From the 2014 Gates Annual Letter, "Three Myths That Block Progress for the Poor"
You may have read news articles about foreign aid that are filled with big generalizations based on small examples. They tend to cite anecdotes about waste in some program and suggest that foreign aid is a waste. If you hear enough of these stories, it’s easy to get the impression that aid just doesn’t work. It’s no wonder that one British newspaper claimed last year that more than half of voters want cuts in overseas aid.
These articles give you a distorted picture of what is happening in countries that get aid…What we see over time is people living longer, getting healthier, and escaping poverty, partly because of services that aid helped develop and deliver.
I worry about the myth that aid doesn’t work. It gives political leaders an excuse to try to cut back on it — and that would mean fewer lives are saved, and more time before countries can become self-sufficient…
One of the most common stories about aid is that some of it gets wasted on corruption. It is true that when health aid is stolen or wasted, it costs lives. We need to root out fraud and squeeze more out of every dollar.
But we should also remember the relative size of the problem. Small-scale corruption, such as a government official who puts in for phony travel expenses, is an inefficiency that amounts to a tax on aid. While we should try to reduce it, there’s no way to eliminate it, any more than we could eliminate waste from every government program — or from every business, for that matter. Suppose small-scale corruption amounts to a 2 percent tax on the cost of saving a life. We should try to reduce that. But if we can’t, should we stop trying to save lives?
You may have heard about a scandal in Cambodia last year involving a bed net program run by The Global Fund to Fight AIDS, Tuberculosis and Malaria. Cambodian officials were caught taking six-figure kickbacks from contractors. Editorial writers trotted out headlines like ”How to waste foreign aid money.” One article mentioned me as someone whose money was being wasted.
I appreciate the concern, and it’s a good thing when the press holds institutions accountable. But the press didn’t uncover this scheme. The Global Fund did, during an internal audit. In finding and fixing the problem, The Global Fund did exactly what it should be doing. It would be odd to demand that they root out corruption and then punish them for tracking down the small percentage that gets misused.
There is a double standard at work here. I’ve heard people calling on the government to shut down some aid program if one dollar of corruption is found. On the other hand, four of the past seven governors of Illinois have gone to prison for corruption, and to my knowledge no one has demanded that Illinois schools be shut down or its highways closed.
Melinda and I would not be supporting The Global Fund, or any other program, if the money were being misused in a large-scale way. Malaria deaths have dropped 80 percent in Cambodia since The Global Fund started working there in 2003. The horror stories you hear about — where aid just helps a dictator build a new palace — mostly come from a time when a lot of aid was designed to win allies for the Cold War rather than to improve people’s lives. Since that time, all of the actors have gotten much better at measurement. Particularly in health and agriculture, we can validate the outcomes and know the value we’re getting per dollar spent…
Another argument from critics is that aid holds back normal economic development, keeping countries dependent on generosity from outsiders.
This argument makes several mistakes. First, it lumps different kinds of aid together. It doesn’t differentiate aid that is sent directly to governments from funding that is used for research into new tools like vaccines and seeds. The money America spent in the 1960s to develop more productive crops made Asian and Latin American countries less dependent on us, not more. The money we spend today on a Green Revolution for Africa is helping countries grow more food, making them less dependent as well. Aid is a crucial funding source for these ”global public goods” that are key for health and economic growth. That’s why our foundation spends over a third of our grants on developing new tools.
Second, the ”aid breeds dependency” argument misses all the countries that have graduated from being aid recipients, and focuses only on the most difficult remaining cases. Here is a quick list of former major recipients that have grown so much that they receive hardly any aid today: Botswana, Morocco, Brazil, Mexico, Chile, Costa Rica, Peru, Thailand, Mauritius, Singapore, and Malaysia. South Korea received enormous amounts of aid after the Korean War, and is now a net donor. China is also a net aid donor and funds a lot of science to help developing countries. India receives 0.09 percent of its GDP in aid, down from 1 percent in 1991.
Even in sub-Saharan Africa, the share of the economy that comes from aid is a third lower now than it was 20 years ago, while the total amount of aid to the region has doubled. There are a few countries like Ethiopia that depend on aid, and while we all — especially Ethiopians themselves — want to get to a point where that is no longer true, I don’t know of any compelling argument that says Ethiopia would be better off with a lot less aid today.
Critics are right to say there is no definitive proof that aid drives economic growth. But you could say the same thing about almost any other factor in the economy. It is very hard to know exactly which investments will spark economic growth, especially in the near term. However, we do know that aid drives improvements in health, agriculture, and infrastructure that correlate strongly with growth in the long run. Health aid saves lives and allows children to develop mentally and physically, which will pay off within a generation. Studies show that these children become healthier adults who work more productively. If you’re arguing against that kind of aid, you’ve got to argue that saving lives doesn’t matter to economic growth, or that saving lives simply doesn’t matter…
Let’s put this achievement in historical perspective. A baby born in 1960 had an 18 percent chance of dying before her fifth birthday. For a child born today, the odds are less than 5 percent. In 2035, they will be 1.6 percent. I can’t think of any other 75-year improvement in human welfare that would even come close.
To get there, the world will need to unite around this goal, from scientists and health workers to donors and recipient countries. If this vision is reflected in the next round of the United Nations’ Millennium Development Goals, it will help get everyone working on this milestone.
Many low- and middle-income countries will develop enough to pay for this convergence themselves. Others will need continued generosity from donors, including investments in health-related R&D. Governments will also have to set the right policies. For example middle-income countries should look at taxing tobacco, and at cutting fossil-fuel subsidies to free up funding for health.
Above all, I hope we can stop discussing whether aid works, and spend more time talking about how it can work better.