Foreign aid is a failure

Of course, no amount of evidence can dissuade a true believer. Among the foreign-aid faithful is the Columbia University economist Jeffrey Sachs, author of 2006’s The End of Poverty and champion of the United Nations’ experimental (and controversial) Millennium Villages Project. Sachs acknowledges that foreign aid often fails, yet he still calls for the design of “highly effective aid programs.” He is short on details about the specific changes that would distinguish those ideal programs from existing, mistake-riddled boondoggles.

Sachs takes it on faith that aid programs can be made effective. Unfortunately, he and his acolytes have failed to grapple with the fundamental reason so much aid fails: Governments simply do not have enough information to know what each dollar’s best use would be. People are forced to compete for resources in the political arena, and money ultimately goes to those with the most connections, not to those most in need.

Aid providers also have trouble figuring out which investments are most appropriate for a particular developing economy, so money ends up being poured into bad projects. These white elephants not only fail to encourage economic growth but frequently divert scarce resources to destructive ends. Aid money becomes a tool of oppression rather than empowerment. As Moyo put it in a 2009 Wall Street Journal essay, “A constant stream of ‘free’ money is a perfect way to keep an inefficient or simply bad government in power.”