Foreign aid is a failure: throwing good money at bad governments makes poor countries worse off.

• Author: de Rugy, Veronique
• Position: Columns - Column

IT'S BEEN ALMOST a decade since one of the deadliest natural disasters in modern history devastated the coast of South Asia. In the final days of 2004, a 9.1-magnitude undersea earthquake triggered a tsunami in the Indian Ocean, killing over 230,000 people in places such as Indonesia and Sri Lanka and leaving thousands stranded without the basic necessities of life.

International leaders immediately called on the global community to provide help. What happened after that underscores the flaws in the developed world's approach toward foreign aid: Governments gave generously, pledging more than $10 billion. Yet the humanitarian response to the crisis fell far short, and many desperate needs went unmet.

For years, it was believed that solutions to complex global problems could be engineered if only wealthy nations mustered enough will and funding to see them through. But despite a desire to help and a willingness to give, the international community keeps stumbling to address both short-term crises, such as natural disasters, and longer-term challenges, such as global poverty and economic development.

In his 2013 book Doing Bad by Doing Good, the George Mason University economist Christopher Coyne explains why measures intended to alleviate suffering often go so wrong. Most people agree that wealthy countries have some responsibility to help relieve hardship in distressed areas. But while we are usually clear about our goals, we rarely stop to consider whether government can realistically accomplish them. Our efforts abroad tend to be marred by culturally illiteracy. Without meaning to, we frequently create perverse incentives that harm the people we are trying to assist.

Foreign aid is the main tool of state-led humanitarian efforts among wealthy members of the Organization for Economic Co-operation and Development (OECD). While such spending accounts for a mere drop in the bucket of the donating nations' budgets, the combined sum from governments around the world is enough to cause big problems in developing economies. In Fiscal Year 2013, OECD countries spent a total of $138 billion on foreign aid. From 1962 to 2012, they contributed a cumulative $3.98 trillion.

It was long believed that directing money to stagnant communities could jump-start economic growth. Yet numerous studies have found little evidence that foreign aid actually leads to greater economic development.

Take Africa as an example. To date, the continent has received well...