Why so much aid for the poor has made so little difference

Aid institutions too often pursue disconnected agendas. For every development success story, there's another about exporting plans and resources irrelevant to needs. Excelling at raising money, uncertain about results. Struggling to coordinate 21 US agencies and 50 operating units that deliver aid. Subsidizing (through clenched teeth) shameless kleptocracies and grotesque dictators. Funding fiascoes, such as $5 billion spent since 1979 on Nigeria's Ajaokuta steel mill, which has yet to produce any steel.

Humanitarian aid budgets aren't focused on the last billion, where the average person has an income one-fifth of those in mid-tier developing countries. Seventy percent of the last billion live in Africa, yet in 2008 only a third of all US government direct aid will go there. (This is progress: In 2001 it was only 8 percent.) Instead, Israel and Egypt together get 10 times the US direct aid that Darfur does. Russia gets as much as 20 sub-Saharan nations combined. Ireland gets 167 times what the Central African Republic does. These may be rational political transfers – but they're not life-saving assistance.

Development agencies around the world can't find staff to serve in places such as Chad. The World Bank has offices in every middle-income country, but only one staff member in the Central African Republic. The aid posts with the most people from most rich governments are in places such as China and Brazil, which don't need the help. And when the help is there, too many of the rich world's best efforts have unintended consequences. Malawi agriculture, for instance, withered under a prohibition against subsidizing fertilizer and seed. Finally, in 2005, Malawi defied the World Bank – and after decades of dependence, became a net grain exporter.

Some aid efforts hurt even as they help. Take food aid: First-world farmers get subsidies to grow crops. Surplus food stocks are then bought (with more tax dollars) and shipped to a struggling nation, where they're distributed or converted into currency to fund (hopefully peaceful) projects. But here's the problem: Local farmers can't compete with "free" produce. No indigenous capacity ever develops. So aid reinforces a tragic cycle of dependency.

While wealthy nations underwrite this diffuse agenda, the last billion continue to pay for it with their lives, and instability spreads. To eradicate abject poverty in one lifetime, the developed world's approach must change – in some ways subtly, in others significantly. (Tomorrow we'll take a look, through the eyes of experts, at the best levers for helping the last billion help themselves.)

• Mark Lange, a former speechwriter for President George H.W. Bush, is working on a book about financing the next green revolution.

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