The United States spent $28.7 billion dollars in 2009 on official development assistance, more than any other country in the world. There is no denying that many people in poor nations live in desperate conditions and Americans rightly want to help them improve their lives.
In an effort to measure progress toward this end, the United Nations created a set of goals to be attained by 2015, known as the Millennium Development Goals (MDGs), which include objectives such as lowering child mortality rates and providing universal access to education.
On Friday, July 30th, the Obama Administration released the United States’ strategy for meeting the MDGs. Although the report proclaims that the U.S. “fully embraces the MDGs”, the MDGs themselves are peculiarly downplayed. They are not listed or described in any detail. The U.S. report does not really lay out a strategy for meeting the MDG targets. Instead, it describes the U.S. “approach” to the MDGs, which is simply a reiteration of U.S. aid policy. Indeed, the strategy is more a laundry list of current and proposed U.S. aid projects and programs accompanied by their intended outcomes than a strategy for meeting any particular MDG, much less all of them.
This is not a critical observation. On the contrary, it is welcome. The MDGs, while capturing the imagination of the general public and serving as a useful fundraising tool for the U.N. and development-oriented governmental and non-governmental agencies, falls far short of an actual development plan or comprehensive strategy. For the most part, the MDG targets measure the symptoms of poverty. Improvements can be indicative of development, but they can also simply be an artificial boost facilitated by aid but lacking the permanence of true development. In other words, would the achievement remain absent aid?
Moreover, aid is no guarantee for achieving the MDGs as the struggle to achieve the MDGs even with massive aid flows illustrates. According to the OECD, donors have provided over $343 billion (2008 dollars) in official development assistance to Sub-Saharan Africa since 1990 (the base year for the MDGs). As the U.S. MDG strategy observes, however, “In Sub-Saharan Africa, the absolute number of people living on less than $1.25 a day has increased substantially since 1990, to nearly 400 million.” Meanwhile some countries, such as China and India whose growth has driven MDG improvements in poverty reduction, have made MDG progress despite relatively low levels of aid per capita. Even in Africa, countries like Mauritius and Botswana have developed with relatively little aid while many large recipients have stagnated.
Unfortunately, the debate on aid at the U.N. generally ignores this complex reality. Discussions in the U.N. on strategies to attain the MDGs focus almost exclusively on redistributing wealth from rich to poor countries in the form of aid as opposed to encouraging poor countries to generate their own wealth. Indeed, one of the MDG targets for development simply measures increases in aid levels.
As the U.S. strategy rightly recognizes,
Progress toward the MDGs will be of little consequence if development gains are not lasting. To help make them sustainable, the United States will promote broad-based economic growth by helping countries formulate and implement pro-growth policies, promote trade, invest in infrastructure, and stimulate entrepreneurship.
Considering the emphasis placed by the administration on doubling U.S. development assistance, perhaps the most startling part of the U.S. strategy is the general acknowledgement of aid’s secondary importance in development, “We know that assistance, while essential, cannot bring about development in the absence of domestic policies and international flows of trade, investment, skills, and ideas that create opportunities for lasting economic growth..”
In short, the Obama Administration’s approach to attaining the MDGs is hardly revolutionary. Indeed, it seems to be a continuance of U.S. policy (albeit with new programs and funding flourishes) with a more accommodating tone toward the U.N.
Unfortunately, the strategy is also not revolutionary in its assessment of development assistance. One can point to numerous benefits of aid – a school built, a road paved, a child immunized. But is aid really the key to development? The evidence suggests otherwise. While aid may provide some temporary assistance, it is not correlated with long-term sustainable economic growth. By contrast, market friendly policies, such as those measured by the Index of Economic Freedom and other works like the World Bank’s Doing Business report, have been linked to long-term, sustainable economic growth and improvement of the MDGs themselves.
Moreover, aid itself can be counterproductive. In a review of the new book, The Aid Trap, the website AidWatch, summarizes the problem,
Not only does aid support bad policies and the government that created them, but by decreasing the reliance on taxes for funding aid removes incentives for reform. Why become a less corrupt, more business-friendly government when aid makes it unnecessary?
Aid stifles the private sector by hindering local entrepreneurship, decreasing reliance on market transactions and trade. It is often more profitable to work for an aid agency or a NGO than to start a business. Locals get squeezed out of business when an aid agency shows up, so instead of competing with aid agencies most try and join them. Why buy grain from the local farmer when a NGO is giving it away for free?
In sum, while aid may play a role in development, the private-sector is the source of wealth-creation. If it is to generate that wealth, the private-sector needs the freedom to work and aid can crowd out nascent markets and dissuade budding entrepreneurs in developing countries. While the administration’s MDG strategy report acknowledges the value of pro-market policies and the need to measure and evaluate aid programs, it willfully shies away from assessing the efficacy of past aid efforts.
In late September, world leaders will attend a U.N. summit to discuss the next steps in achieving the Millennium Development Goals. The Administration’s strategy makes clear that it is aware that “if we are to meet the ambitious objectives we have set, historic leaps in human development will be needed.” Historic leaps will be impossible if the U.N. focuses on aid, rather than policy change. A fundamental reevaluation of the U.N. approach is needed.
The best approach to eliminate extreme poverty is to discourage policies that stifle economic growth and promote policies such as free trade that encourage it. The United States should provide incentives for countries to pull themselves out of poverty by eliminating obstacles to free-market growth and by giving development assistance to countries that place a priority on good policy. Doing so would benefit countries truly seeking development and focus scarce resources on efforts most likely to contribute to development and progress toward the MDGs.
The Obama Administration’s MDG strategy generally acknowledges this reality. Will it have the boldness to promote this vision in September?
This post was co-authored by Caitlin Harman. Harman is currently a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm