The problem with this idea is that systematic foreign aid creates opportunities for corruption, cultures of dependency, and disincentives to develop. The aid faucet misaligns incentives between donors and recipients, making it extremely difficult to turn off the flow. For example, Zambian economist Dambisa Moyo often cites cases of government officials spending aid on private jets and shopping trips on the Champs-Élysées.
Similarly, in Haiti, the Duvalier dynasty stole millions in aid funds from 1957 to 1986. Government leaders stand to gain more by perpetually receiving donations from rich countries, rather than developing a healthy economy and ultimately ending funding. Aid distorts political institutions because country leaders do not have to rely on taxpayers to provide funds, so there’s no incentive to respond to citizens’ needs and requests. No taxation; no representation.
The developed world can and should promote growth by eliminating agricultural subsidies and tariffs so that poor farmers can exploit advantages in farming. Bill Clinton and George W. Bush have taken the first, small steps to do that by advocating relaxed trade restrictions on Haitian goods. The international community must heed these recommendations.
Foreign investment – not international donations – is a worthy development strategy that aligns long-term incentives between lenders and borrowers. The International Monetary Fund and World Bank should encourage sovereign countries to seek financing on international markets rather than provide grants and loans below market terms.