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In August, the US-Mexico border crossing by migrant families hit a record high. The same happens in Europe, where irregular immigration from the African continent is increasing. Hence, an obvious question arises: Since the West is sending billions of dollars in foreign aid, how come the number of economic migrants is growing?
The USAID website informed that the President’s Fiscal Year (FY) 2024 Budget Request includes $32 billion in foreign assistance, which is $3 billion (10 percent) above the FY 2023 Adjusted Enacted level. To this amount of money, one should add other billions of dollars coming from European foreign assistance agencies. However, as, over the years, the total of grants and highly concessional loans (which are often forgiven) amounts to trillions, people in developing countries should be by now very rich. Since this is not the case, foreign aid failed.
Hollywood’s “Pop Culture Of Aid”
Foreign aid has been financing central governments (not the people!), which ended up promoting statism and discouraging the creation of an entrepreneurial culture. As a result, government bureaucrats became richer, and regular citizens got poorer. As British economist Peter Bauer put it: “Aid is a process by which the poor in the rich countries subsidize the rich in poor countries.”
According to Zambian-born economist Dambisa Moyo, Hollywood’s “pop culture of aid” bolstered the misconceptions that development assistance is helpful.
However, “aid has helped make the poor poorer, and growth slower.” In her book “Dead Aid,” Moyo stated: “[Aid] props up corrupt governments – providing them with freely usable cash. These corrupt governments interfere with the rule of law… making both domestic and foreign investment in poor countries unattractive… which leads to fewer job opportunities and increasing poverty levels.” As a result of growing poverty, donors give more aid, continuing the “downward spiral of poverty.”
Foreign aid has not favored agricultural development
Concerning Africa, where several military coups took place, state interventionism, which has been promoted by foreign aid, is also one of the causes that countries in the continent have become food importers instead of exporters, as they used to be in the past. Foreign aid has not favored agricultural development, since donor countries did not promote a type of agriculture aimed at the market, but rather at self-consumption.
Western donor countries tried to make the traditional production system survive (i.e., low-tech agriculture), without realizing that this system was crumbling because of demographic growth.
Subsistence agriculture allows farmers to obtain only the minimum necessary for survival, and this is a problem for African peasants, as they cannot accumulate wealth to invest in their businesses. Hence, African farmers live in precarious conditions: they have no savings, no food supplies, and cannot borrow money from banks. Furthermore, in certain areas, a year with little rain can create a state of famine.
In addition, aid-recipient African governments have destroyed “peasant capitalism,” a term that was coined by Ghanaian economist George Ayittey. In the continent, even though the operating unit was the tribe and not the individual, the clan could engage in whatever economic activity it chose (trade, fishing, or cloth-weaving) without having to ask the tribal chief’s permission. “If an occupation or a line of trade was unprofitable, African natives switched to more profitable ones and always enjoyed the economic freedom to do so. In modern parlance, those who go about the economic activities of their own free will are called free enterprisers,” Ayittey explained.
Foreign aid thwarted the entrepreneurial spirit
Yet, this entrepreneurial spirit was thwarted by the dependence on foreign aid. In this regard, Nigerian expert Ibrahim Anoba remarked: “Donations rarely alleviate the problem. Instead, they push local businesses out of the market through unfair competition with free goods.”
On a similar note, the Nigerian-based ALOD think tank further stated: “[Aid] catalyzes the vicious cycle of corruption and poor economic structure, hindering economic growth. There is a clear correlation between increased aid and corruption. It increases the resources available to already corrupt elite groups, thus tipping the balance of power further into the hands of the executive arm of government.”
This is why developing countries need access to markets and direct investments, not “charity” misused by central governments. However, till foreign aid keeps discouraging free enterprise and limiting economic growth, the migrant crisis will continue and become unsustainable.