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Is aid the best way for rich countries to help the developing world?


Oliver Buston

Has anything of substance come out of L'Aquila for the world's poor? Today's announcement of a deal to support farmers in poor countries is potentially one of the brighter moments. The aim of the $20bn ($12bn) package is to help poor countries feed themselves rather than us doling out millions in food aid to keep them alive. And one day soon they might even be able to feed us, too.

Barack Obama showed the global leadership expected of him in bringing this deal to the table and said he was doubling US aid for agriculture. The question now is how much of the $20bn is really new money? We're still pushing governments to clarify where the funds will come from.

A welcome point about the food security deal is the emphasis it puts on making aid for agriculture more streamlined and effective. There have been hugely positive developments in the past decade, with smart aid being channelled in support of improved leadership in developing countries. The old clichés of aid propping up corrupt dictators no longer hold true.

The field of agriculture has seen some impressive results. The Alliance for a Green Revolution in Africa (Agra) is an initiative funded by international donors including the Bill and Melinda Gates Foundation and the Rockefeller Foundation. It has been working to boost agricultural productivity in Africa by training smallholder farmers, supporting the development of high-yielding seed varieties, and ensuring that farmers have access to good quality seeds, tools, and fertiliser. Since 2006, Agra has trained and certified more than 5,000 new agri-dealers and aims to reach 9,000 by 2011. This is having a real positive impact on farmers: in 2006 in western Kenya, a farmer had to travel an average of 17km to an agri-dealer to purchase seeds and fertiliser; today that distance is an average of only 5km. There are many more such examples of smart aid and the initiative on food security will confirm that increasing trend.

And at the G20 summit in Pittsburgh in September, President Obama will get the opportunity to accelerate what he helped start here in L'Aquila.

The writer is the Europe director of One, the advocacy group co-founded by Bono


Fredrik Erixon

No, it will not matter much for development in poor countries if small and great powers in the G8 cheat on their Gleneagles pledge to boost foreign aid. The simple reason is that increasing aid never has been, and probably never will be, a source of genuine economic growth in developing countries.

If history is our yardstick, aid should be scaled down: not even the greatest enthusiasts of foreign aid can produce evidence demonstrating beyond doubt that aid has had a discernible and positive effect on development in poor countries. In fact, a dispassionate account of evidence from 50 years of aid-giving strongly suggests that governments should stay away from it.

If the governments of the rich G8 nations were genuinely determined to boost growth in Africa and other poor regions, a useful first step would be to stop spraying their own inefficient farmers with subsidies and take away their tariff protection.

Development is about behavioural change. Countries are poor because they have economic structures and political systems that reward unproductive economic behaviour. To grow economically, countries need to reform, root and branch, their economies.

Time and again we have witnessed the power of economic reforms for development. When eastern Europe, China, India, Chile and others opened their economies to trade and investment, and did away with thousands of regulations that strangled new and old entrepreneurs, growth soared. Such growth sustains itself. It spurs new wealth and revenues not only at the time the reforms are implemented but in the following years.

In poor countries that seriously reform economic policy and consequently enjoy sustained development, aid is unnecessary. At best, it may have only a marginal effect on development.

On the other hand, in poor countries with political leaders who are unwilling to change, aid tends to cement bad economic and political structures that perpetuate poverty. Aid has predominantly been given to the second category of countries. That is the sad reality.

Fredrik Erixon is the director of ECIPE, a world economy think-tank based in Brussels

The pledges Gleneagles

*At the G8 summit at the Gleneagles Hotel in Scotland, in July 2005, leaders agreed to write off the $40bn owed by 18 highly indebted poor countries to the World Bank, the IMF and the African Development Fund.

*The G8 members from the European Union also agreed at the Gleneagles summit to reach a collective foreign aid target of 0.56 per cent of their gross domestic product by 2010 and 0.7 per cent by 2015.