The Failure of Developmental Aid: William Easterly

Read this short article (pdf) by William Easterly published exactly 10 years ago on July 4th, 2001, in the Financial Times (London). The headline reads: “The failure of development: In spite of billions of dollars spent on aid to poor countries, there has been no real progress, says William E.” Short excerpt below the fold.

Contrary to conventional wisdom, aid to the developing world has been a big disappointment.

Consider the facts and it soon becomes evident that the Dollars 1,000bn spent on aid since the 1960s, with the efforts of advisers, foreign aid givers, the International Monetary Fund and the World Bank, have all failed to
attain the desired results.

Sub-Saharan Africa has not emerged from a decades-long economic crisis; Asia remains the home of the majority of the world’s poor; Latin America has known only erratic and low growth; the Middle East has not converted oil riches into sustained development. It is little wonder that protesters have demonstrated so vehemently against the international organisations.

Each of the different actors in the development aid community has contributed to this debacle. The first culprits were the economists whose attitude was “build it and they will come”. We thought that certain objects associated with prosperity in the industrialised world – dams, roads, schools – could bring success to the developing world.

Later, fads changed to include institutional magical objects. Thus we urged governments to embrace democracy, constitutions, independent judiciaries, decentral-isation to local governments and other magic bullets. None of them worked.

The second culprits were the recipient governments that resisted development and the aid lenders that tried to change their attitudes. The donors failed to realise that conditional loans were a minor factor in politicians’ incentives. Governments in many poor countries were torn by conflict over redistribution of the existing pie between regions, political factions and ethnic groups. Or the landed and industrial elite, to whom power was more important than development, were afraid to invest in the masses that might demand their share of power.

In class, we will discuss the impact of aid on development.

PS: About the article, Easterly tweeted: “@bill_easterly: the piece that got me fired by the World Bank.”

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