‘International Charity: a Sacred Cow’, New Society

6th May, 1965

International charity, in the sense in which I wish to examine it, is one of the new phenomena characteristic of our time. Yet it has become so familiar over the last twenty years that we fail to realize how novel and paradoxical it is, and how deserving of analysis and critical examination.

A government raises by taxation, or borrows by the use of public credit, a quantity of economic resources which it then places at the disposal of another government, either as a gift or as a loan on intentionally favourable terms. The gift or favourable loan may be made either direct from government to government or through an intermediate agency. The resources given or loaned are usually expressed in terms of money; but the money may either be exchangeable into other money before it is finally exchanged for goods or services, or else it may be expendable only in the donor country. Exceptionally, the gift may take the form of actual goods or services purchased or hired by the donor government.

This phenomenon is commonly called ‘aid to underdeveloped countries’ ‘aid to developing countries’, ‘international aid’ or sometimes briefly ‘aid’; but since these expressions are sometimes used in a sense which includes other things also, I would emphasize that the phenomenon here examined is limited to the actions of governments. The transfer of resources by other agencies, whether Oxfam or the Methodist Church or British American Tobacco, is not my concern.

This activity of governments is one of those which in this country are believed to be electorally advantageous, or at least which it is believed electorally disadvantageous to disclaim or repudiate. At the General Election last October [1964] the Conservative manifesto said: ‘under the Conservatives since 1951 £1,400 million has been provided in Government aid, preponderantly to the Commonwealth. Last year it reached the record level of £175 million, more than double what it was six years earlier. ... As the British economy expands, so the level of aid will progressively rise.’

The Labour Party’s manifesto went perhaps further, and promised that ‘Labour will increase the share of our national income devoted to essential aid programmes not only by loans and grants but by mobilizing unused industrial capacity to meet overseas needs’. It is a fascinating paradox that the promise to raise in taxation and give away a constant or even a rising proportion of the national income should be regarded as an essential ingredient in manifestos addressed to the mass electorate.

The grounds on which this activity of government is explained and justified fall into two classes: self-interest and altruism. Though in common parlance these are often interlaced with one another, they are in fact mutually inconsistent. The essence of an altruistic act is that the doer does it with the object of obtaining no advantage for himself other than the advantages of disinterested action, such as self-esteem, or the fulfilment of an impulse, or reward in another life. An action cannot be altruistic insofar as it is adequately motivated by considerations of self-interest.

The motives of self-interest which are advanced in explanation of aid divide themselves again into two: economic and political.

If aid is justified on grounds of economic self-interest, this implies the belief that the donor country will be more prosperous – for example, that it will enjoy a larger income per head – as a result of giving aid than it could otherwise. Since aid involves a sacrifice or renunciation of economic benefit in the present, the proposition must be that future advantage more than compensates for this, so that, taking a sufficient period of time into account, economic advantage is maximized. In other words, on this view, aid is an investment.

In deciding whether and how much to invest we use the rate of interest on capital as a means of comparing one advantage with another – a present advantage with an expected future advantage. The rate of return expected on an investment must be more than sufficient to compensate for the disadvantage and risks of waiting. A gift or a loan at artificial rates of interest can therefore be economically justified on one assumption only: that the capital market is wrong in its assessment of the future and that the donor government has such superior insight and knowledge as enable it to perceive that investments which its citizens would not on their own judgment make voluntarily will in fact pay off better than those in which they blindly and misguidedly prefer to invest their savings. Of course, there is a school of political thought which is prepared to make that assumption. It cannot, however, be limited in its application to investment overseas and in specific countries overseas. If true at all, it must apply to investment generally. This generality is what deprives it of its relevance to aid.

One of the elements taken into account in investment choices is risk, and this factor naturally tends to bulk larger in overseas than in home investment. It might perhaps be thought that governments are more likely than the market to gauge accurately the degree of risk attaching to an overseas investment – what likelihood there is, for instance, that the government of the country concerned will devalue its currency, go wildly inflationary, prohibit the remittance of dividends, or be overthrown by a Communist revolution. In fact, a government is under positive pressures to get the answers to these questions wrong, since its advice has to be given publicly and officially and thus becomes a factor in international relations. True, a government can undertake to insure risks in investing in, or selling to, a foreign country at a lower rate than they are commercially insurable. But that itself is a form of aid.

