One of the most controversial questions regarding foreign aid is the effect that it has on good governance in developing countries. After the end of the Cold War, primarily Western donor countries attached conditions to their aid to developing countries. These conditions included respect for human rights, elimination of corruption, enhanced property rights, and the promotion of democracy. I think that this topic is interesting because it seems as if foreign aid has done more to impede good governance.
Advocates believe that foreign aid will help lead to political reforms through greater engagement, allowing for donor countries to lobby for changes in recipient countries, enhance social development, and ensure accountability. However, detractors argue that foreign aid will increase corruption, limit accountability, and inhibit the implementation of much needed changes in governance. These considerations lead me to expect that greater amounts of foreign aid will have a negative effect on measures pertaining to good governance in developing countries. In order to test my hypothesis on how greater amounts of foreign aid will have a negative impact on measures dealing with good governance, I will be examining the amount of foreign aid and various measures of governance in fifty-four African countries. I will be looking at Africa because Africa is the poorest region in the world.
Furthermore, these states have several historical similarities between them, with nearly all being colonized by European powers and many having turbulent political histories. I will be using data collected by Freedom House (2015), the Organization for Cooperation and Economic Development (2015), and the Corruption Perceptions Index (2015).The data in the table supports my hypothesis that countries receiving large amounts of foreign aid have poorer governance. In the data collected from Freedom House, about one third of the countries had a ranking of “Free”.
While about a fifth of the twenty countries with the highest amount of foreign aid scored a rating of “Free,” the greatest percentage of countries with the highest rating received the lowest amounts of foreign aid. An interesting observation from the table is that countries receiving moderate amounts of aid had the lowest percentage of countries with a “Free” rating. Furthermore, the last twenty countries with the greatest amount of aid only had twenty percent with a “Free Rating.
” Another metric that validated my hypothesis was the data from the Corruption Perceptions Index. The data collected shows that countries receiving the least amount of foreign aid received a score of 38.27.
An interesting observation is that within this average, there were several countries whose score was on par with countries in Europe such as Latvia and Malta, and Botswana was almost on par with the average score for Western Europe (CPI 3,7). The countries with moderate aid had a score lower by five points, and the countries with the greatest amounts of aid had a slightly lower score. The middle countries were mostly clustered within a range between a score of 37 and 17 while countries with the largest amounts of aid had a greater range of scores. While countries such as Sudan had scores as low as twelve, countries such as Rwanda and Senegal had scores on par with many European countries (7).
A final metric on good governance that I used data from was the Index of Economic Freedom World Rankings from the Heritage Foundation. Despite the Heritage Foundation having a bias for right-of-center economic policies, I felt that factors used in calculating the values such as property rights, labor freedom, and business freedom were pertinent and could be considered part of good governance. This data further supports my hypothesis that countries with more foreign aid have worse governance. The countries with the least amount of foreign aid had an average score of 56.13.
An interesting observation is that countries such as Mauritius and Botswana had scores on par with many highly developed countries, such as Estonia and Austria, respectively (Heritage 5). The middle countries had a score of about 52.16, which is lower than for countries that received the greatest amounts of aid. While donor countries believe that their aid will be used to improve non-political programs such as education, health care, and infrastructure, in reality greater amounts of foreign aid enable greater human rights abuses. One reason is that foreign aid could be repurposed towards elites and security services, and these groups would be more likely to violate human rights in an effort to maintain access to aid money. Another reason that aid programs could be used to punish dissent.
For example, government officials in Ethiopia deny access to “seeds, fertilizer, agricultural land, credit, food aid, and other resources for development” in an effort to control the population and punish dissent (Human Rights Watch). Furthermore, aid can also be used to gain greater support for autocratic regimes by giving aid money and jobs to people who support the government. According to evidence discovered by Human Rights Watch, part of the $3 billion from the Protection of Basic Services Program that was intended to give local governments money for agriculture, roads, and education is used to entice teachers and farmers to join the ruling party, despite prohibitions against the aid being allocated based on political affiliation. There are several reasons as to why increased foreign aid has a positive correlation with corruption. One possible reason why corruption increases is because aid that is intended to benefit the people is instead used to give government officials excess salaries and/or increase the bureaucracy. For example, legislators in Liberia are given a salary between $12,000-15,000 per month while civil servants get a salary of $125 per month.
However, 54% of Liberians live in poverty, and 18% live in extreme poverty (Front Page Africa). This highlights the idea that foreign aid often does not reach those who most need it, but instead lines the pockets of corrupt governments. Another reason why corruption increases is because it contributes to a “conflict of interest” in many countries (FPA).
This idea permeates many aspects of a developing country’s national culture. It allows for politicians to line their own pockets, siphoning off aid money from services such as education and healthcare. Furthermore, governmental corruption alienates the public, while also creating the sense that they must “eat their own too, nurturing the culture of corruption in society” (FPA). Foreign aid also enables corrupt politicians to become millionaires. This impedes the democratic development of country’s receiving such aid because contenders for top posts will fight over the spoils of corruption, leading to greater instability and possibly civil unrest. Finally, it also leads to the disenfranchisement of the poor majority, furthering instability. It is argued that in developing countries like Liberia, the government is “of the rich, by the rich and for the rich with no chance for poor citizens.” For example, a presidential candidate in Liberia has to pay significant sums of money in order to campaign, including paying a $100,000 bond (FPA).
Economic freedom is also impeded by large amounts of foreign aid. Large amounts of foreign aid enable governments to maintain poor and/or highly interventionist economic policies. Because their economies are coddled by aid, the underlying problems within their economies are not fixed. One such problem is very little property rights, which leads to raising capital being very difficult. Local police take advantage of this lack of property rights, harassing “business owners into bribes and without strong property rights and fair courts to settle disputes, much of these economies are little more than a black market” (Mises). This, coupled with the fact that many African countries have hostile business environments, forces many companies to stay in the informal “grey” or “black” markets. In such markets, a company operates out of a country’s regulatory framework. This harms the economic development of African nations because registered companies have “greater productivity and investment, create more jobs and growth, and enjoy legal protection against fraud and themselves and their customers,” but the informal economy accounts for “between 50 and 80 percent of Africa’s GDP” (Press).
Greater amounts of foreign aid will have a negative effect on measures pertaining to good governance and developing countries. My research has shown that this statement is correct. In all three metrics I used, the countries that received the largest sums of aid had the worst scores. There are several possible reasons for why this is true.
Human rights violations are more likely to occur because aid money could be used to punish opposition and reward supporters. There is also an increase in corruption, for politicians are more likely to use the aid to increase their salaries and/or enlarge the government, impeding access to foreign aid by those who need it the most. Furthermore, a culture of corruption is nourished, with the people also wanting a share of the spoils. Finally, economic freedom is hindered, because key aspects of economic freedom such as property rights are hindered, leading to difficulties in raising capital.
In conclusion, greater amounts of foreign aid has a negative effect on measures of good governance, such as human rights, corruption, and economic freedom.