Rt Hon Lord Lilley

    Sunday 18th May 2008

    After £1trillion of Aid

    Peter Lilley MP

    Preliminary remarks


    In recent years the nations’ conscience was stirred by the Make Poverty History and Drop the Debt campaigns. The assumption was that more Aid was the solution to poverty.

    That provoked the challenging question which is the title of this talk. Since President Truman launched the programme of Aid to developing countries in 1948 over £1trillion of aid has been given to the developing world. So after £1trillion of Aid, why isn’t poverty history?

    Before I answer that I should, in this place, acknowledge that I am talking about material poverty. In my visits to India and Africa I also found plenty of evidence of spiritual wealth. In Ghana the exuberant and all pervasive evidence of Christian faith was a joy – penetrating every aspect of life. Even shops and businesses are given names like ‘The Lord’s Blessing Dry Cleaners’ or ‘the Light of the World repair workshop’. The radio phone in programmes respond to troubled listeners queries with challenging moral and scriptural advice rather than, as in this country, telling you to indulge your every whim.

    So the notion that until people’s material hunger is assuaged they have no spiritual appetites is as false as it is patronising. On the other hand poverty does not itself make people good. We should not romanticise poverty. When Christ said “Blessed are the poor in spirit” I have always taken it to mean ‘blessed are those who are not enslaved by material desires or possessions’. He certainly was not saying we should neglect poverty – on the contrary, He said if we fail to give food, drink, clothing or comfort to those in need we spurn Christ Himself. Poverty and the disease, ignorance and the grinding toil which accompany it are grim. We have a Christian duty, in so far as we can, to help people to escape from it.

    But back to the question of why £1trillion has not ended poverty.

    A whole range of explanations have been given as to why aid has not been more effective at eliminating poverty. Let me gallop through a few before settling on one or two which deserve more attention than they get.

    1) Too little? £1trillion sounds a lot. But over 60 years and several billion people it is only a handful of dollars a year each. Even if the world delivers the increases promised at Gleneagles, aid alone can never provide all the health care, nutrition, education they need. But aid can make a difference.

    2) Too much? Nonetheless, it is surprising how frequently I hear people imply that the poorest countries remain poor because an excess of aid has induced dependency. The idea that for people struggling to survive on a dollar a day a few extra dollars over the year blunt the incentive of to get out of the bed in the morning is frankly ludicrous – though some governments may become worryingly aid dependent.

    3) Exploitation? The idea that the poor are poor because the rich are rich and that western trade and investment involve exploitation and impoverishment is widespread. It has sadly been propagated by some NGOs who are ideologically opposed to free markets. But it is frankly nonsense. Trade is not a zero sum game. Trade creates wealth by enabling people to exchange what each is best placed to produce. The most successful developing countries are precisely those who trade most. The poorest are those with whom we trade least. The problem is that we trade too little and the EU still maintains barriers against their products.

    4) Debt? Having criticised the anti-capitalists let me be even handed and criticise those of my fellow free marketeers who have been reluctant to support debt relief because they fear it will reward imprudent borrowing. They forget that in a free market debts are written off automatically when a business fails. We don’t try to get the debts back from the employees. It is monstrous to hold the poor responsible for repaying debts incurred by their often venal rulers. So donor governments should to write off bad debts of Highly Indebted Poor Countries. The last Conservative government wrote off all Britain’ aid loans. Britain’s only remaining debts are our share of debts to multilateral organisations and trade guarantees. Prevention is better than cure: so aid should generally take the form of grants not loans in future.

    5) Inefficient aid? Because aid is well intentioned there is a reluctance to question its efficacy. But Christians should recognise that good motives are necessary but not sufficient. The purpose of aid is not to make us feel good but to do good. Efficiency springs from accountability but aid agencies are not easily held to account by either aid recipients or tax payers. So aid agencies emphasise inputs not outcomes; how much they spend not on how much they achieve. We recommend an Independent Evaluation Agency and complete transparency on the web of all aid projects from specification to assessment.

