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Stop funding Argentina

8 June 2012

4:15 PM

8 June 2012

4:15 PM

One of the justifications for Britain’s large, and rapidly growing, international development budget is that it promotes our national interests. Politicians are wary of appealing to a public sceptical of the benefits of aid purely on the basis that it will help where it is spent. The idea is that by supporting poorer countries we increase their stability, and thereby create a safer world for British people as well.

But the evidence that foreign aid promotes political stability is weak. Harvard economist Nathan Nunn and Yale economist Nancy Qian found in a Working Paper published this January that ‘an increase in U.S. food aid increases the incidence, onset and duration of civil conflicts in recipient countries.’ They documented how and why that happens, with ‘aid stealing’ as ‘an important mechanism.’

Some aid projects do foster political stability, but the idea that all aid does simply isn’t backed up. Therefore, the rationale for using our aid to further our interests has to be that we buy security in some way. If a country receives our aid, then they are more likely to buy our products, support causes that are important to us and respect our interests.

For that to work though, we can’t give money to countries that snub Britain at every turn. The Argentinian government has tried to organise a boycott of British goods, repeatedly attacked the right of residents of the Falkland Islands to remain British, and attacks us in every international forum available. Despite all that, they still get World Bank loans backed with our money.

Argentina is a major recipient of World Bank loans and Britain is one of the bank’s biggest shareholders. They have $16.2 billion of outstanding loans from the World Bank and affiliated institutions. Based on our shareholdings in the relevant multilateral development banks, our share of that is over £225 million.

The government doesn’t use its votes to oppose these loans. The Obama administration blocks new lending to Argentina, exasperated by the way the Argentinians have treated their creditors, but Cameron’s administration doesn’t. The TaxPayers’ Alliance has launched a new petition arguing that Britain should vote against the loans, which you can sign here.

The best justification for spending on foreign aid is that in some very specific circumstances it can directly save lives. That is obviously a fine way to spend our money, but it’s less convincing as a justification for a big government aid budget. Taxpayers can and do give their own money.

Besides, humanitarian aid is just a small part of the total aid budget. In terms of DFID’s bilateral work, for example, there was £351 million in humanitarian assistance in 2010-11. The other £3,897 million was &”other bilateral assistance”. Then there is another £3,222 million in multilateral assistance (which will include some humanitarian assistance) through a whole range of institutions including the World Bank and its affiliates.

If politicians are going to claim that foreign aid is about more than altruism, then it is madness not to use the votes our generous support of the World Bank brings us to oppose loans for Argentina. If you agree that our financial support for Argentina has to end, go to and sign the petition.

Matthew Sinclair is Director of the Taxpayers’ Alliance. 

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