Examining Aid Success Using an Octopus, Classical Economics and a Blog

Aid, you say? Well, on the one hand...

"Aid, you say? Well, on the one hand..."

Owen Barder recently wrote an excellent, thought-provoking piece for Open Democracy about what aid does and how it should be judged. There seems to be an incipient groundswell around the idea that the ‘failing aid’ agenda is based on a misconception of what aid should be assessed against. Roger Ridell alluded to the same in his earlier piece that I wrote about here, and Chris Blattman floated the idea following conversations with Owen.

What Owen and Roger essentially argue is that the role of aid is more limited than that which it has been assessed on. Most critiques of aid are concerned with the stylized fact that aid is being poured into countries that remain resolutely poor. But what if aid isn’t meant to affect how rich or poor a country is? What if aid is just meant to make people healthier, give them a better education, and access to clean water? What if, in short, aid is simply about making conditions for individuals better without actually changing the economic structures within which they live? Owen doesn’t completely rule out the possibility that aid may make long term macroeconomic improvements, but he argues that if they do occur, there is little to suggest that they would become visible before many years pass.

The argument is enticing in that it allows a way out for those who argue that economic transformation is the standard against which development must be measured. Even if we believe this, it no longer follows that aid should be rejected, since its virtues are shorter term. This allows us to celebrate unreservedly the education that aid funds, the bednets it distributes, and the farmers it supports. None of us wants these things to be bad or useless: we all like to see individuals made better off. If we completely separate the arguments for economic growth and transformation from the arguments for education, health and farmer-support, we remove any need for us to choose what to support.

By my reading, there are three central components to this argument that we should examine a little further.

  1. Aid is aimed at improving lives of individuals and communities, without changing the structural aspects of the socio-economies in which they live. As such, aid can be successful without causing a transformation in the economy.
  2. Aid doesn’t harm the prospects of structural change in the economy. Owen argues that “aid can be used in ways that make such transformations more likely. It can pay for critical infrastructure – such as power, roads and ports – on which economic growth depends. It can finance new skills and capacity. It can provide access to financial services for entrepreneurs wanting to build their businesses.” He also cites South Korea and Taiwan as countries that grew with the support of aid.
  3. Though aid is working, according to the bounded criteria we should set for it, it could work better. Just because he thinks aid works doesn’t mean that there isn’t much we can do to make aid work even better; at the heart of this is a need for more transparency.

I believe in aid. This may come as a surprise to some of our readers, because I take a critical view of how it works and question much of our dominant thinking about development. At root, though, I believe that aid can contribute to deeper changes that are necessary, but to get there we need to change a great deal of our discourse about development. From this perspective, there are things I would challenge, and things I would wholeheartedly support from Owen’s argument.

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