Can Aid Work?

Nick Kristof has a review in the current New York Review of Books of recent books by Jeff Sachs, Bill Easterly, Ruth Levine, Robert Calderisi, David Leonard & Scott Straus about the effectiveness of aid.

Coincidentally, G and I went to a presentation by Bill Easterly this morning, here in London to promote his new book.

I agree with Easterly that:

  • we need a range of entrepreneurial, small-scale activities to innovate and test new ideas;
  • we need more thorough and independent evaluation of aid; (see here for an analysis of the evaluation gap)
  • aid should be more accountable to the people it is intended to help;
  • we should stop interventions which do not work;
  • and we should scale up interventions which do.

But I also fundamentally disagree with Easterly:

  •  there is abundant evidence that more aid is positively correlated with growth in developing countries; Easterly cites a misleading sample of technically inadequate papers to the contrary;
  • we need planners as well as searchers: once good ideas have been developed and tested, they should be scaled up and this requires coordinated plans;
  • the country-led approach which Easterly derides has not yet been fully tested, but early indications are positive.  The forty years of failure which he criticizes were years in which donors pursued aid interventions much more like those he advocates than the policies they pursue now.

Finally, none of the books that Kristof reviews does justice to the role of the private sector in development.  We need to understand better the range of policies and interventions that would help to foster private sector development, and not stifle it.

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