Understanding foreign aid is crucial to understanding the way the international system works. Unfortunately, while it may be easy to quantify the amount of goods or expertise governments or multilateral institutions give out, measuring the amount of real change that development assistance creates is a whole lot harder — especially now that aid is often designed to strengthen policy and institutions rather than deliver a direct service.
This situation makes those skeptical of the value of foreign aid (of which there are many) uneasy. It's understandable that many in countries that give out aid might start to wonder: What good are we actually doing with our money?
In an attempt to address this, a new report by AidData, a research lab based at the College of William & Mary, does something surprisingly rare: It asked those working in the poor nations that receive foreign aid. The initiative interviewed 6,750 policymakers and practitioners in 126 low- and middle-income countries about their experiences with development assistance from Western and non-Western sources between 2004 and 2013.
The results of this survey were then used to evaluate development partners' ability to influence the reform agenda in their target nations. This was, in turn, contrasted with the money that the development partner had committed to foreign aid in the period. Combining these two sets of information, AidData was then able to create what it describes as a "value for money" index.
As you can see, there's a wide disparity in the amount of bang that governments and multilateral institutions get for their development buck. The chart above has some important takeaways: Notably, multilateral institutions such as the GAVI Alliance, the Inter-American Development Bank and the World Bank seem to get far better value for money than their peers. It also shows that some smaller countries, such as Luxembourg, Taiwan and New Zealand, get a decent return on their investment.
Others don't do quite so well. The United States, a country that spent an enormous $207 billion on development assistance between 2004 and 2011, according to AidData's research, didn't quite get the returns that could be expected. Many other Western nations did worse, including big names such as Japan, Germany and France. At the very bottom of the list are Saudi Arabia, United Arab Emirates and Kuwait. This is notable as these three nations are not members of the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), a forum for development favored by many Western states.
AidData acknowledges that its data is "rough-and-ready" and that there are some gaps — China, for example, is not included as it is a non-transparent donor. However, the group does think that, given the paucity of information out there, its research may have lessons for policymakers.
"Why might multilateralism matter?" Brad Parks, a co-author of the report and AidData's co-executive director, asked in an e-mail. "One reason is that supranational institutions are often seen as 'honest brokers' that provide independent and credible policy advice which is not unduly influenced by the geostrategic or commercial interests of Western powers." Parks says that legislators in Washington or London might be better served by allocating their aid budgets to multilateral institutions rather than going it alone if they really want to influence reform.
Parks also notes that smaller countries may do better as their aid programs are more limited in scope and that major Western donors often excel in sectoral areas: Germany is successful in environmental policy, for example, while the United States provides democratic reform advice and assistance. "When an aid agency spreads itself too thinly across many countries and many sectors, it runs the risk of becoming a jack of all trades and a master of none," Parks writes.
AidData's findings don't necessarily support some of the biggest critiques of the development — that foreign aid can ignore local factors and end up stifling economies, for example — though it doesn't seem to contradict it either. It does seem to show that there's a huge variation in the amount of effect that a dollar in foreign aid can have — and that throwing money at a problem just isn't enough.