On the alternative view that the motive of self-interest is political, aid is an expenditure to purchase political advantage, such as allies or immunity from attack. One might quote as typical the relevant passage in The New Britain: ‘Poverty is an ever-present fear for more than half the world’s population. It presents the Western industrialized nations with a tremendous challenge which we ignore at our peril: for there is a growing danger that the increasing tensions caused by gross inequalities of circumstances between the rich and poor nations will be sharply accentuated by differences of race and colour.’

Again there is a close similarity between the languages of the two parties. ‘It is the gap in living standards’, said the Conservative manifesto, ‘between the industrialized and the developing nations that gives racial conflict its cutting edge.’ If this means anything at all, it is this: ‘if the poor nations do not quickly become richer, indeed as rich or nearly as rich as ourselves, they will come here and overrun us; therefore it is the lesser evil to spend our money to help them to get rich quick.’ There is nothing particularly novel about this line of thought: it is a kind of combination of the Yellow Peril and Danegeld. But the reasoning behind its application to aid is very curious.

Poor and weak nations do not attack rich and strong nations or, if they do, they are less dangerous to them than rich and powerful enemies. We are not afraid of Soviet Russia because her standard of living is low. Soviet Russia does not fear America because America is poor but because America is economically so strong. It is not China’s poverty, but the prospect of her becoming rich enough to afford nuclear weapons, that scares both Russia and the West. If what we fear is being attacked and overrun by Africans and Asiatics, then (one might say) long live the gap: the wider it is and the longer it lasts, the safer we shall be.

If, on the other hand, the argument is that nothing can stop these nations from becoming rich one day, but that, if we have helped them to do so, they will be kind and friendly and not attack us when they are rich and powerful enough to do so, that will not stand up to examination either. When they have become rich, then ex hypothesi the motive of aggression will have disappeared – presumably progressively as their standard of living rose. And in any case, what reason is there for supposing that a nation bent upon aggression is deflected by considering that its intended victim has behaved nicely to it in days gone by? These are tales told to the marines.

A more hopeful argument is that in the competition for allies between the Communist and the non-Communist countries an important position could be purchased by gifts in the form of aid. There is no logical fault in this argument, so far as it goes: countries can, and do, sell their support to the highest bidder, and may be impressed by the generosity, as implying the wealth and power, of one of the suitors for their alliance as compared with another. A recent study (H. J. P. Arnold, Aid for Developing Countries, Bodley Head) concluded that: ‘U.S. aid has gone primarily to those countries which occupy a prominent position in the overall strategy of U.S. policy’, while ‘Soviet aid has mostly gone to those countries whose relations with the West have deteriorated for some reason. By and large it is true to say that U.S. and Soviet aid to the less developed countries has been motivated by cold war considerations.’

It is on practical grounds that the limitations arise. It is irksome to have to go on subsidizing an ally, especially as the relationship is degrading and inconvenient to both parties, implying blackmail on the one side and patronage on the other. This is not the soil of common interest in which lasting goodwill grows, especially as the attempt to secure value for money by infiltrating politically or militarily produces a hostile reaction which in turn leads to the call for further infiltration.

Even so, it has come to be realized that the volume of Russian aid, in the sense in which the term is here used, has been grossly exaggerated by skilful propaganda, and is only a small fraction of the expense to which America and the rest of the West have put themselves to offset and counteract it. Much that is publicized as Russian aid proves on examination to be commercially motivated in the terms of Soviet economics: ‘Soviet aid’, Arnold concluded, ‘just like the market operations of Western commerce, ought to be regarded as a method of securing foreign markets.’

After allowance has been made for these characteristics of much that is included under Communist aid, the disproportion between the volume and value of aid from the Communist and the non-Communist sides is enormous – so great that if the motive is political self-interest, one can only conclude that the West must be getting extraordinarily low value for money.