    Good motives may not be enough. But without them many of the most effective aid programmes would not happen. Probably the single most impressive project I saw during my visits to Africa and Asia was a visit prompted by a member of this congregation to the Mercy Ship moored off Ghana. Christian nurses, doctors and consultants volunteer take time off not just to bring medical care to hundreds of patients but also to bring equipment and train local medical staff in the latest techniques. So when the ship departs they leave much strengthened local health facilities behind them. A wonderful example of Christian witness

    6) Corruption? Corruption undermines the aid effort but it should not be used as an excuse to abandon aid. Corruption is as prevalent in Asia and the former Soviet Union as in Africa but has not prevented the former from growing successfully. The idea that all aid ends up in Swiss Bank accounts is a gross exaggeration. A massive World Bank survey asked thousands of businesses in scores of countries what bribes they had to pay to do business or win government contracts and found that it averaged a few percent of sales; monstrous but not the huge fraction some assume.

    Moreover, something can be done about government misappropriation even where it is rampant. Public Expenditure Tracking Surveys, in Uganda, for example, showed that a high proportion of money allocated for schools never reached them. But once the results were published and the amount each school was supposed to receive posted up in the school the money got through. Aid agencies should insist on publishing where aid money is supposed to end up. ‘Sunshine is the best disinfectant’.

    This brings me to the Sherlock Holmes moment. When Holmes and Watson were pursuing Moriarty and they camped out in a field. Next morning, waking under a starry sky, Holmes asked Watson what he could see and what he deduced from it. Watson thought and replied: from a cosmological point of view I deduce the universe contains millions of stars and galaxies; from a theological point of view I see that the Creator is of infinite power beyond human comprehension; from a meteorological point of view I see that we are in for a fine day and from a geographical point of view I see we are facing North. What do you deduce Holmes. To which Sherlock replied – I conclude that someone has stolen the flipping tent!

    Growth is crucial. In asking why poverty isn’t history can easily miss the fact that for many hundreds of millions of people, poverty is history – particularly in the rapidly growing economies of Asia. More people, in more countries, more rapidly than ever before in history are achieving a tolerable and rising standard of living.

    What marks out those countries who have succeeded from those who lag behind? It is not the amount of foreign aid they received. It is above all economic growth.

    Aid is essential to help tackle disease, provide education, and alleviate suffering in the poorest countries. But only economic growth can provide a sustainable exit route from poverty.

    Yet the extraordinary thing is that over the last two decades the proportion of a rising aid budget devoted to promoting economic growth has been cut by three quarters. And the absolute amount of aid devoted to agricultural growth fell even further.

    Recent events. One of the central recommendations of the Report I published last year was to reverse the 20 year decline in aid for agriculture. We argued that major investment in research and infrastructure was required to promote a second Green Revolution focussed on the semi-arid and poorest areas of the world. Our recommendation was received by those currently responsible for development policy with interest – but no sense of urgency.

    When asked what he most feared, Harold Macmillan famously replied: “Events, dear boy, events!”

    In recent months, disturbing “events”, whose imminence I confess we did not foresee, have forced governments across the world face up to the issue we raised. Prices of staple foods have risen three or fourfold, food riots have broken out in country after country, and food and bio-fuels are competing for land. Hunger, which seemed set to become history, is now a growing threat to hundreds of millions of the poorest people in the world.

    Importance of boosting Agriculture. Three-quarters of the population in the poorest countries depend directly or indirectly on agriculture. Increased agricultural output is the most effective way to boost their incomes, to reduce food prices for poor consumers and to feed growing urban populations.

    The Green Revolution was one of the great successes of development aid. In 1967 a best seller entitled ‘Famine! 1975’ predicted mass starvation in India by 1975. Yet by then India had become a net exporter of food. New high yielding varieties of rice and wheat, coupled with intensive fertiliser use and irrigation, made this Green Revolution possible.

    Unfortunately, the success of the Green Revolution in Asia and the apparent failure of Africa to follow suit led donors to conclude that Asia’s agricultural problems were solved, and that Africa’s were insoluble. Both conclusions are mistaken. Asia’s Green Revolution was limited largely to areas with irrigation; agricultural growth has been disappointing in most rain-fed, semi-arid areas of Asia (and Latin America) as well as Africa. Those areas are precisely where poverty remains most acute.

