Rich countries sent $137bn in aid to poor countries in 2014, plus large amounts given through non-governmental organisations. People give because they feel a moral obligation to help those who live and die in destitutione destitute. Yet we still do not know whether these gifts are helping or hurting, or how to use the money to good effect.
The obvious answer is to give to those who suffer most. Yet many of the people in the greatest need are those living live in countries where aid would be wasted — because of war, because their governments exploit their citizens rather than help them or because the state has little capacity to govern. Giving money directly to citizens, or via NGOs, does little to block a powerful “extractive” state.
Aid given to good governments in poor countries can work, but capable governments have other, often better, alternatives, such as borrowing from international capital markets. Whatever the disposition of the government, large aid flows detach leaders from the needs of their people, making them like the autocrats who sit on mining and oil revenuesells whose revenues require no cooperation from their citizens. In Africa alone, there are more than a dozen governments who obtain more than half their revenue from foreign aid.