Effective Foreign Aid: Diasporas and Remittances

The public school NSDA policy debate topic for the coming school year calls for immigration reform:

Resolved: The United States federal government should substantially reduce its restrictions on legal immigration to the United States.

The Stoa league policy topic calls for reforming foreign aid (one of three choices listed here):

Resolved: The United States federal government should substantially reform its foreign aid.

These topics are connected by diasporas and remittances, the money immigrants send home. Remittances are three times greater than aid – how can they go even further? (The Guardian, May 11, 2016) reports data from the Migration and Remittances Factbook 2016:

Remittances sent to all countries in 2012 (developing and highincome) was $534bn, three times greater than aid budgets to the developing world.

In 2016, the World Bank expects remittances to reach over $600bn, with over $440bn being sent to developing countries

Not only are remittances three times larger than foreign aid, remittances are decentralized and draw from local knowledge to address family and community desires and investment opportunities.

Development economist William Easterly contrasts “the planners and the searchers.” Searchers are entrepreneurs looking to identify and respond to business and investment opportunities. Planners, like those in the foreign aid community, work from preconceived development plans and goals.

Amaryta Sen’s review essay The Man Without a Plan, (Foreign Affairs, March/April 2006) looks at Easterly’s book The White Man’s Burden, subtitled “Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good.” Amaryta Sen, winner of the 1998 Nobel Prize in Economics is author of Development as Freedom. Sen’s Foreign Affairs review quotes Easterly:

“In foreign aid, Planners announce good intentions but don’t motivate anyone to carry them out; Searchers find things that work and get some reward. Planners raise expectations but take no responsibility for meeting them; Searchers accept responsibility for their actions. Planners determine what to supply; Searchers find out what is in demand. Planners apply global blueprints; Searchers adapt to local conditions. Planners at the top lack knowledge of the bottom; Searchers find out what the reality is at the bottom. Planners never hear whether the planned got what it needed; Searchers find out whether the customer is satisfied.”

Roger Bate of the American Enterprise Institute also reviews Easterly’s book in Planners vs. Searchers (April 28, 2006):

Foreign-aid is driven by “Planners” says Easterly. Perhaps the most famous planner and a determined opponent of Easterly is Jeffrey Sachs of Columbia University and the United Nations. Planners think of development as a technical problem that can be overcome by ambitious, multi-faceted, centrally-controlled campaigns, backed up by oodles of cash. Unfortunately, planning lacks market feedback mechanisms, so cannot measure useful performance indicators. Plus, Planners are rarely held accountable for their myriad failures.

A more detailed discussion can be found online in Easterly’s Planners versus Searchers in Foreign Aid (Asian Development Review, Vol. 23, No. 2, 2006)

And Easterly’s 2015 book, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor, continues his research into problem of foreign aid policies. (Link to Amazon page where students can “Look Inside”)

The Guardian article linked above is written from a planning perspective and focuses on SDGs (Sustainable Development Goals). The article looks at remittances in the context of how they can help achieve the SDGs chosen by the foreign aid establishment

After years of meetings, foreign aid officials from the United Nations and developed countries agreed to seventeen SDGs. They are show and described here (and each one has a nifty graphic) 

Skeptics question why there are so many separate goals chosen for people in the developing world. And given limited foreign aid funds, how are choice to be made between achieving different goals. Rapid economic growth in China increased economic inequalities. Nearly everyone’s income has increased, but successful business people became far, far wealthier than average workers. Climate Action and Affordable and Clean Energy might reduce access to electricity for more people in poor countries.

The goal of ending poverty might be better achieved by developing reliable low-cost electricity from coal and natural gas instead of wind and solar power installations. (Online are many article and studies advocating wind and solar for developing countries, and many other article critical of wind and solar. In the critical camp is Hundreds of MILLIONS of UK foreign aid ‘wasted’ in green energy schemes (Express, March 13, 2017):

There as been little benefit from a variety of projects such as an Ethiopian wind farm and a solar power plant in Kenya which have been part of a foreign aid project valued at £2 BILLION which have been earmarked to tackle climate change and established eight years ago.

One scheme costing £260 million of taxpayers’ money had produced only enough renewable electricity to power the equivalent of around 100 British homes, equivalent of a typical street, according to findings by The Daily Telegraph.

Other schemes include solar parks in Kenya and Mali, a rubbish-burning power plant in the Maldives and a wind farm project in Ethiopia.

Some 1.3 billion people have no access to electricity, most in Africa, but also 300 million in India. They already have “green” jobs an a “green” lifestyle. Most grow food in small family plots. India’s huge need for electricity is a problem for the planet, Washington Post, November 6, 2015) notes that economic progress for India depends upon huge increases in electricity consumption which also means large increases in fossil fuel used and carbon dioxide emissions:

Fossil fuel generation of electricity is the largest single source of greenhouse-gas emissions worldwide. Yet demand for inexpensive power will rise in a great tide in the decades to come, especially in South Asia and sub-Saharan Africa, the two regions of the globe with the least access to electricity. All the countries of Africa, taken together, have twice as many people without electricity as India does — 622 million. No country is content with that.

An earlier post recommended the Hans Rosling TED video The magic washing machine on the importance of electricity to poor people in developing countries.

Returning to the immigration-fueled and grassroots alternative to foreign aid programs: remittances. The Migration and Remittances Factbook 2016 notes the major impact remittances have for developing countries (in Foreword):

These inflows of cash constitute more than 10 percent of GDP in some 25 developing countries and lead to increased investments in health, education, and small businesses in various communities.

And, from page 6:

In 2015, worldwide remittance flows are estimated to have exceeded $601 billion. Of that amount, developing countries are estimated to receive about $441 billion, nearly three times the amount of official development assistance. The true size of remittances, including unrecorded flows through formal and informal channels, is believed to be significantly larger.

African Diaspora remittances better than foreign aid (New Zimbabwe, February 18, 2018)

This article addresses important questions such as: what exactly is the volume of this important source of income to Africa, how do we compare remittances from Africans in the Diaspora to development aid from non-Africans… We conclude with the idea that Diaspora African contributions are better than foreign aid funds from mostly western donors who may exert negative external influences on Africa’s sovereignty and future development.

What We Know About Diasporas and Economic Development, a Migration Policy Institute Policy Brief (September, 2013) begins:

Diasporas can play an important role in the economic development of their countries of origin. Beyond their well-known role as senders of remittances, diasporas can also promote trade and foreign direct investment, create businesses and spur entrepreneurship, and transfer new knowledge and skills. Although some policymakers see their nationals abroad as a loss, they are increasingly realizing that an engaged diaspora can be an asset — or even a counterweight to the emigration of skilled and talented migrants.

For NSDA debaters researching immigration and Stoa debaters researching foreign aid, growing diasporas and remittance flows play an independent but key role in promoting economic development in poor countries.