MYTH TWO

FOREIGN AID IS A BIG WASTE

by Bill Gates



It is ironic that the foundation has a reputation for a hard-nosed focus on results, and yet many people are cynical about the government aid programs we partner with. Bill Gates

You may have read news articles about foreign aid that are filled with big generalizations based on small examples. They tend to cite anecdotes about waste in some program and suggest that foreign aid is a waste. If you hear enough of these stories, it’s easy to get the impression that aid just doesn’t work. It’s no wonder that one British newspaper claimed last year that more than half of voters want cuts in overseas aid.

These articles give you a distorted picture of what is happening in countries that get aid. Since Melinda and I started the foundation 14 years ago, we’ve been lucky enough to go see the impact of programs funded by the foundation and donor governments. What we see over time is people living longer, getting healthier, and escaping poverty, partly because of services that aid helped develop and deliver.

I worry about the myth that aid doesn’t work. It gives political leaders an excuse to try to cut back on it—and that would mean fewer lives are saved, and more time before countries can become self-sufficient.

[3] I’ll focus mostly on health and agriculture programs, since that’s what Melinda and I have hands-on experience in (and an increasing share of all U.S. aid goes to health). I support other kinds of international aid, including infrastructure and education, but we have done less work in those areas.

So I want to take on a few of the criticisms you may have read. [3] I should acknowledge up front that no program is perfect, and there are ways that aid can be made more effective. And aid is only one of the tools for fighting poverty and disease: Wealthy countries also need to make policy changes, like opening their markets and cutting agricultural subsidies, and poor countries need to spend more on health and development for their own people.

But broadly speaking, aid is a fantastic investment, and we should be doing more. It saves and improves lives very effectively, laying the groundwork for the kind of long-term economic progress I described in myth #1 (which in turn helps countries stop depending on aid). It is ironic that the foundation has a reputation for a hard-nosed focus on results, and yet many people are cynical about the government aid programs we partner with. The foundation does a lot to help these programs be more efficient and measure their progress.



Foreign aid helps refugees like Nikuze Aziza feed their families and stay healthy (Kiziba Camp, Rwanda, 2011).

The Amount of Aid

Many people think that development aid is a large part of rich countries’ budgets, which would mean a lot can be saved by cutting back. When pollsters ask Americans what share of the budget goes to aid, the average response is “25 percent.” When asked how much the government should spend, people tend to say “10 percent.” I suspect you would get similar results in the United Kingdom, Germany, and elsewhere.

Here are the actual numbers. For Norway, the most generous nation in the world, it’s less than 3 percent. For the United States, it’s less than 1 percent.

One percent of the U.S. budget is about $30 billion a year. Of that, roughly $11 billion is spent on health: vaccines, bed nets, family planning, drugs to keep people with HIV alive, and so on. (The other $19 billion goes to things like building schools, roads, and irrigation systems.)

[4] Since the measles vaccine costs 25 cents per child, $30 would buy enough vaccine for 120 children.

I don’t want to imply that $11 billion a year isn’t a lot of money. But to put it in perspective, it’s about $30 for every American. Imagine that the income tax form asked, “Can we use $30 of the taxes you’re already paying to protect 120 children from measles?”[4] Would you check yes or no?

[5] I calculated the drop in child mortality since 1980, the start of the “Child Survival Revolution” that made vaccines and oral rehydration therapy much more widespread. It comes to 100 million deaths averted. The total amount of aid, $500 billion, counts money for vaccines, HIV/AIDS, family planning, and water and sanitation from all donors since 1980. This calculation does not take into account how child mortality might have declined without aid, which would increase the cost per life saved. On the other hand I included a lot of aid that wasn’t meant to save children—but, say, to treat adults with AIDS. So overall this calculation overstates the cost per life saved.

It also helps to look at the overall impact this spending has. To get a rough figure, I added up all the money spent by donors on health-related aid since 1980. Then I divided by the number of children’s deaths that have been prevented in that same time. It comes to less than $5,000 per child saved (and that doesn’t include the improvements in health that go beyond saving the lives of young children).[5] $5,000 may sound expensive, but keep in mind that U.S. government agencies typically value the life of an American at several million dollars.

