Why Poverty Endures Amid Wasted Trillion Dollars

212 views | Akanimo Sampson | December 13, 2020

Without the doubt, there is a huge disconnect between the decision-makers and the poor in most countries of Africa, Nigeria inclusive, on poverty-eradication/alleviation programmes that work for the poor. Sadly, from the shocking data tumbling out of the inner recesses of Innovations for Poverty Action (IPA), a civic group, the bulk of the money pumped into such programmes has been largely wasted.

IPA’s theory of change is addressing two problems the group sees in the world. According to it, ‘’there is limited evidence on what works to help the poor, and that the evidence that does exist is often unused by those who create and run programmes for the poor’’.

The implication is, most of the poverty-eradication/alleviation programmes are either ineffective or not as effective as they could be, and often, to wasted money and enduring poverty like in Nigeria, the world’s poverty capital.

On its website, IPA says it is therefore, working to make sure strong evidence exists on what anti-poverty programmes work for the poor, and how development aid and practice have to move towards those effective programmes.

To this end, it has designed and evaluated more than 550 potential solutions to poverty problems and has over 280 more evaluations in progress.

With its experience, IPA has developed extensive expertise in conducting successful evaluations, from the initial concept stage to the sharing of results. It is also working to ensure that decision-makers use and apply evidence by making it useful and accessible.

‘’Our approach to ensuring evidence is used to inform decision-making includes three key components: Creating high quality, policy-relevant evidence together with decision-makers; proactive sharing of results; and technical assistance to apply solutions at scale.

‘’At the study level, our teams work closely with their implementing partners from government, NGOs, for-profits, and civil society to ensure that they are involved in crafting the research questions, understand the data they are collecting, and will be able to use it.

‘’Our teams also write plain language summaries of each study, both before there are results, and an update after, for our website and to share locally.

‘’At the sectoral level, we synthesize evidence, often in collaboration with our partners at J-PAL. We also produce media releases, op-eds, and events that highlight and summarize evidence across a particular sector.

‘’As an organisation, our comparative advantage is our local presence in the countries where we have established offices. This allows us both to develop strong long-term relationships with decision-makers and a long-term view for evidence-based policy.

‘’Our country level approach leverages these relationships to: work with decision-makers in priority sectors to identify key research questions; share key findings through events, workshops, and local media; train local organisations and government entities to understand, use, and apply evidence; and promote and facilitate the adoption of the most effective solutions’’, the group says on its website.

For instance, in 2017 fiscal year (October 1, 2016 to September 30, 2017), the US government allocated the following amounts for aid: Total economic and military assistance: $49.87 billion. Total military assistance: $14.77 billion. Total economic assistance: $35.10 billion, of which USAID Implemented: $20.55 billion.

Canada’s international assistance spending increased by 4.9% to $6.4 billion (Canadian dollar) in 2019, up from $6.1 billion in 2018. International assistance accounts for approximately 1.8% of 2019 federal budget spending – unchanged from the previous year’s 1.8% budget expenditure in 2018.

According to the Organisation for Economic Co-operation and Development’s (OECD) report, in 2016, 30 countries in Development Assistance Committee (DAC) contributed a total of $142.6 billion as financial assistance to poorer countries, with the US, Germany, the United Kingdom, Japan and France giving the largest foreign aid.

On average, the US’ government has given approximately one percent of its federal budget — about $34 billion — each year over the past decade to countries in need of foreign aid.

Out of the aid amounts from all donor countries, US foreign aid ranked at the top of the list. Non-DAC countries, like China, are also responsible for a significant part of the total aid amount.

Each year, developing countries receive aid in tens of billions of dollars from governments in other countries.

From obtaining diplomatic approval to business access, this aid can serve various purposes for the donor countries. From agriculture, to education and public health, recipient countries use aid towards a wide variety of issues and projects.

Here is a rundown of the five countries that offered the largest foreign aid and how that aid was spent by its intended nations. Due to the lack of detailed information for 2017 fiscal year, the list will be based on previous-year statistics.

China

Surprising to many, the winner on the “aid list” is China rather than the US. As a non-DAC country, China has not officially disclosed its aid information. In a recent publication however, researchers from AidData at William & Mary claimed that during the year between 2000 and 2014, China offered $350 billion-worth of aid to 140 countries and territories, sponsoring more than 4000 projects – the largest foreign aid programme in the world.

In 2009, China’s total financial commitment to development aid reached a whopping $69.9 billion, two times that of the US foreign aid in the same year. A large chunk of China’s aid is categorised by AidData as “Other Official Flows,” indicating that though counted as foreign aid, these financial assistances are primarily intended for commercial access rather than for development and welfare.

Top recipients of Chinese aid are largely members of the One Belt One Road Initiative, a programme by President Xi that aims to reinforce trading routes across continents.

As a result, almost half of the aid was spent on infrastructure sectors including energy generation and supply, transportation, storage and communication. The spending on agriculture, forestry and fishing only took up 3 percent of the aid.

