Since the early 1950s, developed countries have contributed billions of dollars to third world countries in form of multilateral or bilateral aid. These are the two ways in which development aid is usually categorized, multilateral aid refers to development assistance that is given through the dozens of local and international organizations that are in existence today with the single purpose of soliciting and distributing aid such as the United Nations.
Bilateral aid is disbursed directly to developing countries and comprises the biggest portion of development aid that is distributed in any given year. In 2005 the Organization for Economic Cooperation and Development (OEDC), which is the Development Assistance Committee (DAC) that documents and monitors the amount of aid flow noted that official aid from donor countries exceeded the 100 billion mark. This is much time over from what OEDC recorded for instance in 1954 when the development aid figure stood at $1.6 billion. If development aid was in any way effective, then we would expect significant economic development in third world countries during the 60 years or so when developed countries first made it their business to eliminate poverty by way of aid assistance.
Unfortunately, this has not been the case nor is there an indication of any evidence that points towards economic improvement in developing countries that can directly be attributed to aid effectiveness. In fact, while the rate of development aid was rapidly increasing during the 1980s most third world countries economic growth dropped by 0.7 to an average of 3.5% in 1987 for instance, individual countries debt of developing countries increased by 10% and their overall debt had gradually increased over the years to a total of $1.21 trillion. Indeed at the current massive amounts, the effect of development aid on developing countries is more adverse and harmful than the little good it does.
There are two ways in which development aid impacts recipient countries. One is way is when it is channeled in the right manner but only trickles down to do any long-term good, the other way is when it actually causes more harm and leaves the recipients far worse and more vulnerable than they could have been without it. Either way, development aid is rendered ineffective but also disastrous in the latter case. In the first instance, the reason that development aid eventually becomes useless is mainly due to corruption by government officials or leaders of the recipient countries who siphon off large funds that are meant for development projects. Thereby sabotaging well-structured projects that would have indeed enabled economic activity such as was the case in Zaire and the Philippines in the early 1980s.
But this is hardly the only reason why aid is ineffective: by far and large the developing countries are equal partners, out of the 23 development countries almost all give out development aid with “ties”. This is when development aid comes with so many conditions that are meant to ensure most of it is eventually channeled back to the source countries. In such cases, the recipient countries are obliged to pay inflated perks to foreign consultancies or source goods from donor countries that are usually overpriced, in the end, what the recipient country actually retains from such arrangements is minimal usually less than half of what was officially announced.
However, the tragedy in aid business is when the very purpose of aid is construed in a way that does not only cause economic instability but environmental degradation as well, which leaves the recipients without economic means to sustain themselves anymore. That is when one gets to ask if indeed aid is help, in Brazil for example World Bank pumped more than $434 million towards the creation of a “polonoroeste”, a form of a resettlement scheme that saw thousands of people displaced to less fertile land that they could no longer eke out a living. Not to mention the fact that the project resulted in environmental degradation through deforestation of thousands of hectares.
In Indonesia a similar project in 1994 caused the relocation of millions of inhabitants, there are other numerous examples where development aid has indeed been very disastrous. What developing countries therefore require is aid that has no strings attached but which is purposeful.