A Defence of Foreign Aid: Why we need Global Development

During a time of austerity, Britain still continues to allocate 0.7% to foreign aid. Dean Hochlaf defends the target.

Last month, flooding devastated widespread areas of Northern England. This is likely a result of decreasing investment in UK wide flood defences. However, some voices within the political establishment, used this as an opportunity to attack the foreign aid budget. This is a misguided approach, and only serves the false rhetoric that somehow the developing world and developed world are independent of one another. The truth is global development benefits us all. The global economy has never been more integrated, and foreign aid can simultaneously improve domestic economic performance, while at the same time alleviate the brutal conditions caused by poverty, that afflicts far too many in the world today.

Britain is only one of a handful of nations that has achieved the UN target of 0.7% of spending on foreign aid, but hardening attitudes has seen a majority of British people call for a decrease in our aid spending. This, I suspect is due to the general economic malaise Europe is facing. In times of hardship, it is much easier to turn attention inwards, but I fear such an attitude is more detrimental to our interests. Politicians also have a negative impact on public perception of foreign aid. This may be due to the political economy. Benefactors of foreign aid wield little power here in the UK. If there were a transfer of funds away from the military or corporate welfare, this would be more likely to incur a backlash from influential economic agents. Another feature of foreign aid is that the effects are intangible in the short term. It is natural for people to desire immediate gratification from public spending, especially when they are enduring hardships themselves, however this comes at the expense of the long-term economic benefits Britain and the developed world will gain from investing in the future of developing nations, and fostering their economic potential.

Ian Britton / Creative Commons License

Ian Britton / Creative Commons License

 

There is a debate at the moment regarding the significance of foreign aid. I am inclined to believe the evidence which has shown, if foreign aid is targeted appropriately it can make important contributions to the growth of the developing world, and achieving the Millennium Development Goals which revolve around lifting people out of poverty. Why then would the growth of developing nations positively impact Britain? It helps to consider how inefficient a world mired by poverty really is. For the poorest, even small increases in spending can have immense marginal gains. Tiny improvements in healthcare and education for those at the bottom of the global economy can improve their productive potential greatly. Additional units of capital that foreign aid can help provide, will generate much greater returns in a developing nation with very little capital than it would in the developed world. In short, foreign aid can stimulate growth through improving the capabilities and potential of the millions trapped in poverty.

Britain, as an extremely open economy, can only gain from improvements in the global economy, which will arise as a result of foreign aid. There will be wealthier, and larger markets for British firms to explore. A greater pool of skilled labour and potential investment partners. As developing nations expand their production, they will increase their supply, which will lead to cheaper imports from these regions. Furthermore as they attain middle income status, domestic demand for British goods will likely increase, especially given our exports are dominated by high quality, income elastic goods. Given that our own manufacturing industries are in decline, and exports are in a slump, this could be imperative for future economic success. In addition to this, the IMF is also warning of “diminished prospects” with emerging markets facing economic turmoil, which threatens the global economic outlook. A decline in the prospects of developing nations will hinder our economy, and furthermore it will deprive millions of a brighter future. If we don’t act now, the shadow of poverty which haunts the development process will worsen and undermine all the progress we have made. How many people will we lose to poverty, who would otherwise have gone on to make significant contributions to the global economy and society?

Defence images / Creative Commons License

Defence images / Creative Commons License

 

While on the topic, we need to stop questioning which nations receive foreign aid. Foreign aid from Britain is targeted at helping the sick and improving educational opportunities for children. Helping these people shouldn’t be conditional. An argument I have often heard regards India as a nation unworthy of foreign aid, on account of their space program. This misses the point of development entirely. There are millions in India that still face chronic poverty. The government also has a space program. These are not mutually exclusive, but this is precisely what we should be encouraging. Developing a sector that can generate technological improvements, jobs and demand for the type of manufactured goods the developed world produces, is vital for the development process. We should not use the existence of a sector that is crucial for long term growth, as justification for removing aid that goes to the poor and vulnerable.

Whether we like it or not, we live in a globalized world. Economic integration is now commonplace, and barring any major international conflict or disaster, we are unlikely to return to the world of isolated nation states. As a result, the developed and developing world have a symbiotic relationship. What affects one, will affect the other. Foreign aid should not be caricatured as charity. It should be recognised as an investment into our fellow citizens of the global economy. It should be seen as an investment into our partners and friends in a world facing an uncertain and volatile future. The merits of international aid may need to be studied in more depth, so that we focus our efforts into the areas which will reap the most rewards for the people receiving aid, and the future economic success of the world. However, we cannot fall into the populist trap of attacking aid to compensate for domestic failures. Britain benefits from aid. The gains may not be noticeable immediately, but improving the economic state of the world is vital for our universal success, our national security, and our future prosperity. For these reasons, Britain cannot shy away from its international responsibility, and that is why our foreign aid should be defended.

Dean Hochlaf has a Masters in International Finance and Economic Development from the University of Kent. He takes interest in the development of Latin America. He tweets @DHochlaf.

 

 

 

 

 


The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.

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