Who are the world’s poor?
- The global economy resembles a pyramid, with the wealthiest 1 billion living in developed countries at the top, and the remaining 5 billion in developing countries, making up the bottom portion of the pyramid. Out of this 5 billion, however, the lowest 1 billion are the most impoverished, living on less than $1.25 a day.
- The poorest billion in this pyramid are residents of what are called least developed countries (LDCs). In addition to being extremely poor, they live in economies that have experienced little or no growth during the post WWII era, an era in which the global economy as a whole has expanded. They have literally been left behind, and this inequality is only increasing as globalization compresses the evolutionary time of others who are experiencing growth.
- They are distinguished from (and in competition with) the residents of developing nations who are experiencing growth, such as Brazil, Russia, India, and China (the BRICs). These growing nations may experience poverty, but not on the same scale or level of intractability.
- They share many of the same characteristics that are both symptoms and causes of their poverty, trapping them in cycles that have proven extraordinarily difficult to address. Some characteristics are immutable, such as geography and demography; other characteristic have been of their own and others’ making, such as international and internal conflict, poor infrastructure, bad governance, and structural inequality.
What are the central types of assistance given to the developing world?
- Fundamentally, poor countries are poor because they have failed, for a variety of reasons, to grow or to develop economically. International development assistance is a term encompassing all measures that are used to address the causes of stagnant or declining economic growth among these countries.
- Though it seeks many of the same ends, development assistance is different from humanitarian or emergency assistance, which aim to mitigate the experience of poverty and/or address short-term crises. The important distinction is that development assistance seeks to help countries break out of the poverty cycles and traps described above and to create sustainable solutions to global poverty. Development and humanitarian assistance are often used together to stabilize societies and provide for the basic needs of populations while issues of growth are being addressed.
- Aid is the most common, and perhaps most contentious, type of development assistance, and is subject to many internal debates in regard to who should receive it, in what form it should be given, how it should be used, and in what manner it should be monitored and evaluated for effectiveness. Aid can be cash or budget support for the governments of LDCs or for Non-Governmental Organizations (NGOs). It can also be in the form of special projects or services. It may be tied or untied to the interests of the donor; it may be conditionally or unconditionally offered.
- Assistance with economic policy and governance reform is another broad category of assistance. It is given with the hope of making aid simultaneously more effective and less necessary, by improving the economic, political, legal, judicial, and social infrastructure of the recipient country. This type of assistance seeks to improve the rule of law on the ground, and prepare the conditions thought to be conducive to growth through participation in global markets.
- International trade policy represents the negotiated rules and systems that guide the participation of all nations, developed and developing alike, in the global market. Negotiating rules that allow LDCs to exploit their own comparative market advantages is seen as a form of development assistance that may be conferred on poor countries by wealthy countries, who must often cede their own existing advantage.
- Foreign direct investment, or FDI, has been the primary engine lifting hundreds of millions of people in China and India out of poverty over the last few decades. More FDI, as well as various forms of business support for local entrepreneurs, is seen as a capitalistic, pro-market form of development assistance aimed at increasing the economic and social capacity of poor countries.
- Microfinance is a relatively new and promising mechanism for providing credit and loans to people living in LDCs, so that they may establish or expand small businesses. When adopted along the lines of the Grameen Bank of Bangladesh, microfinance leverages peer pressure and celebrates a self-help mentality that often extends beyond the commercial realm to improve the general health, education, and well-being of participants.
- Military intervention is a development assistance measure of last resort, yet one that is often seen as necessary to establish the requisite stability for economic growth and effective use of other forms of development assistance.
- Climate change mitigation has entered the realm of development assistance as global warming further imperils many of the world’s most impoverished areas. Reduction of carbon emissions and the development of new and adaptive technologies are seen as ways the developed world can offset and reverse the damage done to (low-carbon emitting) poor countries, which disproportionately bear the brunt of climate change.
Who makes up the international development community?
- The wealthy nations of the world, or those comprising the Organization for Economic Development (OECD), are considered traditional bilateral donors, countries who give significant amounts of foreign aid in the form of grants, loans, and special projects using public money.
