humanitarian.info

This week the Cato Institute (Full disclosure: I don’t share their politics, but draw your own conclusions) is running a series of articles entitled What Can Foreign Aid Do For the World’s Poor? The series is spearheaded by William Easterly, and if you recognise his name, you can probably guess what the Cato Institute thinks about aid. Unfortunately they’ve disabled comments, although the Institute urges readers to “enter into the conversation on their own websites, blogs, and even in good old-fashioned bound publications.” I find this quite comic, since it basically limits the conversation to people who have websites, blogs and (?) publications – if you had a conversation like that in the real world, there’d be a very limited number of participants. Luckily I have all three.

I don’t have much to say. I tend to agree with a large amount of what Easterly says: the evidence suggests that large-scale aid flows have failed to improve the lives of the poor around the world. I also agree with his conclusions that feedback and accountability are the two critical factors that are missing in the aid equation, although they are necessary but not sufficient factors for success. That is to say, feedback and accountability are the starting point for successful “development,” and at present we don’t have a lot of either of them.

Easterly makes a suggestion about how we might actually fulfill these two basic requirements, but unfortunately his suggestion is as technocratic as the problems. “Truly independent scientific evaluation” couldn’t be further away from the lives of the poor if it tried, although he cites the PROGRESA programme in Mexico as an example. PROGRESA is a very interesting initiative that I don’t object to, but it’s clearly as politically driven as the other forms of aid that Easterly objects to. His final conclusion is that:

The lesson for aid reformers is: a combination of free choice and scientific evaluation can build support for an aid program where things that work can be expanded rapidly.

Basically, capitalist markets + empirical science = development. As I said, I tend to agree with Easterly, but I’m not seeing much substance here. Hopefully his next book will expand on this argument and present more workable conclusions.

The first response essay comes from Branko Milanovic. He’s a Lead Economist for the World Bank, so perhaps it’s no surprise that he disagrees with Easterly. What is surprising is that his rebuttal of Easterly’s argument fails to… well, it fails to rebut the argument.

Milanovic identifies three areas where he believes that Easterly misleads the reader. The first is through failing to separate out aid from loans; the second is by creating a false dichotomy between “searchers” (good guys) and “bureaucrats” (bad guys); the third is by attacking people like Jeffrey Sachs for their “grand plans” while substituting his own grand plan. His arguments are weak, but I’m not going to unpack them, because that’s not what I found most interesting.

Easterly’s key point – in fact his only point, since the rest of his article is just comment around that point – is that

The two key elements necessary to make aid work, and the absence of which has been fatal to aid’s effectiveness in the past, are FEEDBACK and ACCOUNTABILITY.

Milanovic rebuts most of Easterly’s comments, which is fair enough, but does not rebut this central argument. In fact, Milanovic doesn’t even refer to feedback or accountability in his response, which sugggests to me that he didn’t really get the point. Instead, he has focused on those points which attack his own position and that of his employer – the World Bank. In addition, he doesn’t provide a counter-position, or any reassurance that his vision of the future of aid will be a better one. I don’t fully subscribe to Easterly’s position, but this central point he raises is absolutely critical.

Do you know what I think the problem is with aid? Economists. Chew on that.