here's a brief piece on ineffective foreign aid from THE WEEK magazine.
"only about 20% of all international aid actually goes to the people it is meant to help, 2 major aid agencies said this week. Oxfam and Action Aid, both based in the UK, said that bureaucratic costs ate up most of the money donated by western governments. much of the money actually ends up in the rich donor nations, b/c the aid agencies are required to buy products and services from donor-country companies at inflated prices. the US and Italy are the worst offenders, the groups said, effectively taking back 70% of the aid they supposedly donate." the UK Oxfam site sez "Italy ties 92% of its aid spending to the purchase of goods and services from Italian companies." http://www.oxfam.org.uk/what_we_do/issues/debt_aid/art_green_eu.htm