Thursday, May 28, 2009

The Impact of Aid

Dambisa Moyo's book about decreasing foreign aid has caused a stir that people are still arguing about. Jeffrey Sachs tackles the topic in a recent article, highlighting the many instances in which foreign aid has in fact been beneficial to a country's overall economic success. In an interesting twist, he compares the scholarships Moyo received for her studies and the money needed for a child to receive a malaria net. He challenges his readers to reconsider aid- if we eliminate it, where would we draw the line?

"Of course, most Americans know little about the many crucially successful aid efforts, because Moyo, Easterly, and others lump all kinds of programs - the good and the bad - into one big undifferentiated mass, rather than helping people to understand what is working and how it can be expanded, and what is not working, and should therefore be cut back. Nor do Americans hear that many poor countries graduate from the need for aid over time, precisely because aid programs help to spur economic growth and successfully prepare countries to tackle future priorities. US aid to India for increased food production in the 1960s paved the way for India's growth takeoff afterwards. There are countless other examples in which countries have benefited from aid and then graduated, including Korea, Malaysia, Taiwan, Israel, and others. Egypt is on that path today, and Rwanda, Tanzania, Ghana, and others will be as well if both donors and recipients carry forward with a sensible assistance strategies.

Out of every $100 of US national income, our government currently provides the grand sum of 5 cents in aid to all of Africa. Out of that same $100, we have found around $10 for the stimulus package and bank bailouts and another $5 for the military. It is not wonderful that what has caught the public's eye are proposals to cut today's 5 cents to 4 or 3 cents or perhaps zero."

Read the full article here.