Comments on: The Case Against Development Aid: China, India, Africa

By: Why More Aid Will Not Work - The Limits of Sachs at The Discomfort Zone

Why More Aid Will Not Work - The Limits of Sachs at The Discomfort Zone — Thu, 12 Jul 2007 17:00:44 +0000

[...] from St. Jude asked me to comment on an article by Jeff Sachs on the role of the World Bank. Sachs is well known for his theory that [...]

By: Gillian

Gillian — Thu, 05 Jul 2007 07:04:38 +0000

Hmm… thanks Dweep… what do you think of this item by Jeffrey Sachs in Fortune Magazine? Do you see any role for aid?

http://money.cnn.com/2007/06/25/news/economy/sachs_worldbank.fortune/?postversion=2007062606

By: Dweep Chanana

Dweep Chanana — Wed, 27 Jun 2007 19:58:59 +0000

Gillian,
Thanks for your comment, but I really encourage you to read the Cato paper. The analysis is exceptionally lucid, shows clearly how foreign aid to India killed the private sector in general, resulted in supporting a massive budget deficit, and in investments in wasteful public sector enterprises that never made any money. It prevented growth and promoted a massive, bloated bureaucracy.

Note that then, India was poorer than Tanzania is now. It grew not because of foreign aid, but in spite of it. In fact, it managed to climb out of a hole dug for it by the World Bank and the USA, only after it was forced to liberalize.

This has nothing to do with education – which is the challenge you present. Only a fraction of development aid is ever spent on education or other public goods. IDA will go to build roads that are never built, dig wells that run dry, and buy machinery that is never used. India’s primary education system is horrendous – do you think that USD 55 billion helped avoid that tragedy? No.

To answer your initial question – yes, I do think that USD 55 billion had something to do with India’s development. It prevented it.

By: Gillian

Gillian — Wed, 27 Jun 2007 07:25:15 +0000

Do you really think that the USD55 billion of aid had nothing to do with the economic development? You don’t think that it might have formed the foundation for development that followed? Donation funding has tapered off when the country grew enough towards self-sufficiency.

Education and health are two of the foundations for economic development and neither of them is provided by market forces. Even the most market-oriented society (e.g. USA) provides most education and health services through govt funding.

How do the poorest countries build a literate and educated population without funds?

Currently Tanzania spends 18% of its national budget on education. This compares with Australia where 25% of the New South Wales government budget is spent on education. NSW children get 100 TIMES MORE resources for education than Tanzanian children. Tanzania’s education budget has been boosted in the past 5 years by the removal of debt burdens and by donations from other countries — 39% of the Tanzanian govt budget is provided by other countries.

Even with this development aid there is still only 1/100th the resources that children in my country have. This isn’t enough for Tanzania to catch up. Perhaps it is enough to prevent it sliding even further into poverty.

I’m with Jeffrey Sachs – more development aid is needed to help the poorest countries to climb onto the first rung of the ladder of development. Then, like India, they can climb further without the same assistance.

How do you propose that Tanzanian children get a useful education, without development aid?