The US

From 2002, the United States Agency for International Development (USAID) has gradually boosted the total foreign aid budget to a steady amount that rests around $32 billion. With the Department of State and USAID as the nation’s main donors, the US government distributed — not counting fiscal worth of military assistance — $34 billion official development aid (ODA) to over 100 foreign governments during the 2016 fiscal year.

Such an amount makes the US the largest foreign aid donor among DAC countries.

Israel, Afghanistan and Egypt are the largest recipients of the US foreign aid, receiving $3.10 billion, $1.51 billion and $1.46 billion of assistance, respectively. More than one-third of the US budget is spent on long-term projects that promote economic growth and public health programmes.

About 23 percent of such aid is used as humanitarian aid, and aims to fund short-term disaster relief programs.

Germany

With a volume of $24.67 billion in 2016, Germany’s foreign aid ranked the second largest in OECD’s report. Compared to 2015, Germany’s aid budget experienced an impressive 36.1 percent increase, making Germany’s ODA to gross national income (GNI) ratio hit the 0.7 percent mark.

An important factor in accounting for this major boost is the wide-ranging social benefits provided to the large influx of refugees.

Starting from 2016, the German government reclassified this in-house spending on refugee assistance as international development aid, aiming to hit United Nations’ 0.7 percent ODA/GNI target.

The United Kingdom

Before it was made a legal obligation by the UN, the UK hit the 0.7 percent ODA/GNI mark in 2013 and has since maintained this ratio very well. In fiscal year 2016, the UK spent a total of $18.01 billion in development aid, thus becoming the third largest foreign aid donor among DAC countries.

Pakistan, Ethiopia and Afghanistan each received more than $300 million in UK aid, and Nigeria, Syria, Sierra Leone, South Sudan and Tanzania all received more than $200 million. The aid is largely used for humanitarian programs and other crisis-relief projects in nations close to the European Union.

Japan

As the third-largest economy in the world, Japan contributes the fourth-largest ODA among DAC countries. Though Japan ranked high on the list of total aid volume, its $10.37 billion aid in fiscal year 2016 merely took up 0.2 percent of its GNI compared to the US’ criticised 0.18 percent.

As a close tie to China in overall economy, Japan also engages in competition with China for potential markets in developing countries by giving out development aid. While China desires more of natural resources in recipient countries of its aid, Japan wants cheap land and labor so that it can compete with the world’s leading manufacturing industry in China.

As OECD’s report indicates, the world’s total development aid is on the rise. This trend is so prominent that DAC Chair Charlotte Petri Gornitzka expressed her delight in the ever-increasing trend and the generous contributions of the largest foreign aid donors.

With an increasing amount of ODA being spent on short-term humanitarian and refugee aid, Gornitzka urged countries to also focus on long-term development programmes.

Regardless of the purposes of aids, this healthy trend of increasing aid showcases the collective efforts of the world in reaching the UN’s Sustainable Development Goals

Impressive as the trend appears, IPA tends to see the multiple-billion dollars aid flow differently. IPA is inviting us to vividly imagine if the trillions of dollars spent on aid in the past 50 years went to programmes that had a tangible and cost-effective impact. Would Nigeria have become the world’s poverty capital? Perhaps, the answer will be no.

IPA says it exists to make this vision, a vision of a tangible and cost-effective impact a reality.

By designing and evaluating potential solutions to global poverty problems and supporting decision-makers to use this evidence, IPA is helping to create better programmes and policies, and ultimately, is building a world with more evidence and less poverty.

High quality evidence

In partnership with top researchers in the field, the group designs and implements randomised evaluations to measure the effectiveness of programmes and policies aimed at helping the poor.

‘’We specialise in randomized controlled trials (RCTs) because this rigorous methodology allows us to isolate the effects of a programme from other factors. Like in medical trials, researchers assign participants at random to different study groups’’, IPA says.

One or more groups receive a programme (the “treatment groups”) and another group serves as the comparison (or “control”) group.

IPA evaluations do not simply give a passing or failing grade to programmes, but rather seek to uncover and disentangle causal mechanisms and determine which adjustments will make a programme more effective.

Its well-established partnerships in the countries where it works, and a strong understanding of local contexts, helps make its research projects successful.

IPA’s teams operating in 21 countries work on the ground to develop new studies with non-governmental organisations and government institutions interested in conducting rigorous evaluations of their programmes and in testing new ideas. It is boasting of more than 1,000 research staff who implement the research on the ground. Studies range in time from months, to years, and to decades.

Once an intervention has proven effective in one context, ‘’we work to test it in other contexts. This replication process is an essential step on the path to scaling up effective programmes.

‘’IPA has an extensive network of more than 600 researchers from among the top universities in the world who collaborate with us in designing and conducting the evaluations. Many of these academics are pioneers in their fields of research, particularly in development economics.’’

212 views | Akanimo Sampson | December 13, 2020

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