The United States gives more money in foreign aid than any other country in the world. Researchers in Virginia have just launched a web database called Aid Data that allows people to see where those dollars are being spent. it can be thought of as the Wikipedia of development finance. The website allows anyone to track the flow of aid money around the world.
Mike Tierney, who teaches government at the College of William and Mary, developed Aid Data with his colleagues last spring. Before the tool existed, there was simply no good way to monitor whether billions in aid had any effect.
"Millions of dollars would go to a project that sounded good, and the money wouldn't end up being spent for the people that it was meant for," Tierney says. "And it caused a lot of people to say we want to know where our dollars are going. Do the dollars that we spend make a difference?"
A classic case in point: In the mid-1990s, aid was given to Ugandan villages for their schools, but the funds were grossly mishandled.
"When economists at the World Bank went in to study where this money actually went, what they found was that only about 20 percent of the dollars were actually getting down to the local level to buy pencils, to pay teachers, to fix desks, the basic things that you needed to run a school in a Ugandan village," he says.
The fix turned out to be simple. By posting school budgets for parents and teachers to see, the schools held their local governments accountable. As a result, the amount of money that made its way to schools jumped from 20 to 80 percent.
"So overnight, you get a massive increase in the effectiveness of the same dollar amounts just by providing information to the beneficiaries about those projects."
U.S foreign aid began in earnest under the Marshall Plan, which helped rebuild European economies after World War II. Tierney says that today, the U.S. gives aid to countries with democratic reforms and free markets.
"One suggestion that was made in the early part of the Bush Administration, which I think was an incredibly innovative idea, was instead of giving money and hoping the recipient would change its behavior, you simply pick the winners," Tierney says. "You pick countries that are already doing the right things and you give money to them rather than giving money to your political cronies."
But, that's not always possible. Tierney says U.S. foreign aid is crucial for maintaining national security and goodwill. But, sending money abroad can be a hard sell.
"Politically, it's extremely difficult to tell your voters that you think it's a good idea to send money overseas to help poor people when people are struggling here at home."