Jason Hickel – The scandal of foreign aid

If we look at the data, it becomes clear that poor countries are developing rich countries, not the other way around

Jason Hickel is an anthropologist who works on political economy and global justice. He is the author of a number of books, including most recently The Divide: A Brief Guide to Global Inequality and its Solutions which was reviewed in BRAVE NEW EUROPE

Cross-posted from Jason Hickel´s blog

*This is the text of a speech delivered at the Cambridge Union in defense of the proposition: This house believes that British aid is not working.

Ladies and gentlemen, it is vital that we distinguish clearly between two very different critiques of aid that are out there – one from the far right and one from the mainstream left.

Both of them are inadequate.

In these Brexity days of course the right-wing narrative is obviously the most prominent – splashed as it is across the tabloids.  And I’m sure you know it well.  Aid is a waste of our money, it says.  We’re sending an eye-watering £14 billion pounds per year to poor countries in Africa and Asia.  But why should we shoulder responsibility for the welfare of people in these far-flung lands?  Plus, the only reason they’re poor in the first place is because their governments are corrupt… it makes precious little sense to throw money down that drain.

This argument – favoured by hucksters like Nigel Farage and Tommy Robinson – is clearly shot through with nationalist sentiment, laced with xenophobia, and devoid of basic human compassion: pull up the drawbridge, they say – it’s every nation for itself.  If the world beyond our shores is crippled by poverty and suffering, it has nothing to do with us.  Not our problem.  We’re better off spending that money on ourselves.

This has always struck me as completely bizarre.  The right lambasts aid as out of step with their national economic self-interest.  But in fact nothing could be further from the truth.  And this is where the standard left-wing argument comes in.  It’s not aid itself that’s the problem, they say.  Aid is a vital expression of human solidarity.  It’s how aid is used that’s wrong.  It gets leveraged to advance neoliberal agendas, it ends up lining the pockets of British companies, and it does precious little to help actual poor people.  

And in this they’re absolutely right.  A huge chunk of British aid – billions of pounds each year – goes not to poor people but rather to an old colonial-era investment firm called CDC.  CDC’s investments include luxury hotels, shopping malls, restaurant chains and advertising companies.  They claim that all of this will end up trickling down to the poor – but there’s exactly zero evidence for this, and in fact even the National Audit Office in a recent report agrees that it’s a lie. 

But there’s more.  Of all the UK aid spent on procurement, a paltry 3% of it goes to suppliers in the global South – the countries our aid is supposed to help.  Meanwhile a staggering 90% gets paid to British firms.  Boomerang aid, we might call it.  And it’s a booming business. 

Consider for example the single biggest recipient of this boomerang aid: Adam Smith International, a right-wing, for-profit firm whose main purpose is to peddle free-market extremism around the world.  They’ve been handed more than half a billion pounds in aid-funded contracts over the past few years; more than the entire amount spent on human rights and women’s equality organisations, and twice the amount spent on HIV programs.  The company’s profits have soared while suckling on the teat of British aid, as its directors pay themselves towering six-figure salaries. 

This is the real scandal, then: that aid money is taken from the pockets of British taxpayers and sent straight into the already-gilded coffers of the British business elite.  It’s a shameful abuse of our most compassionate impulse.

But this is just the tip of the iceberg.  While British aid is supposed to be “independent” from British interests, the government’s actual policy on this explicitly aims to use aid – and I quote – “to strengthen UK trade and investment opportunities around the world.” 

So what does this look like?  Well, instead of helping poor countries build up the public services that people need, like the ones we enjoy here in Britain, DFID is leading a push for for-profit companies to deliver private schooling and healthcare across Africa and Asia.  Having faced stiff opposition trying to privatize public services at home, the government are taking their agenda abroad – despite the avalanche of evidence on how destructive this approach has been. In fact, the UN itself just released a report concluding that privatization has caused immense harm to the poor while eroding basic human rights.  And yet DFID marches on. 

And it’s not just privatization.  Aid money is being leveraged to get poor countries to adopt so-called “business-friendly” laws that slash social and environmental protections.  It’s being poured into Private Finance Initiatives that shackle governments to high-interest debts.  It’s being channeled into private equity firms that operate out of tax havens.  And, perhaps worst of all, hundreds of millions of pounds are being pumped each year into fracking and other fossil fuel projects around the world, helping companies like BP pry open oil and gas reserves abroad, giving lie to our government’s promises to tackle climate breakdown.

So, is British aid working?  Well, it depends on who you are.  It’s working quite nicely for well-connected British firms, for oil barons and for slick investors looking to break their way into new markets – something that the Farages of the world bizarrely fail to appreciate.  But not so nicely for poor people hoping to access the basic goods they need to live decent lives. 

But I digress.  This is not in fact the argument I want to make to you tonight.  There’s something else – something more important, something that transcends this partisan squabble. 

