Aid: What is it Good for?

June 29th, 2010

Today in the UK’s Guardian newspaper, Armando Barrientos argues that rather than the “aid industry” (as he describes it), transferring money and resources directly to the poor would be much more effective.

Photo: Erik Hersman

This is an appealing argument. If poverty is at heart a lack of power, then providing cash, without conditions, to the poor restores some of that power. After all, aren’t those in poverty best placed to know their needs? Initiatives such as the Basic Income Project advocate that a small amount of money should be granted to all without means test of conditions. Trials in Namibia have shown that this can reduce poverty and inequality dramatically.

But while this argument is appealing, it should not be made in isolation. What good does it do if the poor have more money on essential goods, when there is no provision for education to help them lift themselves out of poverty? If there are no roads or electricity to help them start a business and create jobs?

For these things, there is a role for government. In the short term, aid can be used to fill the gap and provide these essential services. But in the long term, they must be financed through tax revenue.

This is why we need to think about the use of aid money to strengthen the economies of developing countries and increase their ability to collect tax. And this is why we need international transparency to challenge illicit outflows that undermine the ability of governments to provide essential services so that the poor can invest the little they have in something that will grow.

Written by David McNair

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