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Poverty Despite Massive Aid

In the past 50 years, Western countries have granted more than $2.5 trillion in humanitarian aid, loans and debt relief to the developing world to help stimulate growth and reduce poverty. But the grants have not been enough to pull many African nations out of poverty.

There has been a steady increase in the amount of international aid given to poor countries in recent years. Last year, for example, total aid from donor countries was $106 billion, up from $80 billion in 2004. But despite increased aid, many countries remain so poor that worldwide 29,000 children die every day from easily preventable diseases such as malaria, polio and diarrhea. More than a billion people live on less than one dollar a day and more than a billion have no access to clean water.

Marian Tupy, Assistant Director of the Project on Global Economic Liberty at Washington's Cato Institute, says in the past four decades African countries have received close to $600 billion in aid, but that many are poorer now than 40 years ago.

"Although Asia received much less foreign aid -- some countries received almost none at all -- Asian countries have obviously developed over the past half a century, whereas many African countries have declined in their economic performance." Marian Tupy says countries such as Singapore, South Korea and Taiwan have emerged from poverty and now enjoy booming economies because they have opened to foreign trade and international competition. At the same time, he says, many African nations have declined under socialist systems and centrally planned economies.

Negative Effects of Foreign Aid

"When you look at Africa, research has found that economic growth and foreign aid are inversely correlated, which is to say that in Africa foreign aid has played a negative role rather than a positive one." Tupy says that foreign aid helps keep in power authoritarian rulers who control the aid money and have no incentive to reform. In some cases, he adds, warlords have used aid money to buy arms.

Sylvain Boko, a professor of economics at Wake Forest University in North Carolina, agrees that a lot of aid money was wasted in the past because recipients did not have the legal, financial and other institutions to manage it efficiently.

"At the beginning, after World War Two, aid was viewed as a way to throw money at a problem of lack of infrastructure -- building up the infrastructure, building up huge dams, roads, etc., without properly addressing the issue of the institutional setting that existed in these countries," says Boko. "Second problem: there was no leadership for a long time within these countries to adopt the proper incentives that would allow for the development, for example, of internal entrepreneurship and private markets that the aid can help with. Because when you give assistance and it's only going to the government, it is not going to trickle down. And so you need a solid private sector within the country, which is going to be the instrument to crate the jobs that will be needed to address the poverty problem."

But Professor Boko says the international donor community has learned from the mistakes and that programs in recent years have been more successful. He cites the example of Burkina Faso, a West African country that began introducing democratic institutions in the 1990s.

"I knew the country back in the 1980s and I went back after these systems have been put in place. What I saw were communities who are proud to be making decisions for themselves," says Boko. "People were telling me: 'We don't need outside aid as much. We only need things that we are not able to accomplish.' I went to a community in the mountains. They are using their own resources to build their own workshops, their own schools, their own health clinic and that is an attitude that I haven't seen in other countries."

Professor Boko says foreign aid programs are needed to help build institutions and governance systems that will control corruption, sustain development and eliminate dependence on foreign assistance. He says increasing aid amounts without these systems in place will not reduce poverty.

Coping With Conflicts

Mark Sundberg, a lead economist in the World Bank's development economics group, argues that many critics neglect to mention that years of war and conflict have perpetuated the misery of people in many African countries. He points out that much of the aid had to be used to avert humanitarian disasters, not to stimulate economy.

"Many of the aid instruments that are used - - for example, emergency assistance to deal with catastrophes, natural disasters, famine, etc. - - are not linked to growth or improving outcomes, education or health, but rather to avert disaster," says Sundberg. "Debt relief, which has been spoken of to a great extent, is also counted as aid to a country. But in fact if this is writing off non-performing loans that have been made in the past and badly used in the past, it's not a new resource transfer."

Sundberg says much of the $106 billion given to developing countries last year was to wipe clean all debts owed by the poorest countries, notably Zambia, Tanzania, Ghana and Cameroon. He says that poverty is a result of political, social, historical, institutional and technological factors that differ for each poor nation. Failure is part of trial-and-error learning. But many lessons have been learned, he says. The international donors now set definite goals for each country and monitor the results.

"Over the period from about 1997 to 2003, we've seen child nutrition improve for the poorest people in Madagascar by a rate of about 18 percent per year, which is a very rapid rate. We've seen child mortality fall by roughly six percent per year in Mozambique," says Sundberg.

The World Bank economist says the days when donors randomly poured money into developing countries are gone. There is a new emphasis on building better governance and fighting corruption. And governments are held accountable for the aid they receive.

This story was first broadcast on the English news program,VOA News Now. For other Focus reports click here.