Effective and working governments are necessary for prosperity. However, foreign aid is getting in the way of government progress, says Princeton University’s Angus Deaton. The author of the new book The Great Escape: Health, Wealth, and the Origins of Inequality argues his case in Project Syndicate.
Unfortunately, the world’s rich countries currently are making things worse. Foreign aid – transfers from rich countries to poor countries – has much to its credit, particularly in terms of health care, with many people alive today who would otherwise be dead. But foreign aid also undermines the development of local state capacity.
This is most obvious in countries – mostly in Africa – where the government receives aid directly and aid flows are large relative to fiscal expenditure (often more than half the total). Such governments need no contract with their citizens, no parliament, and no tax-collection system. If they are accountable to anyone, it is to the donors; but even this fails in practice, because the donors, under pressure from their own citizens (who rightly want to help the poor), need to disburse money just as much as poor-country governments need to receive it, if not more so.
It comes out the same week that the UN will deliberate how to proceed after the Millennium Development Goals expire in 2015. Advocates like the ONE Campaign and Jeff Sachs are making the case for more aid, not less. The book should revive the academic debate over whether foreign aid causes more harm than good.