The problem with foreign aid

A lot of people, ranging from the respected Fraser Institute to African economists, regard foreign aid programs as mostly useless.

Others, like U.S. libertarian presidential contender Ron Paul, see foreign aid as an instrument that props up dictators — a view, sadly, that is substantiated by looking closely at the African continent.

Ron Paul notes that $70 billion in aid to Egypt over the years didn’t do much for the ordinary Egyptian, but did bolster the Mubarak bank account. In his words: “Foreign aid is taking money from the poor in rich countries, and giving it to the rich in poor countries.” A glib way of saying something that often is too true.

The 10 biggest annual recipients of U.S. aid are Afghanistan ($4.1 billion), Israel ($2.7B), Pakistan $1.88 billion), Haiti ($1.77 billion), Egypt ($1.55 billion), Iraq ($1.11 billion), Jordan ($843 million), Mexico ($758 million), Kenya ($680 million) and Nigeria ($615 million).

Of these, only Israel can be considered genuinely “stable”, with Jordan and Kenya marginal. Afghanistan is peaceful only as long as foreign troops are there, Pakistan is a questionable ally, Egypt is in chaos, Iraq is uncertain, and Haiti is a perpetual basket case. Not resounding triumphs of exporting democracy or helping the needy.

(In 1970, developed countries agreed to allocate 0.7% of their gross national product (GNP) to foreign aid, but few countries have lived up to this pledge. Canada allocates roughly 0.33% of its GDP to foreign aid, and in 2006 ranked 16th among 22 countries. That year the U.S. was (and still is) the world’s most generous aid donor in absolute terms, but only 17th in percentage of GDP.