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Time to Stop Fooling Ourselves about Foreign Aid 
 A Practitioner’s View
by Thomas Dichter
Thomas Dichter is the author of 
Despite Good Intentions: Why Development Assistance to theThird World Has Failed
(Amherst and Boston: University of Massachusetts Press, 2003). He has workedin international development since 1964 in a variety of institutions including the World Bank, the United Nations Development Programme, the Peace Corps, and numerous nongovernmental organizations.
No. 86
The foreign aid industry has for decadestried one approach after another in aneffort to make aid work. A career of fieldexperience in the aid industry, however,confirms the empirical record that aid isunimportant to growth or poverty reduc-tion and suggests that aid is not likely towork in the future. The belief that foreignassistance has been generally ineffective,moreover, appears to be widespread amongaid practitioners with long field experience.The current effort by the UnitedNations to double worldwide aid flows ispart of a pattern to reinvent foreign aid.Since the 1950s, the industry has alternate-ly focused on promoting industrialization,agriculture, poverty reduction, health, insti-tutions, and so on. The UN has sponsorednumerous grandiose resolutions that havealso failed to spur development. We havecome to the point where new ideas on mak-ing aid work are recycled old ideas.In practice, the aid industry has notchanged much. The ineffectiveness of aid haslittle to do with a lack of resources. Its roots lieinstead in the complex nature of poverty andthe flawed nature of institutions and govern-ments in poor countries. The aid industry’sbureaucratic continuing growth also under-mines effectiveness and accountability. Richnations should reject calls for increasing aidand should probably reduce such funding.
September 12, 2005
Executive Summary 
 
Introduction
In January 2005 the United Nationsissued a massive report calling for a doublingof aid to developing countries between now and 2015 in order to conquer poverty.
1
Despite the increasing political correctnessof advocating more development aid,
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andthe promises from aid donors that they willbe more “selective” in disbursing funds in thefuture, the developed nations should beskeptical about going beyond the amountsalready committed and should consider a reduction in aid funding.I am an aid practitioner with close to 40 yearsexperience in developing countries at practically all levels, from the “field” up through the worldof international nongovernmental organiza-tions (NGOs); the U.S. Agency for InternationalDevelopment; aid subcontractors in Washing-ton, D.C.; foundations; and multilateral institu-tions like the World Bank and the UnitedNations Development Programme. I haveworked on aid projects and helped design, trou-bleshoot, and evaluate them. I have directly observed aid programs in more than 50 coun-tries. The only part of the development aid uni- verse that I have been spared is poverty itself,though I do know what dysentery, tapeworm,hepatitis, and malaria feel like.Somewhat late in my career I have come tobelieve that
as a means of reducing world poverty
,aid has not worked, is not likely to work in thefuture, and
cannot 
work. If I am one of the few aid insiders to so conclude, I am not alone inharboring private doubts about the effective-ness of aid. I don’t know a single colleaguewith long field experience who believes whole-heartedly that aid has been effective.But before reviewing the dismal record of aid’s effectiveness, there are a couple of issuesthat need to be cleared out of the way. First, if aid cannot solve the problem of poverty, it canbe argued that aid has humanitarian value, asa means of helping people in times of disasteror to prolong human life (e.g., immunizationprograms, food assistance). But let’s be clear:humanitarian assistance is not the same asdevelopment aid aimed at poverty reduction,and indeed in some ways humanitarian aidcan exacerbate overall poverty at least from a statistical standpoint (e.g., the continuinglarge number of poor people in the world is inpart due to improvements in health andlongevity among the poor).Second,
 saying that aid cannot solve world pover-ty is not saying that world poverty is doomed to con-tinue
. As I discuss in the next section, the currentstate of world poverty is gloomy, especially inSub-Saharan Africa, but there have beenimprovements, and those are likely to continuein various places, albeit along a somewhatbumpy trajectory. The fact that poverty reduc-tion has occurred in some places and not inothers attests to the unimportant role of aid,since in those countries where aid has dominat-ed the national budget (e.g., Haiti, Malawi),poverty statistics have not brightened, while inthose where aid has played a minor role (e.g.,India, China), poverty has often come down. A thorough analysis of what brings aboutpoverty reduction is not the aim of this paper.Suffice it to say that we do have answers tothat question by now and they are not, as weused to say, rocket science. Lasting poverty reduction takes time, and it takes timebecause it is a function of economic growth.Trickle down works imperfectly, but it doeswork. And sustained economic growth islinked to the rule of law (a legal and regulato-ry framework one can count on), good gover-nance (a government of accountability andtransparency), and leadership that is relatively un-self-interested.