My opponents have stood up here and tried to convince you that British aid is making a real difference to the lives of the poor.  And I have no doubt that on some level they’re right. Look past the handouts to British firms, look past the privatization, the debt, the destructive fossil fuel investments… somewhere down the line at least some of that 14 billion pound budget must be doing something to help the wretched of the earth. 

So, let’s imagine, just for the sake of argument, that they’re correct.  In fact, let’s go further and imagine that every single pound of British aid directly improves the lives of the poor.  Even if that were the case, I would still defend the proposition that aid is not working.  How can I say this?  Because the aid industry fundamentally misses the point about what causes poverty in the first place, and therefore can never hope to solve it.  It has the story all wrong. 

And this is crucial: aid is, above all, a story.  It is a story about the world that carries a powerful implicit message about poor countries and rich countries.  Poor countries are poor because of their own internal problems, it tells us.  Maybe they don’t have the right policies, maybe they have bad institutions, maybe they’re corrupt.  Meanwhile, rich countries like Britain are rich because of their own brilliance and hard work, and they now reach out across the chasm to give generously of their surplus.

The problem with this story is that it presupposes a fundamental disjuncture between the wealth of rich countries and the poverty of poor ones, as if the two have nothing at all to do with one another.  But nothing could be further from the truth.  On the contrary, historians are clear that rich countries have grown rich not in spite of poor countries, but because of them – through a global economic system that has been designed to siphon our world’s wealth and resources into the hands of a few powerful nations at the expense of most of the rest of the world.

And it’s not colonialism I have in mind here, though that would be an obvious target.  No, I’m talking about what’s happening right now.  According to the most recent data we have on the movement of financial resources around the world, more money flows from poor countries to rich countries than the other way around – and that includes everything: aid, loans, foreign investment, remittances, everything.  In fact, net outflows from poor countries amount to some $2 trillion per year.  If we look at the data, it becomes clear that poor countries are developing rich countries, not the other way around.  

What constitutes these losses?  Well, poor countries lose some $200 billion dollars a year in interest payments on debts to the rich world, many of which have already been paid off many times over.  They lose some $500 billion dollars each year in profits repatriated by multinational companies.  And they lose nearly $1 trillion each year to large firms that siphon money into offshore tax havens. 

These losses vastly outstrip the aid budget.  In fact, get this: for every dollar of aid that poor countries receive, they lose up to $24 in net outflows because of how the global economy is structured.  And that’s not counting the losses they sustain through unfair trade and underpaid labour – losses that happen year after year because the institutions that govern the rules of the global economy – the World Bank, the IMF, the World Trade Organization – are fundamentally undemocratic, designed to hand voting power and bargaining power mostly to the richest economies, ensuring that global inequality will reproduce itself forever. 

If you’ve ever wondered why the income gap between the global North and South continues to widen, tripling since the end of colonialism, this is it. 

But all of this gets erased by the story of aid, which makes the takers of this system seem like givers, and grants them a kind of moral high ground. 

Britain boasts about its aid budget.  But no one ever talks about Britain’s role in imposing structural adjustment across the global South since the 1980s, forcing poor countries to cut social spending, slash labour laws, and dismantle public services, pushing billions into poverty.  No one ever talks about how Britain illegally dumps subsidized grains on global South markets, undercutting local farmers and driving them off their land.  No one ever talks about Britain’s role in driving land grabs and illegitimate debt.  And no one ever talks about how the City of London sits at the center of the world’s tax haven network, which has sucked trillions of dollars out of global South economies. 

Aid?  There is no aid, really – it’s just a fraction of the plunder that rich countries extract.  Given back like a slap in the face. That’s why aid is not working, and that’s why it will never work.  Aid is just a story we tell ourselves.  It neatly hides the violence that maintains the global class divide, and lulls us into consenting to an unjust world order.    

It’s important that we retain our impulse to compassion and solidarity. But let’s be honest.  It is delusional, and anti-intellectual, to believe that charity can be a meaningful solution to what is ultimately a pathology of power.  We need to be smarter than that.  We need to recognize the structural dimensions of global inequality.   The poor don’t need charity, what they need is justice.  They need a global economy that is fundamentally fairer. 

There’s much that Britain could do toward this end, if we were serious about it.  We could push to democratize international institutions, ensuring that poor countries get a fair voice in the decisions that affect them.  We could close down the tax havens that Britain controls in its overseas territories.  We could push for new rules that protect public services, and even for a global minimum wage, which would guarantee a decent livelihood to the workers who produce the mountains of stuff we consume. 

And here’s the best part: all of this could be accomplished without a single pound of aid.  It would, however, require a fight – a fight against those who benefit so tremendously from the status quo.  But then, so has every struggle for a better world.  The arc of history bends toward justice, Martin Luther King Jr once said.  But it will not bend on its own. 


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