It is not, therefore, surprising that there has been a tendency, especially recently, to replace or buttress the motive of political self-interest (the ‘cold war’) with that of altruism. After all, it is no reproach not to get value for money, if value for money is just the one thing which is not sought. The assimilation of aid to private charity is accordingly prominent in official pronouncements. The Labour Government’s new Ministry of Overseas Development, said The New Britain, ‘will help and encourage voluntary action through those organizations that have played such an inspired part in the Freedom from Hunger Campaign. We must match their enterprise with Government action.’

Point and counterpoint, the Conservative manifesto declared: ‘As the British economy expands, so the level of aid will progressively rise. We shall also support voluntary endeavour, of which the Freedom From Hunger Campaign has been such a splendid example.’ So here, explicitly, aid is viewed as altruistic in motive, as charitable. But is there any meaning at all in ‘charity’ in this context?

Charity is essentially the act of a person. The commandment of perfection, ‘Thou shalt love thy neighbour as thyself, turns upon the verb ‘love’, which is meaningful only when applied to an individual human (or divine) being. It is a personal emotion; and self-sacrifice in which it results is something peculiar to individual persons: ‘Greater love than this hath no man, that he lay down his life for his friends’. Only a creature capable of dying individually can exhibit this love, and that is true of the lesser acts of self-sacrifice. Morality, religious or ethical, is about persons. Wherever the terms of morality are applied to collective or inanimate entities, they are either being used metaphorically, or they apply in fact to the individuals underlying the collective or inanimate entity.

Of course, persons can perform acts of charity in company. A group of people or the members of a religious order may each decide to give up his possessions and his career in order to heal the sick and teach the ignorant for no material or worldly reward. But the charity is still that of the individuals, and when we refer to the order or the institution as charitable, that is no more than an abbreviated mode of speaking. However widespread a voluntary charity may be, it retains always the characteristic that every individual who participates in it does so as a personal and deliberate act, which to that extent involves a personal deprivation for him.

The question is whether charity or altruism can have any meaning when applied to the act of a public authority, decided on and executed by an organ of that authority and financed with money raised by compulsion. Clearly a charitable act is not performed by the Cabinet Minister who resolves to make a present of public money to the government of India or the administration of St. Helena. So far from imposing a deprivation on himself (or herself) for the benefit of others, it appears that electoral advantage and party and personal credit is sought thereby. It might become an altruistic act perhaps if the Minister believed that the result would be to endanger his seat in the Cabinet or in Parliament. Meanwhile it will be necessary for the Minister concerned to give part of his salary or private means secretly to an underdeveloped country in order to qualify as charitable.

However, it may be said: ‘Surely we, the electorate, who have voted for a government which undertook to give away a lot of our money for no advantage to us – surely we are performing a charitable act?’ But in the first place, none of us had any choice, because in this respect there was no material difference between the prospectuses put before us. In any case our vote notoriously cannot convey affirmation of any specific item of policy; there was not a separate referendum: ‘Do you want £150 million of aid and an extra 6d. on your income tax standard rate, or not?’ Even if there had been such a referendum and it had been carried – otherwise than unanimously on a 100 per cent poll of those only who pay income tax at the standard rate or higher – it would still not have been a charitable act, except on the part of the ‘Ayes’ in respect of their own individual one contributions. Thus the act has to be converted back into an individual and voluntary one in order to acquire a charitable character.

Probably it is familiarity with what we call the Welfare State that has shielded us from perceiving the inherent absurdity and contradiction of a state or government purporting to behave charitably. The Welfare State does indeed perform some of the acts which are also, or would otherwise be, performed charitably; but that does not make its acts charitable, any more than the fact that some are also performed by entrepreneurs or companies makes the acts of the latter charitable. From the most rudimentary forms of society onwards, government has performed functions which the members of that society conceived it as performing on their behalf. It did so because the members of that society believed that upon the whole it was better for them that it should do so – better that it should make and enforce certain laws, better that it should arm and lead them against their enemies, better that it should make and keep promises to other governments. In our own society we have believed it better that the Government, directly or indirectly, should organize the education of the young, the care of the sick and the maintenance of the old. In all these activities it is possible to identify groups who are net losers in consequence but it is a collective advantage which, rightly or wrongly, is anticipated: we believe it will be better for us upon the whole, that ours will be a better society generally, if there is state education, a national health service, and a national insurance and assistance scheme. This is why we accept the reasonableness of arriving at these decisions by majority, the weight of numbers prevailing and enforcing their will upon the minority, who in turn accept it. There is no analogy here with a government deliberately incurring a public loss in order to perform a moral act of which the essence is to be voluntary and individual.

