Aid Wars

The debate about the impact of aid on African countries has divided scholarly opinion, with proponents, such as Jeffrey Sachs, saying that more is needed if we are to see an impact, and opponents – such as William Easterly and Dembisa Moyo – proclaiming that aid can do very little, and that in many cases it can actually do more harm than good. Sachs’s The End of Poverty, for example, argued that development aid can help countries exit the poverty trap of low savings, low investment (in physical and human capital), low productivity growth, low income growth and, consequently, low savings. Aid can – exogenously – increase a country’s investment in education, for example, which will increase productivity and propel it on a higher growth path, according to Sachs. In contrast, Easterly argued in his book The White Man’s Burden that development aid do more harm than good by fostering dependency in recipient country governments (they aim to please the donor instead of their electorate), by focusing on the wrong projects (project impacts are often not measured scientifically), and by crowding out private sector activities – like farmers, when food aid is distributed – in the recipient countries. The vehement debate between Sachs and Easterly has often found an uneasy compromise in the absence of clear causal evidence on the impact of aid. Macroeconomic empirical studies find, as expected, a negative relationship between aid and growth, but that is because aid is directed at the poorest of countries. And while randomised field experiments can help, their results are often true only at the local level: de-worming programmes in Kenya work, yes, but does that mean development aid is good or bad everywhere else?

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