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Those attributes are inturn related to education and, in ways wehaven’t fully understood yet, to history andculture.
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Finally, many poor countries wouldprobably move forward faster if world tradearrangements were based on less protectionand fewer preferential arrangements.
A Brief Review of WorldPoverty Trends
The latest data suggest that world popu-lation will increase by 40 percent to 9.1 bil-
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As a means of reducing worldpoverty, aid hasnot worked, isnot likely to workin the future, andcannot work.
 
lion in 2050, with virtually all of that growthin the developing world, especially the 50poorest countries that “already struggle toprovide adequate shelter, health care andeducation.”
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In contrast, the population of richer developed countries will remain most-ly unchanged at 1.2 billion. One clear resultof that situation will be an increase in thepressure to immigrate (legally and illegally)to the richer countries, and rich countries’fear of that is perhaps one of the biggestunspoken political reasons behind the pushfor more aid. But world poverty trends over just the last 20 years of aid suggest that allarguments for more aid, whether rational oremotional, are not well-founded.One of the most thorough reviews of poverty statistics, covering the period1981–2001, gives us some gross numbers,many of which are not encouraging.
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In fact,the good news on poverty reduction is con-fined to the rather arcane issue of whether weare looking at “extreme” poverty (defined as$1 per day or less) or just plain poverty (between $1 and $2 per day). All the evidencesuggests that the number of people at orbelow $1 a day has declined by as much as390 million people. But, as the same reportstates, “More people living near $2.00 per day became worse off in the period (1981–2001)than the number who gained.”
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 Almost all of the drop in the number of “extremely poor”occurred in China and had little to do withdevelopment aid. In contrast, the number of extremely poor elsewhere in the developingworld went from 840 million to 890 million,and in Sub-Saharan Africa it went from 164million to 316 million. In 2001 Sub-Saharan Africa had about 29 percent of the world’sextremely poor; in 1981 it had 11 percent.The report suggests that getting over the$2 line is the real challenge, and here againthe data are not encouraging. The number of people in the world who live under the $2threshold has gone from 2.4 billion to 2.7 bil-lion (42 percent of the world’s population),with the most dramatic change being the“bunching up” of the poor who live onbetween $1 and $2. In 20 years that groupgrew from 1 billion to 1.6 billion people, a 60percent increase in absolute terms. In short,while many people (skewed by China) havemoved from the $1 threshold to a zonebetween $1 and $2, for the time being, they are not making the leap that would get themout of poverty to a state of sustained eco-nomic well-being. Even in high-growth, low-income countries, poverty eradication is a slower, more complicated process than theadvocates of aid doubling like to think.On other measures of poverty there is also a mix of good and bad news. Life expectancy isgenerally up in the developing world as a whole, as are the immunization of childrenand access to safe drinking water. Fertility ratesare declining, and in general economic growthrates are improving everywhere. Even Sub-Saharan Africa might see some gains. Currentper capita growth estimates for 2006–15 sug-gest that Sub-Saharan Africa could grow at a 1.6 percent rate, which would mean that in2015 about 70 million Africans would be liftedabove the $1 extreme poverty line.
8
But that isonly 22 percent of the current 316 million inthat category. The tide is rising, it is true, but itis rising more slowly than population growth,and new problems continue to pile up on topof old ones, beginning, of course, with the pan-demic of HIV/AIDS. In addition, worldwide,almost a billion adults are illiterate, schoolcompletion rates for the poorest children aredismal (which bodes especially ill for thefuture), and 1.2 billion people still have noaccess to safe drinking water.
The Aid Industry Has TriedAlmost Everything
 A discussion of aid’s ineffectiveness is bestbegun by reviewing the history of efforts tomake aid more effective. The aid industry hasfor decades tried one thing after another tomake aid work better, and the underlyingbelief that the right formula is within reach isone of the things that has kept it going.During the 1950s we believed in importsubstitution and industrial development. We
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I am not alone inharboring privatedoubts about theeffectiveness of aid.
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