Waylaid Dialectic

March 9, 2012

Aid Myths Alright…

Filed under: Aid — terence @ 5:58 pm
Tags: ,

Meanwhile the editorial team at New Zealand’s National Business Review paper have penned a missive called ‘Aid Myths’. Even by the standards of the uninformed commentary that tends to come from Western elites when discussing global poverty this one is bad. Read if you dare.

My reply is below:

Dear Nevil,

Thank you for choosing to write about the important issue of global poverty.

Unfortunately you have made a number of factual errors that detract from your efforts to shed light on this topic.

1. First, you claim that the World Bank’s introduction of a dollar a day poverty line “spawned a huge global business based on government-funded and philanthropic aid”.

This is incorrect. Aid has been given by governments since at least the end of the Second World War (with private philanthropy going back further still). No industry was ‘spawned’ in 1985. As it happens, aid as a percentage of rich country GNI fell in the late 1980s and early 90s.

2. Second, you use the example of China to imply that aid doesn’t work. It is true that China has contributed in a major way to declining global poverty. You would expect it to: it’s the world’s largest country. It is also true that China’s poverty reduction successes have not largely been a result of aid. However, as you yourself note – in a moment of apparent confusion – poverty has been falling in almost all of the poorest regions on Earth in recent years. What’s more the best available evidence suggests that aid has played a modest but discernible role in this. See the following here, here and here.

Aid’s role has been modest because aid flows themselves have been modest. Official Development Assistance is more than one percent of GNI in only a few Scandinavian countries. In most OECD countries it falls far below this. In New Zealand’s case, last time I checked, we gave about 0.3% of our GNI as aid. Or, to put it another way: 30 cents from every hundred dollars.

3. You criticise India and Brazil for seeking more say at the World Bank despite poverty being a major issue in these countries. Yet both countries, and particularly Brazil, have made great gains in poverty reduction in recent years (every bit as impressive as those you cite for China). Quite possibly, in the complicated world of poverty reduction, there is actually much that can be learnt from them. For some interesting insights into Brazil’s success see here.

4. You cite research from Banerjee and Duflo to suggest that poor countries are poor owing to the fecklessness of their people (and therefore, one presumes, that aid can do little to help). This is more than just wrong – it is mischievous.

It is indeed true that poor people do not always make economically rational decisions (something that should provide some pause for thought amongst those who advocate free market solutions to poverty – as such solutions are predicated on rational choice models of human behaviour). However, it is not true that the poor are poor simply because of the bad economic decisions they make.

If bad economic decisions were the primary cause of poverty then we would all be poor – because we all make them.

And, in fact, as the Brazilian example that I linked to above shows – one very effective way of reducing poverty is simply to give the poor more money. It turns out that they do not squander all of it – by quite some margin.

Indeed, Banerjee and Duflo, themselves do not lay the blame for global poverty at the feet of the poor. They simply call for a nuanced approach to understanding and trying to solve the problems of global poverty. An approach which is informed and driven by evidence.

You would do well to learn from their example.

Terence

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6 Comments

  1. Like. Nice one Terence.

    Comment by Cynan — March 9, 2012 @ 9:02 pm

  2. Good work, Terence. I’m not sure I can bear to read the original article, but great reply. anyway. On the subject of repeating yourself, you might appreciatethis post from Corey Robin.

    Comment by Simon — March 10, 2012 @ 7:48 am

  3. Thanks Guys. Simon – the link didn’t come through on your comment (to the Corey Robin post). Could you post the link again?

    Comment by terence — March 10, 2012 @ 12:21 pm

  4. Sorry, not sure how that happened. Let’s try again:

    Corey Robin’s post

    Comment by Simon — March 11, 2012 @ 3:15 pm

  5. Thanks Simon. Great quote!

    Comment by terence — March 12, 2012 @ 8:33 am

  6. […] my response to the anti-aid nonsense in the NBR has in turn drawn some comments from the comment box denizens of the paper’s website. Some of […]

    Pingback by A German Watermelon… « Waylaid Dialectic — March 19, 2012 @ 7:51 pm


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