Economics Dictionary of ArgumentsHome
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| Foreign aid: Foreign aid or development policy deals with strategies, programs and measures aimed at the economic, social and political growth of countries and regions. The aim is to reduce poverty, promote education, healthcare, infrastructure and institutional strengthening. See also development economics, developing countries, education, institutions._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Daron Acemoglu on Foreign Aid - Dictionary of Arguments
Acemoglu I 452 Foreign aid/Acemoglu/Robinson: (...) foreign aid is one of the most popular policies that Western governments, international organizations such as the United Nations, and NGOs of different ilk recommend as a way of combating poverty around the world. And of course, the cycle of the failure of foreign aid repeats itself over and over again. The idea that rich Western countries should provide large amounts of “developmental aid” in order to solve the problem of poverty in sub-Saharan Africa, the Caribbean, Central America, and South Asia is based on an incorrect understanding of what causes poverty. Institutions: Countries such as Afghanistan are poor because of their extractive institutions - which result in lack of property rights, law and order, or well-functioning legal systems and the stifling dominance of national and, more often, local elites over political and economic life. >Institutions/Acemoglu, >Terminology/Acemoglu. The same institutional problems mean that foreign aid will be ineffective, as it will be plundered and is unlikely to be delivered where it is supposed to go. In the worst-case scenario, it will prop up the regimes that are at the very root of the problems of these societies. If sustained economic Acemoglu I 453 growth depends on inclusive institutions, giving aid to regimes presiding over extractive institutions cannot be the solution. Conditional aid: One solution (...)is to make aid “conditional.” According to this view, continued foreign aid should depend on recipient governments meeting certain conditions—for example, liberalizing markets or moving toward democracy. The George W. Bush administration undertook the biggest step toward this type of conditional aid by starting the Millennium Challenge Accounts, which made future aid payments dependent on quantitative improvements in several dimensions of economic and political development. VsConditional aid: (...) the effectiveness of conditional aid appears no better than the unconditional kind. Countries failing to meet these conditions typically receive as much aid as those that do. There is a simple reason: they have a greater need for aid of either the developmental or humanitarian kind. Acemoglu/Robinson: 1) foreign aid is not a very effective means of dealing with the failure of nations around the world today. Countries need inclusive economic and political institutions to break out of the cycle of poverty. Foreign aid can typically do little in this respect (...). >Institutions/Acemoglu. 2) since the development of inclusive economic and political institutions is key, using the existing flows of foreign aid at least in part to facilitate such development would be useful. (...) perhaps structuring foreign aid so that its use and administration bring groups and leaders otherwise excluded from power into the decision-making process and empowering a broad segment of population might be a better prospect [than conditional aid]. Acemoglu I 460 Empowerment: what can be done to kick-start or perhaps just facilitate the process of empowerment and thus the development of inclusive political institutions? The honest answer of course is that there is no recipe for building such institutions. Naturally there are some obvious factors that would make the process of empowerment more likely to get off the ground. These would include the presence of some degree of centralized order so that social movements challenging existing regimes do not immediately descend into lawlessness; some preexisting political institutions that introduce a modicum of pluralism, such as the traditional political institutions in Botswana, so that broad coalitions can form and endure; and the presence of civil society institutions that can coordinate the demands of the population so that opposition movements can neither be easily crushed by the current elites nor inevitably turn into a vehicle for another group to take control of existing extractive institutions. But many of these factors are historically predetermined and change only slowly. See also Reinikka and Svensson (2004) and Easterly (2006) on problems of foreign aid.(1) 1.Reinikka, Ritva, and Jacob Svensson (2004). “Local Capture: Evidence from a Central Government Transfer Program in Uganda.” Quarterly Journal of Economics, 119: 679–705._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Acemoglu II James A. Acemoglu James A. Robinson Economic origins of dictatorship and democracy Cambridge 2006 Acemoglu I James A. Acemoglu James A. Robinson Why nations fail. The origins of power, prosperity, and poverty New York 2012 |
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> Counter arguments in relation to Foreign Aid
