Page 398 - Volume 2_CHANGES_merged_with links

Development Aid

“Izandla ziyagezana” - “Hands Wash Each Other”

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“ We find the return to aid lies in ranges commonly accepted for public investments and

there is little to justify the view that aid has had a significant pernicious effect on
productivity.

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we find that the marginal effect of aid on growth is negative over a non-negligible share of

observations when assessed over a short time horizon (5 years). However, when the
assessment window expands to 30 years, the macroeconomic effects of aid are

consistently positive and highly comparable to findings from recent empirical studies.
The average internal rate of return that corresponds to such results is around 11 percent.
At the same time, we show that productivity and human capital accumulation effects are

critical mechanisms through which aid can affect the macro-economy, especially over the
long run. We conclude it is appropriate to view foreign aid as a long-term investment

whose benefits cumulate slowly over long periods.”
"What Is the Aggregate Economic Rate of Return to Foreign Aid?" 448
The World Bank Economic Review (July 2015)
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The Failure of Big Pushes to Raise Growth
“ Three unsuccessful pushes are particularly notable:

1. The early big push in foreign aid (especially in the most aid-intensive continent, Africa).
2. Structural adjustment (also known as the Washington Consensus) in the 1980s and

1990s.
3. "Shock therapy" in the former Communist countries.

All of these episodes are far from natural experiments, of course, with adverse selection
posing a severe problem for the interpretation of policy impact. However, all three had
such poor outcomes that the counter-factual-that growth would have been even worse

without the macroeconomic intervention-was hardly plausible.”
"Thinking Big versus Thinking Small" 449
whatworksindevelopment_chapter.pdf
jessica cohen and william
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“ The idea that large donations can remedy poverty has dominated the theory of

economic development - and the thinking in many international aid agencies and
governments - since the 1950s. And how have the results been? Not so good, actually.
Millions have moved out of abject poverty around the world over the past six decades, but