Is Foreign Aid Effective? A debate with Christian Bjornskov

On the 10/02/2020, WIDs invited Christian Bjornskov to Warwick University to debate

foreign aid. Christian’s work with the IEA, coupled with his masters and PhD in economics,

has meant he has become a wealth of knowledge regarding the effectiveness of foreign aid.

He has tried to understand what goes wrong from good intentions to bad outcomes. His

research as led him to believe that, on average, foreign aid is not effective.

Looking at the origins of aid with the Marshall Plan of 1946, he discussed how aid is

politically motivated. This was seen then, with the Soviet Union preventing Czechoslovakia

from receiving any American money, and also in contemporary times, for example

“President Trump and I are pushing to draw a closer connection between US foreign aid and

how countries vote at the UN” – US ambassador, 2018. Bjornskov also addressed the flaws

to the current institutions such as the world bank which operate on the basis of Sach’s view,

that you can eradicate poverty by doubling foreign aid. Are there deeper problems than a

lack of resources?

Another topic discussed was the issue of geography. If a country is landlocked, making it

difficult to get their goods to market, is this why poverty prevails? This view is supported by

Sach but in the eyes of Bjornskov, the answer is no. He gave numerous examples of

landlocked countries like Switzerland and Singapore, highlighting how rich countries do lie in

the geography trap.

Then perhaps the most debated question was raised, ‘do we have a moral obligation to help

people?’. The answer in short is yes. But in a way that actually helps, not just looks good. Aid

cannot be treated in the same manner everywhere. For example, after the 2004 earthquake

and tsunami that followed, the same aid was given to Thailand and Sri Lanka. This aid was

extremely effective in Thailand, where there was cooperation with the government. But in

Sri Lanka, where the relief workers had to take on responsibility as there was a lack of

government cooperation, the aid was much less effective.

A big issue with monetary aid is where that money ends up. Bjornskov stated 10% of all non-

military aid ends up fuelling weapons. We cannot be sure what our money will end up

funding. What we can be sure of, as supported by Peter Bauer, is that aid changes political

incentives. And currently that is what aid serves as, a political purpose. Perhaps not much

change from the Marshall plan… Bjornskov believes that the UN will not change their

perspective, and that the 0.7% GDP guideline for foreign aid has no real meaning. He stated,

“It has to be high enough, but not too high to be offensive”. The main issue with this figure

is that, in Britain, we commit to the 0.7%, but we do not commit to the consequences. In

Bjornskov’s analogy this is like a doctor committing to giving a certain amount of medicine

to a patient but having no interest in whether they actually get better.

Regarding the future of aid, we need to see a bigger shift of focus to the consequences of

our aid and stop aid that doesn’t work. Bjornskov believes the solution is free trade. He gave

examples of industries which grew out of the civil war such as coffee in Peru (generating

855,000 jobs in remote/impoverished areas) and cut flowers in Kenya, both of which

employ poor people, and by being able to trade with them, has alleviated them from poverty. Current EU tariffs (such as on Spanish citrus fruits or Argentinian beef) have meant

the playing field is not equal for free trade. Only when this changes, will true free trade

prevail. Only then will we be able to actually help those in need.

Cicely Day, Talks Team