Why Development Aid Doesn’t Solve the Poverty Problem

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Why Development Aid Doesn’t Solve the Poverty Problem

I come from a beautiful archipelagic country in the Pacific called the Philippines. As of this writing, my homeland is inhabited by 100 million people who belong to a brave, hardworking and strong-willed race that has survived over 300 years of colonization.

I am a Filipino, and I say this with immense pride in my heart. But there are many things in my homeland I am not proud about, foremost of which would be the worsening poverty that has driven millions of my compatriots abroad.

Palawan Islands, Philippines
Palawan Islands, Philippines

The most recent official figures place Philippine poverty incidence1 at 25.8%, and subsistence incidence2 at 10.5%. That’s over 25 million people struggling to make ends meet, in a country that’s supposedly teeming with natural resources: Philippine biodiversity is among the richest across the globe, with over 52,000 described species, half of them endemic, and its 7,100 plus islands are home to some of the most breathtaking beaches, rivers, mountains, and rock formations. A Forbes report also reveals that the Philippines has the world’s second largest amount of gold reserves, as well as billions of dollars’ worth of nickel and copper deposits.

My country is frequently described as a thriving economy, with an annual gross domestic product (GDP) growth rate of 6%. Evidently this growth has not been benefiting the poorest of my fellow Filipinos, and that is a great tragedy.

The rising poverty levels have drastically worsened the quality of life for many Filipinos, with many of them becoming especially vulnerable to the impacts of climate change. In 2013, for example, the country grabbed the world’s attention after being struck by Typhoon Haiyan, which killed thousands in its Eastern Visayas region, and left many others homeless and destitute.

The calamity drew an outpouring of support from across the globe – support that seamlessly fits into what has been the government’s largely aid-driven development framework. That the region still continues to struggle with poverty two years after the tragedy should invite a question we should have been confronting all along: Why is the influx of millions of dollars in development aid each year not working?

development aid and poverty in the Philippines

First of all, any conversation about aid should begin with an understanding of the root of poverty. In many developing countries, poverty arises from the highly skewed distribution of means of production. Land, machinery, industrial spaces, and financial capital are concentrated in the hands of a few, whose relentless pursuit of profit results in wasteful production that is not built around people’s needs. This would explain why, despite having more than 10 million hectares of arable land, the Philippines needs to import rice from its neighbors, while exporting tons of other products to other continents.

Genuine change cannot be expected when aid only serves to reinforce this relationship, along with unsustainable trade and production practices. A prime example of untenable policies would be the Structural Adjustment Programs (SAPs), whose conditions destroyed the Philippine economy and social services sector. Until now, Filipinos are suffering from the effects of the privatization of state-owned enterprises including the petroleum corporation, electricity and water distribution services, and transportation systems; deregulation of industries; liberalization of markets; and cuts in social spending, among other policies.

Aid should instead be based on a comprehensive poverty alleviation roadmap, one whose goal is to provide the poor access to the many forms of capital, and the mechanisms they need to master the means of production. Moreover, it should promote good governance, and not allow governments to shirk their responsibility, especially in the delivery of public services. Sadly, aid these days very often gets used to finance programs that are already covered by taxpayer funds.

If official development assistance is to truly “ensure inclusive access to public services, leverage other sources of development finance or improve their targeting; and put the world on the pathway to sustainability,” UN Sec. Gen. Ban Ki-moon explains that stakeholders should improve its quantity, transparency and accountability. Private aid should adhere to the same principles. Individuals and organizations should carefully monitor how their donations are spent. Even better, they can course it through civil society organizations that actually work with the grassroots, and lead movements for social justice.

In the end, the most valuable aid is not the kind that solves people’s problems on a piecemeal basis, and undermines their will to effect change. Instead, it’s the kind that inspires them to dream a better world for themselves and more generations to come, and empowers them as they fight for that dream.


1 Poverty incidence is defined as the proportion of Filipinos living below the poverty line set at PhP8,778 on the average every month (equivalent to A$269 or US$187 using today’s currency exchange rates), is the income expanded to cover basic food needs as well as basic non-food needs such as clothing, housing (minor repair and rental, etc.), transportation, health, and education expenses.

2 Subsistence incidence refers to the proportion of Filipinos whose incomes fall below the food threshold, which in turn refers to the minimum income required to meet basic food needs and satisfy the nutritional requirements to be economically and socially productive. The amount is determined by the Food and Nutrition Research Institute, which prescribes low-cost menus and computes the cost based on the average prices of the goods. For the 2014 study, this translates to at least PhP6,125 monthly for a family of 5.

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