In the sixty plus years since the end of WWII, Western governments and aid agencies have dolled out more than $2 trillion dollars in economic assistance to the world’s poorer nations as a means of economic development. The results of all this assistance, to put it mildly, have been far from stunning. Numerous studies have found no positive effect of foreign aid on economic growth, and there is even some evidence that the impact may be negative.
And while some countries have seen spectacular growth in recent years (to the point where the standard of living in these formerly “Third World” countries now exceeds that of many places in the West), this growth has tended to be in countries that have received little in aid.
Confessions of an Economic Hitman, which I reviewed last week, sought to explain these results according to what Robert Heinlein called the “devil theory” of sociology. If aid has left countries impoverished, then it must have been the aim of the people giving the aid to further impoverish those countries. William Easterley’s book The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good, by contrast, takes a somewhat different tact. A former economist for the World Bank, Easterly is largely willing to credit the altruistic motives claimed by aid agencies and other Western actors. Instead, Easterly argues that the failure of aid to work wonders in the developing world is due not to malice but to hubris.
When it comes to promoting development, Easterly argues, Western development experts are largely incompetent, not because they are stupid, but because the information necessary in order to successfully organize an economy is beyond the grasp of any person or small group of people. Just as central planners lack the local information about people’s needs, wants, and abilities to plan an economy, so aid agencies lack the information about the needs, wants, and abilities of the world’s poor (as well as knowledge about local culture, history, and customs) that they would need to have if they were to successfully guide a nation from poverty to abundance. Without this information, any attempt to engineer development is destined to fail, often in unforeseen and spectacular ways.
While foreign aid and international agencies come in for a fair amount of criticism, The White Man’s Burden is hardly a right-wing screed. The book contains many pages recounting the possible shortcomings of markets, several chapters on the folly of Western military intervention in the developing world, and harsh criticism of the “shock therapy” market reforms used in the former Soviet-bloc nations. There is even a favorable reference to Naomi Klein (and a deservedly snide one about Pat Robertson). Nor does Easterly advocate eliminating foreign aid (for that, you’ll have to read Dambisa Moyo’s Dead Aid). Nevertheless, Easterly does conclude that in every case where development has occurred, reliance on markets has been a significant factor, because of the market’s ability to harness the kind of local information that Western planners lack. In fact, one of Easterly’s key recommendations is that foreign aid should become more market based, utilizing development vouchers or other methods that can provide the feedback and accountability present in the market mechanism.
If one wishes to help the world’s poor, one has an obligation to get informed about the basic facts of development. Reading Easterly’s book is hardly the only way to acquaint oneself with this information, but you could do much worse.
The saying that foreign aid is the way to transfer wealth from the poor in rich countries to the rich in poor countries has many, many, many examples.
Dambisa Moyo gives an interesting take here:
http://www.guernicamag.com/interviews/954/moyo/
One of the things that struck me in Easterly’s EconTalk interview about this book was his discussion of the difficulties of top-down aid, and how it is so often coopted by corrupt local government or put into projects which local residents don’t need or care about.
As an example of a bottom up approach to aid, he talked about GlobalGiving, a portal for small aid projects identified by locals and advocated on the ground in needy areas of the developing world, and put up for individual funding. Because these sorts of projects are locally planned and desired, there’s greater likelihood that they’ll acheive their aims.
Also fascinating along those lines was the EconTalk with George Srour, founder of the Building Tomorrow project for locally run non-profit schools in Africa.
Out of curiosity, where would aid that comes through Catholic organizations fall in? Have Catholic organizations managed to be more effective than other international aid campaigns?
I am no expert here, but I remember reading recently that it is reasonably well understood what is required to get an impoverished country’s economy to “take off,” but it requires politically unpopular changes within the target country.
It does seem to me true that the United States tends to use foreign aid in its own self-interest (for example, to help American farmers and American shipping companies) with too little regard for what kind of aid is actually needed by the people we claim we want to help.
Great post. It’s refreshing to read a contributor that uses facts.