- New bilateral donors are coming onto the scene, including the BRIC countries, comprising the former brethren of the bottom billion. China is a new bilateral donor of particular concern because of the unconditional aid they offer to poor nations, especially those possessing energy wealth in Africa. China’s relationship with Sudan is an illustrative case in point.
- Multilateral donors are International Financial Institutions (IFIs) such as the World Bank and International Monetary Fund (IMF). Regional development banks also play a role, as does the United Nations. These organizations make grants, loans, and/or facilitate special projects using pooled funds from member or donor countries, as well as from investment income on these funds.
- Private donors make up an increasingly large share of all foreign assistance. These include everyone from individuals who make contributions to international charities and traditional foundations, to the new generation of venture philanthropists such as the Gates Foundation. Private funds are often channeled through Non-Governmental Organizations (NGOs) such as Oxfam or Save the Children.
- Corporations are also sources of development assistance in the form of donations, Corporate Social Responsibility programs, investment in LDCs, and support for entrepreneurs.
- Most development assistance efforts reflect a hybrid stream of funding from all of the players mentioned above, and often utilize a similarly hybrid logic when distributing aid or services on the ground in poor countries. The public and private sectors are often blurred on both the donor and recipient sides.
What are some common challenges to effective development assistance today?
- Ideological, design, and logistical hurdles plague both donors and recipients of international development assistance.
- On the donor side, assistance is often given without clear goals and objectives in mind. It may be fragmented, spread out across too many small projects with different implementation, monitoring, evaluation, and accountability features. Lack of coordination and harmonization among different players is commonplace, often placing additional undue burdens on already fragile or failing recipient states.
- In the most extreme cases, aid may not only be ineffective, but may also be damaging in terms of unintended consequences such as dependency, corruption, erosion of state capacity, and even accelerated ethnic tensions.
- On the recipient side, development assistance is often poorly absorbed, leading to waste and corruption. Recipient bodies that are not inclusive of local participants in the planning, distribution, and monitoring of assistance generally make poorer use of resources and may exacerbate political and social stratification on the ground.
- All forms of development assistance are impacted by the spirit in which they are given. Programs that are intended to confer significant benefits on the donor (monetarily, politically, geo-strategically) are often less effective and can be harmful to the recipients.
- All forms of assistance are, by their very nature, volatile (subject to political constituencies among donors and unforeseen disruptions). This unpredictability and inconsistency is particularly debilitating to the countries in most need of assistance.
- Although proven to be more effective and cost efficient, assistance aimed at prevention (of disease, natural disaster, financial, and political crises) is often given less generously because it contains a lower profile for the donor and a longer-term commitment.
What do experts believe needs to be done to increase the returns on development assistance?
- Choose recipients carefully and tailor assistance packages to what Jeffrey Sachs has called a country’s “clinical differential diagnosis” – meaning basically that every country is different and has different assistance needs. Calibrate selectivity and conditionality to get funds to those who can best use them, without foregoing assistance to those who may need it most.
- Utilize all tools in the toolbox, sequenced and timed appropriately for conditions on the ground.
- Be clear about the goals of assistance, and be certain that aid will produce long-term growth, not just ameliorate hardship in the short-term.
- Communicate with local, indigenous stakeholders at all levels about needs assessments, priorities, and delivery strategies.
- Promote collaboration between the public and private sector; streamline the agendas and reporting requirements of all players in a geographical area. Take advantage of each player’s unique strengths and use synergies to offset individual weaknesses.
- Be vigilant about not undermining local strengths and capacity; prevent the formation of parallel systems of governance and provisioning; empower local government and promote the bonds of trust between people and their leaders; let the locals take credit where possible.
- Punish corruption, malfeasance, and lack of accountability in donor and recipient organizations and institutions.
- Reward outcomes, not inputs. Create incentives for performance, not aid distribution or consumption.
- Be realistic about what can be achieved through the use of any tool or in any time frame. Readjust expectations regularly and promote accountability to measurable, incremental reforms as well as to overall project aims.
- Don’t be a “planner” (designing wholescale, saturation initiatives) when a “searcher” approach (facilitating small, distinct, locally-driven efforts) is required, and vice-versa. Combine the two approaches when appropriate.
Next: Map: Global Poverty