Ali’s blog

Mostly quant stuff with occasional digressions

Aid to India

Posted by alifinmath on January 24, 2008

Interesting article in today’s FT:

Some bilateral donors, led by the US, now believe the moment is approaching when the aid flow to India can be sharply reduced. They note that India boasts more dollar billionaires than any other country in Asia, has world-class companies in a range of sectors, from vehicle assembly to information technology, and that it harbours plans for costly prestige projects, including an unmanned moon-shot later this year.

“Washington is increasingly of the view that India either is a ‘great power’ or it isn’t, and can’t have it both ways,” observes one ambassador to India from an Organisation for Economic Co-operation and Development member that no longer operates an aid programme in the country. “It has not gone unnoticed that India is developing a sizeable aid programme of its own.”

With up to 400m people living on less than $1 a day, India is home to about one in three of the world’s very poorest people and about 40 per cent of all undernourished children. Many argue that it is the “swing state” that will determine whether the world meets the millennium development goals by 2015.

“Almost a third of children in India are not finishing primary education and there are 20m people aged between 14 and 18 who have not had any basic education at all,” says Shireen Vakil Miller, director of policy at Save the Children in India. “The US government either doesn’t see this side of India or doesn’t want to.”

Ahead of Mr Brown’s visit, Rahul Gandhi (left), a senior Congress party politician, hinted at the extent of corruption, claiming that only 5 per cent of development funds reached their intended recipients, down from 15 per cent when his father was prime minister.

His warning coincided with the release by the World Bank of a report that found “systemic fraud and corruption” in a flagship health programme and “suggested that other projects had been similarly compromised”.

Many in Indian policymaking circles, weaned on a post-colonial ideology of self-reliance, look forward to the moment the last donor leaves and take pride in the fact that a country once written off as a large, exotic basket-case now has a $1bn aid programme of its own.

“This is the contradiction of India,” says one senior government official. “This is our reality. We have to deal with the fact that we have one group of people at the cutting edge of globalisation and another group that doesn’t even have the basics. Some people find it very hard to hold these two ideas in their head at the same time.”

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2 Responses to “Aid to India”

  1. Chris Prouty said

    It is absolutely bizarre to me that the American people allow their dollars to continue to be shipped overseas to half the countries on the planet, developed or developing. I can’t fathom the argument for shipping as much money as we do to Egypt and Israel (1st and 2nd in foreign aid, respectively).

    At a business conference I once met a woman who had come to America from Africa (I’ll omit the nation). She told me that both she and her brother were educated in America and both held graduate degrees. Her brother was a finance professional at a major firm until, through a connection in the government of his homeland, he was offered a position as finance minister. Thinking he could do some good, he accepted the position. He quickly realized that funds from the World Bank were being squandered on the ruling elite, and intended to testify to that effect at his compulsory annual testimony at the World Bank. Before he left for his testimony he was taken aside and told that his family would be staying in Africa until he returned, and that the government was looking forward to his testimony on how the World Bank funds were being appropriated to build schools and infrastructure.

    It’s a nasty world out there and to think that the charity dollars given to foreign nations are being carefully appropriated (as if they would even know how to do so effectively) is a kind of ignorance reserved for those people who still put cookies out for Santa.

  2. alifinmath said

    “Foreign aid” is usually a misnomer. First of all, most such aid usually comes with strings attached e.g., the donor country’s goods have to be bought with the aid, or its companies given the contracts for building a dam or some other white elephant project. As such, the “aid” is really a subsidy provided by US taxpayers to their own multinationals, under the guise of doing good and making the world a better place.

    The most egregious examples of this today are Iraq and Afghanistan, where “nation building” has resulted in no-bid contracts worth tens of billions being awarded to military-industrial giants such as Bechtel and Halliburton — with no effective congressional oversight. Ah, the miracle of democracy. It’s not the US alone that engages in this racket to fleece its taxpayers for its corporate sector: Britain and France are just as guilty. Arguably the most altruistic are the Nordic countries, which also donate the highest percentage of their GDP. Other than benefiting the corporate sector, the other main objective is to support client states: Israel and Egypt thus receive the lion’s share of all such “aid.”

    In just about every poor country I’ve seen, “aid” has become a racket — not just from the donor’s side, but also at the recipient’s end. The genuine poor just about never receive anything. Aid money often ends up in numbered accounts in Switzerland and Lichtenstein.

    Ultimately the poor have to help themselves. It’s an unfair global system — from their point of view — but no-one said anything is fair in this world. People have to make their own justice. There may be something to social Darwinism. Fortune favors the bold, the ruthless, the unscrupulous. The rest wither and die. This is the way of nature, of evolutionary dynamics (I’m oversimplifying: it’s a mix of competition and cooperation).

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