“Nothing but leeches”? The Question of Foreign Aid

James Adams

Heather du Plessis-Allan does not think that Jacinda Ardern should have taken a New Zealand Air Force plane to visit the Pacific Islands Forum in Nauru. Pacific Island nations, in her view, “are nothing but leeches on us.” Countries in the region, apparently, “don’t matter” and only want our money.

Predictably and justifiably, these comments have been widely lambasted. The radio host was referred to the Broadcasting Standards Authority and has been the subject of a number of critical articles. Authors more persuasive than me have lamented how this sort of rhetoric is reminiscent of the 1970s, when police raided the homes of many Pacific Islanders living in New Zealand in a misguided effort to crack down on overstayers. Others have emphasised the benefits that we all experience thanks to our links to our Pacific neighbours.

A Stuff.co.nz journalist even read a report from the Ministry of Foreign Affairs and Trade to find out how much we currently spend on the Pacific Islands: $339 million in 2018/2019. It was pointed out that this is only 0.4% of the government’s annual budget. Of course, had this journalist continued to look into this area, he would have discovered several other factors that should also inform our response.

How effective is aid?

For more than half a century, there has been a rigorous debate in academia and politics as to the effectiveness of foreign aid. Authors, such as William Easterly, have noted that foreign aid can encourage dependence and promote corruption. This is certainly accurate in some circumstances: as Esther Duflo and Abhijit Banerjee discuss in their book Poor Economics, abstinence-based family planning advice can lead to women having children earlier, giving out free mosquito nets can discourage their use, and the unthinking provision of food by external organisations can have deleterious side effects for local farmers.

Similarly, there are plenty of examples of expensive and unnecessary purchases being made with foreign development money.  It was alleged, for instance, in the early 2000s that Malawi’s government spent ₤1.7 million of aid money on Mercedes-Benz limousines. The Norwegian government spent tens of millions of dollars on irrigation projects and a fish farm on the shores of Lake Turkana in Kenya. Inconveniently, the lake subsequently dried up (which the Norwegians should have seen coming). These wasteful and destructive uses of foreign development money tend to make people think that we should cut back on our aid spending.

There is another point of view, however, and one supported by strong evidence. It is worth remembering that, in 1966, half the world’s population lived in extreme poverty (if extreme poverty is defined as living on less than two USD a day). In 2017, that figure had fallen to merely 9%. It’s a similar picture if you look at violence or corruption, deaths from natural disasters or vaccination rates: life has got a lot better in the last fifty or so years.

This is no reason to be complacent. As Martin Luther King once said, injustice anywhere is a threat to justice everywhere. But it does help to recognise that money spent on poverty alleviation is not necessarily money wasted. In combination with resilient, democratic institutions and the right sort of regulation, development aid is a critical means by which we can make other people’s lives better – in the short term and in the long run.

Returning to the example given above from Poor Economics, Duflo & Banerjee highlight a number of interventions that demonstrate how aid can make a huge difference in people’s lives. Remedial education in India has improved reading ability markedly. Children in Kenya who were treated for intestinal worms for two years earned, on average, twenty percent more as adults. Improved water piping can reduce rates of diarrhoea by 95%, with associated reductions in mortality and demand for expensive and often ineffective medicines.

In each of these examples, the entity that was spending the money looked for evidence on how to intervene effectively – and there now an extensive body of academic literature on what works. So, just as it is possible to spend foreign assistance money wastefully, aid can also be a powerful force for good in the world.

What is New Zealand doing?

In essence, New Zealand is not particularly generous when it comes to contributing money to worthwhile causes overseas. Back when it was somewhat accurate to divide the globe into first, second and third-world nations, a United Nations report recommended that governments of wealthier nations commit to contributing 0.7% of their Gross National Income (GNI) in Overseas Development Assistance. New Zealand, and almost every other nation in the ‘developed’ world, were quick to agree.

Unfortunately, we presently give only 0.23% of our GNI to overseas development. This is about the same proportion as Australia gives, and we are less generous than the OECD average, which is 0.31% of GNI. The United States, several East Asian and almost all Eastern European nations give less than us, as a proportion of GNI. The US, the UK and Germany are the largest contributors in terms of how much they give in total.

Only Denmark, Norway, Luxembourg and Sweden have consistently given the 0.7% of their GNI. Each of these countries have their own domestic challenges, which no doubt put pressure on their governments to divert money away from the aid budget. And yet, they have taken the moral position that governments in affluent countries should play a significant role in alleviating suffering overseas. . New Zealand does not appear to have come to the same conclusion.

The majority (59%) of New Zealand’s aid spending goes to the Pacific. We also contribute towards aid projects in other regions (21%) and to multilateral projects (20%), such as the United Nations. The money is spent in a wide variety of ways, including a relatively small share that goes towards emergency relief (4%), a fair amount on infrastructure investments (9%), a similar amount on scholarships (10%), and a much larger amount on bilateral partnerships with foreign governments (33%). The Ministry of Foreign Affairs and Trade (MFAT) co-ordinates this work, and its priorities are set guided by the surprisingly brief Aid Strategic Plan. While this document includes a section on “delivering results and value”, the strategy contains more colourful, upbeat photos than details on New Zealand’s aid spending.

That said, the government has announced a “Pacific reset”, and more money was made available in the budget for overseas development assistance to the Pacific. $122 million will be spent this financial year on “increasing our aid to tackle the biggest global and regional challenges of our time”, according to the budget documents. $160 million will be available next year, and $197 million the year after. It is not nearly enough to meet the 0.7% of GNI target, but it is a move in the right direction. Unfortunately, the Opposition was quick to highlight causes in New Zealand that, in their view, should have received the funding instead. This misses the point that, done right, aid can have much greater benefits than other forms of government spending – it is just that those benefits are primarily enjoyed by people who aren’t New Zealanders.

That said, it remains unclear whether more money will necessarily mean better outcomes for those who need our help. MFAT’s website includes links to a number of evaluation reports, which suggests that the organisation is assessing the costs and benefits of New Zealand’s efforts overseas. On the other hand, none of these links actually connect to the reports – a technical issue that is indicative of how difficult it is for the public to get a grasp on these issues. Similarly, Treasury analysts had concerns about how MFAT were proposing to spend the money. In fairness to the Ministry, it seems these concerns were more applicable to the smaller amount of additional money that went to operational spending and re-opening the embassy in Sweden.

Conclusion

It is not unjustified to question the effectiveness of New Zealand’s overseas development assistance. There are plenty of examples of aid money being wasted, going to the wrong people, or doing actual harm to the people it is meant to help. Getting good information about the activities of the Ministry of Foreign Affairs and Trade isn’t straightforward, despite more money being allocated to that agency.

However, these concerns should not be used to justify derogatory rhetoric, such as the recent display of narrow-mindedness by du Plessis-Allan, or some of National’s criticisms of the 2018 Budget. The small gifts to charity and the larger contributions by governments have had a substantial impact on lifting millions out of poverty in the last fifty years – and there are plenty of opportunities for New Zealand to live up to its promises and take a more active role in ensuring that other people, wherever they live, enjoy the quality of life that most of us enjoy.

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Featured image: https://www.radionz.co.nz/international/pacific-news/271859/samoa-fiji-slanging-match-risks-obscuring-pacific-wide-issue