    Moreover, Asia’s Green Revolution has begun to run out of steam. Growth in yields has tailed off. Yet rising living standards in Asia have boosted demand. In Africa output has barely kept up with population growth. At the same time demand for bio-fuels has absorbed spare agricultural capacity. Together, these factors have driven up food prices dramatically.

    The case for donors stepping up aid for agricultural research, education, and rural infrastructure is now undeniable. It should focus on developing robust, drought resistant varieties, requiring low inputs for semi-arid agriculture, together with water harvesting technologies.

    GM research. Unfortunately agricultural research for developing countries operates with one arm tied behind its back. An unholy combination of EU protectionism, tabloid sensationalism and the ‘back to nature’ brigade in some NGOs has discouraged most African countries from using or developing Genetically Modified crops.

    Shunning GM foods is a luxury which the rich can afford – like organic foods. And tabloid readers clearly get a thrill from reading horror stories about ‘Frankenstein foods’ as they do from viewing equally fictional horror movies. But we have no right to inflict our fads, fears and fantasies on the poor if the cost could be turning today’s shortages into tomorrow’s famine.

    In a week when government is steamrollering through a bill to enable genetic experimentation using human embryos I find it bizarre that we are still so reluctant to promote GM research to feed the poor. We seem to treat embryonic human beings like vegetables and respect vegetables more than human beings.

    Fears of GM foods are largely fictional. No-one has suffered from eating GM foods. It is no different digesting a carrot gene in the original carrot or transposed to a cabbage. Of course, it is important to check out any environmental risks – for example, whether a GM plant with a herbicide resistant gene could produce hybrids with wild strains of the same species which would be more difficult to eliminate with weed killers. But the same risk exists when using a conventionally bred hybrid selected for a resistant gene. Yet we impose no environmental testing regime on them.

    Trade – Breaking down barriers

    Earlier I dismissed the notion that trade with the West has made poor countries poor. On the contrary, they need to trade more.

    Unfortunately developing countries face barriers to trade – imposed by rich countries, imposed by poor countries against each other and imposed by nature.

    The EU boasts that its Everything But Arms (EBA) agreement offers tariff and quota free access to the ‘least developed countries’. But that category is defined to include only 50 smaller poor countries – it excludes the more populous African countries like Nigeria, Kenya, and Cote d’Ivoire. Also, complex Rules of Origin (intended to prevent third countries getting round EU tariffs by channelling their goods via an EBA country) mean that in practice as much as 40% of goods which should be tariff free bear tariffs.

    We argue that the EU and other developed countries should unilaterally open their markets to goods from all low income countries (as defined by the World Bank – GDP below about $900 per head). In the past the EU and others would not contemplate doing this because the category of low income countries includes India whose size and growing industrial strength arouse protectionist fears. However, India will become a middle income country in a couple of years, followed by Pakistan, before such concessions could start – removing the main obstacle.

    However, the highest barriers to developing countries’ exports are not those imposed by rich countries but those imposed by developing countries against their neighbours. As a result trade with their neighbours makes up a much smaller share of developing countries’ trade than is the case for countries in Europe or North America. One reason for these high tariffs is that many developed countries rely on customs revenues – which are easy to collect – for a significant part of their tax revenues. We have argued that donor countries should encourage the removal of these barriers between developing countries by offering support and help to replace lost tariff revenues and not require them to extend these tariff reductions to imports from the developed world. In particular we should do all in our power to help kick start a pan African Free Trade Area.

    Finally, the poorest countries often face natural barriers – lack of roads, navigable rivers, natural ports etc – which hinder access to world markets. That is the biggest single reason why land locked countries in Asia, Latin America and Africa tend to be the poorest. They also need to build up the commercial infrastructure needed to participate in trade. So we advocate an enhanced Aid for Trade provision to help developing countries integrate into world markets.

    Taken together, these proposals would offer all low income countries Real Trade opportunities to grow out of poverty.


    At the end of the day, it will be the developing countries themselves who make poverty history. To do so speedily, will mean that they must achieve in a generation what took us centuries. We can help them accelerate the process by the sort of measures I have spelt out, by providing humanitarian assistance in the interim and above all by opening up trading opportunities – which are as much in our interests as theirs.

    God willing, material poverty will be history in the life time of some of us. Then we can turn to the more difficult task of tackling spiritual poverty at home and abroad.