Also remember that healthy children do more than merely survive. They go to school and eventually work, and over time they make their countries more self-sufficient. This is why I say aid is such a bargain.

This graphic shows you a few of the programs supported by aid from the United States and other donors. As you can see, the impact is quite impressive.

The U.S. government spends more than twice as much on farm subsidies as on health aid. It spends more than 60 times as much on the military. The next time someone tells you we can trim the budget by cutting aid, I hope you will ask whether it will come at the cost of more people dying.

Corruption

One of the most common stories about aid is that some of it gets wasted on corruption. It is true that when health aid is stolen or wasted, it costs lives. We need to root out fraud and squeeze more out of every dollar.

Four of the past seven governors of Illinois have gone to prison for corruption, and to my knowledge no one has demanded that Illinois schools be shut down or its highways closed. Bill Gates

But we should also remember the relative size of the problem. Small-scale corruption, such as a government official who puts in for phony travel expenses, is an inefficiency that amounts to a tax on aid. While we should try to reduce it, there’s no way to eliminate it, any more than we could eliminate waste from every government program—or from every business, for that matter. Suppose small-scale corruption amounts to a 2 percent tax on the cost of saving a life. We should try to reduce that. But if we can’t, should we stop trying to save lives?

You may have heard about a scandal in Cambodia last year involving a bed net program run by The Global Fund to Fight AIDS, Tuberculosis and Malaria. Cambodian officials were caught taking six-figure kickbacks from contractors. Editorial writers trotted out headlines like “How to waste foreign aid money.” One article mentioned me as someone whose money was being wasted.

I appreciate the concern, and it’s a good thing when the press holds institutions accountable. But the press didn’t uncover this scheme. The Global Fund did, during an internal audit. In finding and fixing the problem, The Global Fund did exactly what it should be doing. It would be odd to demand that they root out corruption and then punish them for tracking down the small percentage that gets misused.

There is a double standard at work here. I’ve heard people calling on the government to shut down some aid program if one dollar of corruption is found. On the other hand, four of the past seven governors of Illinois have gone to prison for corruption, and to my knowledge no one has demanded that Illinois schools be shut down or its highways closed.

Melinda and I would not be supporting The Global Fund, or any other program, if the money were being misused in a large-scale way. Malaria deaths have dropped 80 percent in Cambodia since The Global Fund started working there in 2003. The horror stories you hear about—where aid just helps a dictator build a new palace—mostly come from a time when a lot of aid was designed to win allies for the Cold War rather than to improve people’s lives. Since that time, all of the actors have gotten much better at measurement. Particularly in health and agriculture, we can validate the outcomes and know the value we’re getting per dollar spent.



Since 2000, a global effort against malaria has saved 3.3 million lives (Phnom Dambang village, Cambodia, 2011).

More and more, technology will help in the fight against corruption. The Internet is making it easier for citizens to know what their government should be delivering—like how much money their health clinic should get—so they can hold officials accountable. As public knowledge goes up, corruption goes down, and more money goes where it’s supposed to.

Aid Dependence

Another argument from critics is that aid holds back normal economic development, keeping countries dependent on generosity from outsiders.

This argument makes several mistakes. First, it lumps different kinds of aid together. It doesn’t differentiate aid that is sent directly to governments from funding that is used for research into new tools like vaccines and seeds. The money America spent in the 1960s to develop more productive crops made Asian and Latin American countries less dependent on us, not more. The money we spend today on a Green Revolution for Africa is helping countries grow more food, making them less dependent as well. Aid is a crucial funding source for these “global public goods” that are key for health and economic growth. That’s why our foundation spends over a third of our grants on developing new tools.

Second, the “aid breeds dependency” argument misses all the countries that have graduated from being aid recipients, and focuses only on the most difficult remaining cases. Here is a quick list of former major recipients that have grown so much that they receive hardly any aid today: Botswana, Morocco, Brazil, Mexico, Chile, Costa Rica, Peru, Thailand, Mauritius, Singapore, and Malaysia. South Korea received enormous amounts of aid after the Korean War, and is now a net donor. China is also a net aid donor and funds a lot of science to help developing countries. India receives 0.09 percent of its GDP in aid, down from 1 percent in 1991.

