Debt Relief

Aid and development

Onnesha Roychoudhuri
February 22, 2005 contributor Onnesha Roychoudhuri poses an interesting question for international lending agencies: What incentive do “lending agencies have, in their current form, to eradicate poverty? After all, these are organizations that would be out of business in 2015,” if the United Nation’s Millennium Development Goals to halve global poverty
and hunger by then are realized. “The problem here is that many governments [that receive aid] are in no state – being corrupt or unstable, or both – to absorb large sums of money all of the sudden and divert them to sustainable infrastructure and development programs within 10 years,” writes Roychoudhuri.

“In fact, this ‘fast-track’ campaign could very well make the road to sustainable human development even longer and bumpier by taking precedent over a more measured campaign that builds up civil society structures in these countries – an important component if the development is to be sustainable.

The United Nation’s Millennium Project takes it as axiomatic that more aid will spur more development, regardless of what sort of government is running the country. Only the
most flagrantly inept or corrupt governments – Zimbabwe and North Korea – are cited as countries that, perhaps, cannot yet be trusted to handle a rapid influx of aid. The problem with this overall approach is that it fails in any new and meaningful way to address the structural reforms that need to happen before developmental aid can actually work.

It’s worth doing a brief review of what money alone can and cannot achieve in developing countries. Despite $1 trillion dollars in loans since the 1960s, the per-capita growth rate in developing countries over the past 20 years has been negligible. A number of analyses have shown that aid has almost no systematic relationship to economic growth. Historically, governmental aid has functioned largely as a political bribe – particularly during the Cold War era. It may not have influenced development, but it can buy diplomatic favors. Unfortunately, poverty, hunger, and disease have not responded nearly as well to monetary handouts.

Aid from the International Monetary Fund (IMF) and the World Bank hasn’t fared much
better. Heaping aid on countries regardless of their economic promise rarely gets results, and according to the World Bank’s own assessments, the strategy really hasn’t produced results – particularly in Africa, where poverty is increasing.”

Full Story: [PDFver here]

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