. It should have a model and measure of the return both locally and to the UK in terms of tax, repayments and the reduced costs of conflict. If we can measure the return on investment we can be sure we’re not just providing hand-outs. In addition we need to focus on business and enterprise abroad, just like we must do at home. Trade is the key and thought needs to be given to how overseas development money can be judged against the extra trade generated and the resultant benefits to the UK. I believe there should be an even closer working relationship between the DFI and UKTI – perhaps a UKTI representative on the ground at every major project where possible?
§ A bigger role for philanthropy
Charities such as Oxfam, Save the Children, Action Aid, the British Red Cross and hundreds of other organisations do amazing, and often under-reported, work across the globe. In addition there are many inspirational philanthropists such as Bill and Melinda Gates and their tireless quest to tackle global health, Bob Geldof and his fearless commitment to getting people to hand over their money for Africa, Bono’s One campaign highlighting the plight of the world’s poorest and unsung heroes across the UK who care enough to make doing their bit for charity part of their life.
§ A list of countries we will support
We should draw up and regularly review a clear list of countries eligible for UK aid; a list of those ineligible and a list of countries we deal with on a case-by-case basis. Then we need to start investing and one of the best ways to do this is through micro-finance direct to entrepreneurs.
§ DFID support for repayable micro-finance
There are many examples of micro-finance working spectacularly well around the world. Micro-finance pioneers such as Finca who now operate in 21 countries worldwide, and the Grameen Bank in Bangladesh set up by Nobel Peace Prize-winner Muhammad Yunus are just two examples of good, well-run microlenders who help people to take control of their own futures. I can see no reason why the DFID could not partner with similar organisations.
DFID do support microfinance but there is scope to increase the size and reach of this funding. I believe we should partner with a higher number of established larger-scale lenders and commit the resources now. Remember, these are tiny amounts of money to each individual – on average, I believe, under £20. But they make a massive difference to people's lives because entrepreneurs are then able to buy stock, trade, earn money, repay their loans and invest for the future of their families.
§ Remove EU protectionism
Another thing that’s top of my list is reducing EU protectionism especially when it blocks out developing countries from trading on a level playing field. Why does this happen? Why are whole swathes of the world’s poorest countries unable to trade effectively with the EU? Who is that helping? Not us and certainly not them. Churchill left his party for a failure to back free trade, what are we to do in response?
Finally we need set tougher targets and renew our focus on getting results rather than the process of aid spending. We might want to define results as some combination of effective humanitarian aid, economic growth and increasing trade. Whatever the method, above all this must be quantifiable. By being unable to quantify results, we continue to place greater emphasis on inputs – i.e. 0.7%. Also, there are places where we need to look again at the figures. We must examine carefully what constitutes aid. Even though we claim to be stopping aid to certain countries like India, we may still be providing aid in the form of free technical support that is not captured in the figures.
§ Unleash the power of human potential
My vision is for Britain at the forefront of international development. I want to see us using our aid money in a smarter ways. It must help the poorest countries in the world unleash the power of human enterprise because it is entrepreneurs and businesses that will trade these countries out of poverty forever. It would be wonderful to report each year on how many productive jobs our money had helped create through better trade and investment both here and abroad, rather than simply reporting how many hand-outs we’d given.
So, perhaps 0.7% of national income is not enough. If we can focus on a new approach to aid in the developing world, help their people reach their potential and invest rather than gift, then 0.7% is definitely not enough.