It is not without relevance to consider the effects of aid on the recipient. It is not charity to confer upon another, even at one’s own loss and damage, that which one believes is neutral or even harmful in its effect on him.

Aid is received and applied by governments, as well as given by governments. It is a matter of political belief whether, compared with market forces, a government has superior insight into the best allocation of economic resources. But in connection with aid there are special factors which tilt the balance heavily against government decision. The fact that the recipient governments are disposing of resources which have not been raised from their own population diminishes whatever incentive there may be to accurate and dispassionate economic appraisal. Even when capital is raised, or subsidies paid, from internal taxation, governments are capable of using the resources concerned with crass and continuing disregard of commercial prudence and economic prospects. But when the resources are a gift from without, the restraints are even weaker.

In all government decisions political considerations, often considerations of short-term advantage to the politicians themselves, are liable to interfere with economic judgment. This interference is specially strong in applying aid. Prestige, prejudice and vanity are on a loose rein: projects which are of propaganda value to donor and recipient governments enjoy an attraction which is out of proportion to their usefulness. Industrialization for industrialization’s sake, heavy industries, manufacturing plant of an advanced character yield a high return in self-esteem. Evidence that income per head would rise faster if there were investment instead in less capital-intensive industry would neither be welcome nor regarded.

The theory has been advanced that before capital and effort can be allocated in accordance with economic considerations, a nation must be brought up to a certain threshold or ‘take-off point’ by uneconomic investment and expenditure. If this were true, spontaneous economic development would never have happened anywhere. The theory rests upon several misapprehensions.

All development presupposes saving, and all saving is deferment of advantage. But this does not mean that the savings, whether indigenous or foreign, are to be applied regardless of advantage. On the contrary, the more scarce they are, the more important is it that they should be so directed as to yield the maximum return. Another misunderstanding arises from observing that some of the factors in economic development are often not commercially financed. For example, the exploitation of a mineral deposit may involve the construction of a road or railway and of dock and harbour facilities. When people see this, they say: ‘We can never exploit the minerals and get the economy of this country going unless the Government builds a port and a railway.’ But if those minerals in that place are worth exploiting – if they are destined to be a source of wealth to the country – it must be profitable to move and ship them as well as to mine and concentrate them. It is a matter of taste whether the mineral company or another company or the state provides and manages the facilities.

A widespread kindred fallacy is to notice that rich countries have fine hospitals and universities and expensive and elaborate public services, and to assume that therefore, if one makes a country a present of these things, it will be enabled to become rich. The true relationship of cause and effect is the other way round. The hospitals and universities are the result of development and growth; they represent predominantly consumption of the fruits of economic productivity. One can no more make a country productive by giving it good hospitals, wide boulevards and many-facultied universities, than by giving it first-class restaurants, night clubs and luxury hotels.

It may be said that all this tends to show that aid is, or often is, wasted, but that that is not the same as showing that it is harmful. But the effect of this waste is not neutral. The introduction of cheap or free capital lowers the price of savings and thus represses the indigenous saving on which sound future development must eventually be founded. As P. T. Bauer wrote in Indian Economic Policy and Development (Allen and Unwin): ‘It would be unpatriotic of the Government to seek to obtain funds on market terms if they are available free or on subsidized terms.’

But aid has more serious effects than repressing or wasting indigenous savings. The reasons for the immense gap between the economic achievements of (for instance) the peoples of Europe and those of the Indian subcontinent in the last three centuries are neither superficial nor predominantly geographical: they are deeply rooted in the profoundest characteristics of men and societies. If these peoples are to will and accomplish the changes which over years and generations would transform their relative economic position, then nothing can be imagined less likely to stimulate and help them than the sham of international charity. Even between one human being and another, where person acts upon person, charity can notoriously do more harm than good and repress rather than stimulate the energies of the recipient. But the impersonal transfer of resources from government to government under the colour of charity only encourages the recipients to delude themselves into supposing that the requirements of social, moral and political change can be dodged or abridged.