The new U.K. coalition government’s strong ongoing support for foreign aid may be one area where it is out of touch with the British electorate. According to a recent poll, the British public identifies foreign aid as one of the top three priorities for spending cuts. Nearly half the respondents indicated that they would like to slash wasteful overseas aid.
The late Peter Bauer, one of the greatest development economists of all time and an adviser to Prime Minister Margaret Thatcher, argued relentlessly against ineffective development aid, noting famously that in practice, foreign aid is equivalent to taxing the poor in richer countries to support the rich and powerful in poorer countries. In fact, the vast flows of foreign aid channeled through dictators and despots over the past decades have contributed to a vicious cycle of corruption, anemic economic growth, and pervasive poverty. At least $1 trillion in foreign aid has flooded Africa since 1950, but more than half of the African population still lives on less than a dollar per day.
The bulk of economic evidence shows that, while there may be a role for assistance from donor nations, the key to development lies in the hands of the governments of developing countries. They must first remove obstacles to development by adopting policies that bolster entrepreneurship, good governance, and the rule of law, as shown in findings of the Index of Economic Freedom. Indeed, over the last decade, the countries with greater improvements in economic freedom achieved much higher reductions in poverty.
The U.K. coalition government may want to rethink its seemingly knee-jerk support for more aid in light of the evidence from around the world—and, of course, the wisdom of the British people who elected them.