4.4 Aid and Development Cooperation

Does helping actually help?

Since the 1960s, wealthy countries have spent trillions of dollars on foreign aid -- and yet poverty persists across much of the world. This uncomfortable fact sits at the heart of one of the most contested questions in international development: does aid actually work? Is it the right approach, or are there better alternatives? These are not idle questions for Norway, which allocates roughly one percent of its gross national income to foreign aid, one of the highest proportions anywhere, funded by Norwegian taxpayers through agencies like Norad.

Before weighing whether aid works, it helps to see how varied it actually is. "Foreign aid" is not one thing but many, and the different forms have very different purposes and effects.

The many shapes of aid

Aid can be sorted in several ways. By channel, there is bilateral aid given directly from one government to another, such as Norway funding schools in Malawi; multilateral aid channelled through international organisations like the World Bank, UNICEF or the WHO; and NGO-channelled aid distributed through non-governmental organisations like the Red Cross or Doctors Without Borders. By type, there is humanitarian aid -- short-term emergency relief after disasters, famine or conflict; development aid -- longer-term investment in infrastructure, education, healthcare and governance; technical assistance providing expertise and training; budget support transferring funds directly to recipient governments; and debt relief cancelling or reducing debts.

By conditions, the distinctions matter a great deal. Tied aid requires the recipient to spend the funds on goods and services from the donor country, which critics argue benefits the donor's economy more than the recipient's. Untied aid lets recipients seek the best value wherever they can, and is generally considered more effective. Conditional aid is given on condition that the recipient government implements specific reforms, such as anti-corruption measures. There is also a formal benchmark: Official Development Assistance (ODA), defined by the OECD as government aid whose main objective is economic development and welfare and which contains a grant element. The UN set a target in 1970 for wealthy countries to give 0.7 percent of GNI as ODA -- a target that only a handful of countries, including Norway, Sweden, Denmark and Luxembourg, consistently meet, while most major economies fall well short.

The great aid debate -- both sides heard

Few questions in development economics generate more disagreement than whether aid works, and a fair account must give the strongest version of each side. The case for aid is argued powerfully by Jeffrey Sachs of Columbia University, who contends that extreme poverty is a trap countries cannot escape without outside help, that well-targeted aid in health, education and infrastructure can break that trap, and that rich countries have both a moral obligation and the means to help. He points to real successes: global extreme poverty fell from 36 percent in 1990 to under 10 percent by 2023, child mortality has halved since 1990 partly thanks to aid-funded health programmes, smallpox was eradicated through an internationally funded campaign, and the Green Revolution prevented mass famine.

The case against aid -- or for reforming it -- is argued just as seriously. William Easterly of NYU warns that top-down, large-scale aid plans often fail because they ignore local knowledge, can prop up corrupt governments and reduce accountability to citizens; he favours adaptive "Searchers" who experiment over grand "Planners." The Zambian economist Dambisa Moyo argues that systematic government-to-government aid has made Africa more dependent, not less, reducing the incentive for governments to tax and answer to their own citizens, and that trade, investment and entrepreneurship are more effective paths. Most experts now occupy a thoughtful middle ground: aid works in some contexts and fails in others, good governance in the recipient country is the strongest predictor of success, aid should complement rather than replace trade and reform, and measuring results and ensuring local ownership are essential. The honest verdict is not a simple yes or no, but "it depends" -- on how, where and with whom aid is done.

In short

Foreign aid takes many forms -- bilateral, multilateral, humanitarian, development, technical and debt relief -- each with different strengths, and untied aid is generally more effective than tied aid. The UN's 0.7 percent ODA target is met by only a handful of countries, including Norway, which gives around one percent of GNI and is among the world's most generous donors. Whether aid works is genuinely contested: Jeffrey Sachs argues it can break the poverty trap, pointing to real successes, while Dambisa Moyo and William Easterly warn it can create dependency and ignore local conditions. The emerging consensus is that aid works best alongside good governance, local ownership, trade and careful measurement -- so the honest answer is not yes or no, but that it depends.