How can aid achieve so much yet add up to so little?

A lot has already been said, written, tweeted, etc. about Bill and Melinda Gates’ highly anticipated annual letter, which paints a rather hopeful and optimism picture of the world, by dispelling three myths they believe keep the world from accelerating on the fight against global poverty and disease.

If you haven’t read it, the myths are:

(1) that poor countries will always be poor;

(2) that aid is a big waste, and

(3) that saving more lives means there’s less space and food for the rest of us, so it’s better to let some people die (I have yet to meet anyone who’s actually made this argument, but maybe I just don’t get out enough).

The couple argues that, contrary to popular belief, the world is getting better (in fact, they go so far as to predict that there will be no more poor countries (not people) left in the world by 2035), that aid is working, and that saving lives will actually help decrease the world’s population, because as people’s incomes grow and more of their children survive, they will choose to have less kids.

I have thoughts on all three, but wanted to comment on one specific thing that caught my eye (apart from the awesomeness that is Bill Nye the Science Guy).

I agree with Mr. Gates that the world is getting better. That’s definitely cause to celebrate.

However,  he makes the implicit statement that aid is the driving force behind these improvements:

“Aid also drives improvements in health, agriculture and infrastructure that correlate strongly with long-run growth. A baby born in 1960 had an 18% chance of dying before her fifth birthday. For a child born today, it is less than 5%. In 2035, it will be 1.6%. We can’t think of any other 75-year improvement in human welfare that would even come close. A waste? Hardly.”

Indeed, aid has proven to save lives. In the middle of his book White Man’s Burden, William Easterly (one of the best-known aid critics) lists several global health successes that were funded by aid, including:

  • “A vaccination campaign in southern Africa virtually eliminated measles as a killer of children.”
  • “An international effort eradicated smallpox worldwide.”
  • “A program to control tuberculosis in China cut the number of cases by 40 percent between 1990 and 2000.”
  • “A regional program to eliminate polio in Latin America after 1985 has eliminated it as a public health threat in the Americas.”

But, as Chris Blattman writes in his blog, there is very little evidence to suggest that aid has any impact at all on overall economic development.

So, how can individual aid projects achieve so much yet add up to so little? Could it be that not all aid is created equal?

In his letter, Mr. Gates differentiates between aid that is sent directly to governments (which he implies fosters aid dependence) from funding that is used for research into new tools like vaccines and seeds (which he says saves lives):

“The money America spent in the 1960s to develop more productive crops made Asian and Latin American countries less dependent on us, not more. The money we spend today on a Green Revolution for Africa is helping countries grow more food, making them less dependent as well. Aid is a crucial funding source for these “global public goods” (GPGs) that are key for health and economic growth. That’s why our foundation spends over a third of our grants on developing new tools.”

While it’s commendable that the Gates Foundation spends a third of its money on research and global public goods, it’s certainly not how most donors spend their money: of $125 billion in annual official development assistance (ODA) only about $3 billion goes to GPGs, or a whopping .02 percent!

That certainly the case for the World Bank. Here’s what CGD’s Lawrence MacDonald has to say about that:

“Many casual observers imagine that that the World Bank, as the world’s foremost development institution and with near global membership, is well placed to take the lead on GPGs. But since the bank was founded more than 60 years ago, most of its resources and decision-making have been locked up in single-country programs designed in discussions with government officials and coordinated by ministries of finance.”

Could it be that aid works but we’re just focusing on the wrong things?

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