George Ayittey on the Failure of Foreign Aid

Recently, the libertarians and conservatives on X are calling for an end to all foreign aid. This sounds like a cruel and unjust proposal until you start asking whether the billions we have spent on foreign aid have had a positive impact.

I believe it’s good that people are charitable to one another, but giving money to the wrong people at the wrong time under the wrong conditions can make situations worse. The Ghanaian economist George Ayittey argues that aid in its various forms given to the governments of developing nations has not been effective in reducing poverty or promoting growth. Western nations have been anything but stingy when it comes to providing humanitarian, military, and financial aid. Ayittey, in his free book Applied Economics for Africa, states that “…since 1960, the West has poured in more than [p. 167] $600 billion to support various programs [in Africa]. But all that foreign aid failed to spur economic growth, promote democracy, liberate the African people, or lift them out of poverty” (p. 167-168).

Why has foreign aid failed to promote economic growth in developing nations like those in Africa? Ayittey lays the blame on both the donors and the recipients. Donors and lenders fund programs that serve contradictory goals, they push the projects and programs they think the people need instead of consulting with the people about what they need, and aid is given to corrupt government officials who then embezzle the funds or waste them by funding unproductive state enterprises and vanity infrastructure projects. Richard Posner suggests that government-to-government economic aid may exacerbate the problems it aims to solve, serving as a bail out to help poorly run governments “…avoid grappling with the political, social, and economic conditions… that are impeding economic development” (p. 360). Magatte Wade writes that one of these conditions impeding economic development in African nations is the stifling regulations that prevent honest entrepreneurs from creating wealth and jobs. African nations have some of the worst business environments in the world. To those who argue that capitalism is the cause of the poverty in African nations, Wade says “Noooooo!!!!! We Africans are poor because we have not been allowed to create companies—precisely because of layer after layer of government bureaucracy that is profoundly un-African” (p. 107).

References

George Ayittey (2018). Applied Economics for Africa. Atlas Network. Retrieved from: https://www.africanliberty.org/appliedeconomics/

Gary Becker & Richard Posner (2009). Uncommon Sense: Economic Insights, from Marriage to Terrorism. The University of Chicago Press.

Magatte Wade (2023). The Heart of a Cheetah: How We Have Been Lied to about African Poverty—and What That Means for Human Flourishing. Cheetah Press.