Myth 7: Aid makes the world a fairer place

Aid isn’t working. Instead of helping to rectify injustice, aid is being used to support multinational corporations, build shopping centres and force poor countries to privatise their public services. Aid urgently needs to stop being a corporate cash cow and start being used as a radical tool for real justice and social change.

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In 2013, the UK gave £11.4bn in official development assistance, the formal term for international aid. The UK finally met the 40-year-old internationally agreed target of spending 0.7 per cent of gross national income on aid. Politicians boast that the UK is now one of the most generous countries in the world.

Amid all the self-congratulation, few people question whether this is generous in the first place.

The language of charity and generosity conceals the fact that UK policy actively contributes to the poverty which aid is supposedly trying to solve.

Just look at trade talks, in which the UK is always a loud voice in favour of forcing poor countries to open their markets, leaving them at the mercy of (often British) multinationals. In climate talks, the UK points the finger of blame at emerging economies like China while failing to do enough to reduce emissions itself. Through state insurance (export finance) and its embassies, the UK promotes the interests of British arms companies over those of the people in other countries. UK tax havens like the British Virgin Islands help companies avoid tax they should be paying in Africa, Asia or Latin America. And the UK consistently votes against attempts to create human rights laws to hold corporations to account.  

When you add them all together, the policies which Britain supports drain Africa of wealth. Through lost tax revenues, unfair trade rules, dodgy debt repayments, climate disasters caused by our carbon emissions, profits being taken back to banks in the City of London, Africa is actually aiding us.  

The world extracts $192 billion from Africa every year through things like corporate profit, debt repayments and tax evasion – while giving only $30 billion in aid. Even if you add together other inflows of money into Africa, such as loans and private investment, the total flow of money from the world into Africa is still just $134 billion.

So, far from giving African countries a lot of aid, the world takes $58 billion more than it puts in.
 

Dodgy aid for corporate gain

But even this is too generous to the British government, because it assumes that all of the aid we give goes towards making poor countries better places to live for the poorest and most vulnerable.

This is not the case. More and more of the UK’s aid budget is going to help multinationals, not the poor.

£100 million of UK aid is being used to encourage Nigeria to privatise its electricity sector. In Bangladesh, UK aid has paved the way for new ‘special economic zones’ where multinationals will get tax breaks and severe limits are placed on trade union membership. Drinks giants SAB Miller (which makes Peroni) and Diageo (Guinness) have pocketed $1.25 million from the UK-funded Africa Enterprise Challenge Fund.  

This is part of a broader shift towards aid being channelled through profit-making private companies. There is a burgeoning ‘aid industry’ that exists purely to profit from money that is ostensibly supposed to help the poor. One company, Chemonics, received almost $833 million from the US government alone in just six months. The UK government even has a special Aid Funded Business Service that exists purely to help UK businesses get lucrative aid contracts.

More and more aid is channelled through financial intermediaries like big banks, insurance companies and opaque investment funds. For example, 88 per cent of the portfolio of the CDC Group, which is a UK government-owned institution that delivers aid, is channelled through the financial sector, which then goes on to ‘invest’ in projects aimed at creating economic growth.  That’s why British aid ends up in dubious (but profitable) projects such as luxury housing and shopping malls in Kenya. In 2006, the CDC even invested in Nigerian companies that were later proven to be used by corrupt politician James Ibori to launder stolen money. 

These institutions also make heavy use of secretive tax havens, which ensures that much of their activity is shielded from public scrutiny. Of the 157 ‘aid’ investments made by the UK’s CDC Group in 2013, 118 were channelled through tax havens. 

Large proportions of aid also go towards cleaning up the mess caused by previous UK government policy. We only need climate finance because the UK has emitted such a large amount of carbon dioxide. Much of the money that went to Afghanistan and Iraq is only necessary because of the UK’s military involvement in those countries.

 

How can we redistribute global wealth?

This doesn’t mean that rich countries should stop giving aid. Redistributing wealth from the richest to the poorest is a necessary element of creating a fairer world – as it is in creating a fairer society. 

It would be a positive step for a UK aid programme to support Venezuela’s drive for food sovereignty or Cambodia’s public water system.

Unthinkable? It shouldn’t be.

More ambitiously, we should see aid more as a system of global taxation.  Funds could be used, under democratic control, to help build up decent welfare states across Africa, sustainable public transport systems, environmentally friendly energy access for all. They could be used to support small-scale farmers producing healthy food primarily for themselves and local communities, and to help cooperatives and small business to produce for local and regional markets. 

The funds would have to be much bigger than they currently are to create such a change, and the mentality would have to change completely. Creating a better world is not generous, especially if you have created the unfairness in the first place. What’s more aid can never be seen in isolation. Fairer trade, cancelling unjust debt, stopping climate change, tackling tax havens and securing democratic freedoms are all more important in achieving global justice.

Aid could make the world a fairer place, but it needs root and branch reform so that it stops being a tool of free market policy which simply supports Western business.