Christopher Coyne writes;
[A] study by the economist Jakob Svensson found that foreign aid, on average, is associated with an increase in corruption in the recipient country as various groups seek to maximize their shares of the windfall profits associated with assistance. Similarly, a cross-country study by Stephen Knack of The World Bank found that foreign assistance undermines the quality of political institutions in the recipient country.
Of importance, [this] does not hold just in cases of the transfer of humanitarian assistance from developed to underdeveloped countries, but also in cases of transfers within developed countries as well. In a study of state-provided disaster relief within the United States, economists Peter Leeson and Russell Sobel note that, like international humanitarian crises, domestic natural disasters result in humanitarian assistance transfers from the federal government, in this case to state governments. They find that just as in the international cases, these windfall profits create domestic rent-seeking opportunities that increase corruption. Specifically, [they] estimate that each additional $100 per capita of FEMA relief raises the average state’s public corruption (defined by crimes that the U.S. Department of Justice classifies as “public corruption offenses” by nearly 102 percent
The problem, in other words, isn’t just the political structures/systems of LDCs, but also of the interaction of human nature and windfall profits, even where corruption is not the norm. As much as we might want to help people suffering through no fault of their own, the calls for more aid may be–inadvertently–calls for the promotion of corruption.