Chris Blattman on why aid seems to fail

Aid, if it achieves the UN’s goals, is often saving the lives of the poorest. In this respect, we can say aid has been successful. And it is this very success that could explain why we don’t see any effect on growth. In fact, for the first few decades of aid, it’s conceivable that it would appear to reduce per capita income growth.

If aid saves the lives of millions of poor infants, or mothers in childbirth, at roughly the same rate a country can industrialize, then we’ll see an increase in the number of poor people at about the same rate that we increase GDP per person. Unless aid is also spurring faster industrial growth, the growth figures essentially won’t change. The things that aid does well–increasing primary education, saving lives, and leading to a demographic transition (essentially lower population growth–may reasonably take a generation or two to impact industry.

So if aid has been good at saving lives now, but not (in the short term) at spurring industry, then we shouldn’t be surprised that we don’t see take-offs. Rather, in most countries aid might actually lower the short term, measured number.

But by almost any measure, though, aid would still be a huge success. Maybe the “failure of aid” is really a failure to industrialize, disguised.

The link is here.  Lately I've been trying to think through the opposite point.  How many uninsured do they have in China?  Over a billion?  Letting a lot of sick people die, or simply not treating them much, can help  your per capita growth statistics.  If you don't take individual preferences to have value in their own right, but simply wish to maximize measured growth per capita, you'll value human life at something like replacement cost.

Comments

And if you're like most economists, you will value total growth ignoring the per capita part and will value life only by what it contributes, even if it means everyone ends up poorer.

And you have to wonder if vastly increasing the number of people living in hopeless, crushing poverty by giving them just enough sustainence to be able to reproduce is really such a hot idea...

Aid fails not because of the effect noted by the writer. It fails because it is administered by bureaucrats with their own agendae and the funds are distributed through governments that have their own agendae. Both are primarily interested in their own survival and the aid is used to that end. Lord Bauer had it right. Trade and growth correlate; aid and growth do not.

Mosquito nets with pictures of Hilary Clinton permanently affixed facing in?

It is remarkable how many people link discrete aid payments with the causes of short-run economic growth, as if there were a necessary connection between the two. There seems to genuinely be a line of thought that goes "Africa is poor because we don't give enough aid; if we gave more aid, Africa would be rich".

One note on comments, which is always a bad idea, but nonetheless. "And if you're like most economists, you will value total growth ignoring the per capita part and will value life only by what it contributes, even if it means everyone ends up poorer." - This is nonsense, has the author of this idiotic post read any development economics? Or even growth economics? Why do people say these things about economists? I think it's because economists are known for telling people that their special privileges cost money, but why would one then be so specifically wrong in one's invective?

Only economist could look at per capita living standards as declining when more persons lives are saved.

The Malthusian tradition lives on!

Reminds me of the cigarrette industry's argument that they saved us money on social security and medicare because people would die earlier.

PS - Wikipedia says a large fraction of the Chinese population has signed up for a new government subsidized health provision, including 80 % of the rural population. China looks likely to reach universal coverage before the US does. http://en.wikipedia.org/wiki/Universal_health_care#People.27s_Republic_of_China

In nearly all circumstances, unearned rewards turn out poorly for those who receive them. The masters of the countries who receive aid benefit more from the aid than they would if they modernized their country and helped their citizens prosper. They are able to loot the aid and make themselves rich. Thus they try to keep the poor as poor as possible to keep the gravy train running. Basically, aid to countries should be tied to the overthrow of bad government.

Did the Europe/US develop because AID was received from abroad? No.

Development occurred because legal frameworks were in place that allowed people to keep the fruits of their own risk taking.

If even just a fraction take risks and make a habit of doing things that create value, the ball gets rolling. Those individuals make economic gains, can hire others and make investments. Others notice and eventually some copy these habits.

If government doesn't seize the wealth created, development will continue. If it grabs the results of risk taking, risk takers will go elsewhere or not bother, leaving the country impoverished.

Or, even worse, they will just join the government and grab the resources they need to live from others. Add foreign aid into the mix and you make grabbing even more profitable and the eternal struggle to be the one that can grab the country's resources intensifies.

Aid must fail for the same reason that stimulus packages designed to 'create jobs' fail; employment is a byproduct of markets and growing productivity (GDP), not a goal. Giving aid actually destroys markets, just as creating jobs does.

We make business cases in private enterprise that often require us to hire people. If we are successful, everyone wins. This is the way 'aid' should be administered. And never from the top down, which is even more inefficient and effective at destroying markets. Governments don't create markets in these cases anymore than they create permanent jobs.

From The Sea Wolf by Jack London: "Why, if
there is anything in supply and demand, life is the cheapest thing
in the world. There is only so much water, so much earth, so much
air; but the life that is demanding to be born is limitless."

I think economists would grade it on the metrics they are qualified to grade it on.

It is interesting to ponder why people would think that saving lives to live miserably would be a good thing. I'm not saying it is or isn't, but it seems like it is to a lot of people who one might think would think otherwise.

The world could not be plundered until we had the technology to do it. we didn't swim into a country with rocks and sticks.

"Why do people say these things about economists?"

Must have hit home. Economists are notorious for selective metrics to "prove" their point, and aren't too happy to have their dirty underwear shown.

There was a time, say years ago, when we spent less than half as much on health care as we do today. How could we possibly have held our head up as a nation in those years, given such palpable neglect of human needs? Wait...that's how much most other developed countries spend now. It's obvious we can spend much less and achieve excellent results. And yet we don't, and won't, if anything like the current legislation makes it into law.

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