Where does the money go?

The foreign spending policy of the United States is an ongoing debate, which incites emotion and political agendas from both sides of the issue. “Does foreign aid actually help the poor?”

In a recent article published by the National Post it stated, “True aid bestows benefits…. eases rich-nation guilt and makes those who favor government solutions very happy.”

According to Jeffrey Sachs in his book The End of Poverty, 30,000 children die every day from the diseases and malnutrition that go along with extreme poverty. Meaning, nearly 2 million children die a year from diarrhea, which could be easily prevented with 10-cent doses of oral rehydration therapy.

Also, the West has already spent $2.3 trillion on foreign aid over five decades, and babies with diarrhea are still not getting the 10-cent doses of oral rehydration therapy. Even in what the World Bank calls an aid success story like Ghana, 50 percent of babies with diarrhea never receive oral rehydration care.

The point is--this money never reaches the desperate poor. And the circular response when asked how can we help the poor in places like Uganda, Somali, Darfur--is to give more money. Yet it doesn’t answer the question of where the original funds went.

According to the Africa News, “not long ago the G-8 summit, in July 2005, agreed to double aid to Africa. They also agreed to double foreign aid a whole by the year 2010, and the aid campaigners will then ask for doubling aid again after 2010.”

Unfortunately, the mania with the amount spent substitutes for customer feedback, incentives, and accountability. It substitutes for focus on whether the money actually reaches the poor, so a second tragedy occurs. It also creates the perverse incentives in aid agencies just to spend money, because if money is the indicator of success, then all the incentives are just to spend aid money and not get results. So here in lies the conundrum.

Nobel prize winner in economics, F.A. Hayek said, “the success of action in society depends on more particular facts than anyone can possibly know.”

According to experts, “the Sub-Saharan Africa is an aid magnet--$400-billion has flowed in since 1970.” If foreign aid worked, Africa would be a prosperous nation, yet, living conditions continually deteriorate in poverty stricken areas like Uganda.

The African Times states monies allocated to help the migrant farmers in Africa went instead to build a new road for mining and drove “the few existing farmers out of business. This is the kind of mess-up on the ground that happens when you try to plan from the top down.”

While African baby stomachs remain distended from malnourishment—wars escalate from factions within corrupt government— the monies allocated to end world hungry and poverty will never produce the desired results. This will continue as long as hidden agendas go unchecked and propaganda in government continues to intercept the funds. That’s why you’ll often find fleets of Mercedes for government officials in aid-receiving nations while the poor stay poor.

When Austrian philosopher, Karl Popper was asked if there could ever be any sort of comprehensive plan to remake society in a way that eliminates poverty, he said, “it’s not reasonable to assume that a complete reconstruction of our social system would lead at once to a workable system.”