The developed nations are happy to send aid, but reluctant to ask uncomfortable questions.

International meetings inevitably produce pledges to commit more funding to combat diseases like HIV and malaria. There are delays, but most of the pledges are eventually met. However, far more important than the amounts spent is that recipient governments are not forthcoming in detailing how the money is spent and are even more reticent in sharing the results of that spending.

The sad truth, according to Alex Preker, a leading economist at the Health Nutrition and Population Department at the World Bank, is that the money, if results are measured at all, is modestly effective at best and actually harmful at worst. Dr. Preker has been giving the same speech around the development community for the past year. He explains that foreign aid crowds out domestic government expenditure: On average, in the period he measured (1998-2002) 82% of health sector aid displaced local government or private support. In other words, for every $100 given in aid for health work, there is only an $18 increase in the total expenditure on health.

Preker is the kind of economist who gives the World Bank a good name: intellectually honest, hard working and intelligent. He does not push loans on countries, but helps their officials with technical assistance and recommends either grants or loans where respectively advantageous. The recent analysis by Preker shows the kind of role the Bank under Robert Zoellick could play, but it makes uneasy reading for donors. After all if only 18% of health aid actually makes a financial difference what does that mean about its impact on health? And what does it mean for increases in aid in the future?

There are several possible readings of Preker’s analysis. The first is the most benign. Donors often want to support specific disease programs, so they can say they’re combating HIV or TB and provide details to taxpayers at home. Aid recipients know this, so they transfer the funding they would have spent on disease programs into health systems development (building clinics, training doctors, subsidizing insurance schemes for the poor etc.). There is some evidence that Senegal and a few other African countries have done this. The second interpretation is that the funds are spent on equally useful non-health programs, such as road building, power station development, or more controversially on armaments and internal security—Ethiopia springs to mind in this category, where aid has improved systems but also allowed internal oppression. The third interpretation is that the funds are simply squandered, delivered to government programs so incompetently or corruptly that nothing much is achieved at all. Kenya is a classic example of this woeful scenario. The fourth possibility is that the funds simply end up in personal bank accounts (quintessentially in Switzerland, but often in neighboring nations) of poor country elites – Congo under Mobuto is the classic of this variety.

But since there is very little measurement by donors or recipients of what is done with the money, it is impossible to know exactly which countries fall into which categories. In reality there is a mix of all four scenarios in most countries, but the allocation share among the scenarios is often simply unknown.

Aid, like welfare, definitely has negative impacts on the private sector; analysts have explained that aid undermines or weakens private sector provision of services, since foreigners often provide services for free. Since the time of Preker’s analysis, private provision is likely to have been weakened further, because there has been a more than doubling of international aid to health from over $4 billion to about $9 billion. In addition, as funds have mostly been directed at specific disease programs, this has the unfortunate effect of placing a greater burden on already weak health systems. Few funds have been allocated to the measurement of any impacts of this aid.

There is some good news. Domestic health spending in a few poor countries, such as Senegal and Ghana, has increased, according to Laurie Garrett of the Council on Foreign Relations, which should improve the health systems and make disease spending in these countries more useful.

Meanwhile, G8 leaders continue to gloss over, or simply choose not to know, whether the funds they commit actually do any good at all. This telescopic philanthropy, as Charles Dickens described it, is purely for donor benefit—to show they care. But they obviously don’t care, or they’d find out if it did any good.

source:www.american.com