Even in sub-Saharan Africa, the share of the economy that comes from aid is a third lower now than it was 20 years ago, while the total amount of aid to the region has doubled. There are a few countries like Ethiopia that depend on aid, and while we all—especially Ethiopians themselves—want to get to a point where that is no longer true, I don’t know of any compelling argument that says Ethiopia would be better off with a lot less aid today.

Critics are right to say there is no definitive proof that aid drives economic growth. But you could say the same thing about almost any other factor in the economy. It is very hard to know exactly which investments will spark economic growth, especially in the near term. However, we do know that aid drives improvements in health, agriculture, and infrastructure that correlate strongly with growth in the long run. Health aid saves lives and allows children to develop mentally and physically, which will pay off within a generation. Studies show that these children become healthier adults who work more productively. If you’re arguing against that kind of aid, you’ve got to argue that saving lives doesn’t matter to economic growth, or that saving lives simply doesn’t matter.

Explainer: How Does Foreign Aid Work?

The lifesaving power of aid is so obvious that even aid critics acknowledge it. In the middle of his book White Man’s Burden, William Easterly (one of the best-known aid critics) lists several global health successes that were funded by aid. Here are a few highlights:

“A vaccination campaign in southern Africa virtually eliminated measles as a killer of children.”

“An international effort eradicated smallpox worldwide.”

“A program to control tuberculosis in China cut the number of cases by 40 percent between 1990 and 2000.”

“A regional program to eliminate polio in Latin America after 1985 has eliminated it as a public health threat in the Americas.”

The last point is worth expanding on. Today there are only three countries left that have never been polio-free: Afghanistan, Pakistan, and Nigeria. Last year the global health community adopted a comprehensive plan aimed at getting the world polio-free by 2018, and dozens of donors stepped up to fund it. Once we get rid of polio, the world will save about $2 billion a year that it now spends fighting the disease.

[6] Specifically, the Lancet Commission on Investing in Health found that the rates of infectious disease, child mortality, and maternal mortality “can fall to those presently seen in the best-performing middle-income countries.” In the best-performing middle-income countries today, the child mortality rate is about 15 per 1,000 live births, equivalent to the rate in the United States in 1980.

The bottom line: Health aid is a phenomenal investment. When I look at how many fewer children are dying than 30 years ago, and how many people are living longer and healthier lives, I get quite optimistic about the future. The foundation worked with a group of eminent economists and global health experts to look at what’s possible in the years ahead. As they wrote last month in the medical journal The Lancet, with the right investments and changes in policies, by 2035, every country will have child-mortality rates that are as low as the rate in America or the U.K. in 1980. [6]

You can see here just how dramatic this convergence will be:

Let’s put this achievement in historical perspective. A baby born in 1960 had an 18 percent chance of dying before her fifth birthday. For a child born today, the odds are less than 5 percent. In 2035, they will be 1.6 percent. I can’t think of any other 75-year improvement in human welfare that would even come close.

To get there, the world will need to unite around this goal, from scientists and health workers to donors and recipient countries. If this vision is reflected in the next round of the United Nations’ Millennium Development Goals, it will help get everyone working on this milestone.

Many low- and middle-income countries will develop enough to pay for this convergence themselves. Others will need continued generosity from donors, including investments in health-related R&D. Governments will also have to set the right policies. For example middle-income countries should look at taxing tobacco, and at cutting fossil-fuel subsidies to free up funding for health.

Above all, I hope we can stop discussing whether aid works, and spend more time talking about how it can work better. This is especially important as you move from upstream research on global public goods into the downstream effort of delivering these innovations. Are the recipient countries in charge of figuring out where health clinics should be built and training the workers? Are donors helping local teams build up the expertise they need to put the Western experts out of business? Are the best performers sharing the lessons they’ve learned so other countries can follow suit? This has been a big area of learning for the foundation.

I have believed for a long time that disparities in health are some of the worst inequities in the world—that it is unjust and unacceptable that millions of children die every year from causes that we can prevent or treat. I don’t think a child’s fate should be left to what Warren Buffett calls the “ovarian lottery.” If we hit this goal of convergence, the ovarian lottery for health outcomes will be closed for good.