And the World Bank and advocates of aid aggressively seized on research that claimed that foreign aid led to economic development.Deaton wasn’t the first economist to challenge these assumptions, but over the past two decades his arguments began to receive a great deal of attention.“I think his understanding of how the world worked at the micro level made him extremely suspicious of these get-rich-quick schemes that some people peddled at the development level,” says Daron Acemoglu, an economist at MIT.Tags: Problem Solving MultiplicationAdventure Essay Photograph WildernessEssay On Quality Of Education In PakistanScoring Essay ItemsMarriage Is Private Affair EssayTurning Point In China An Essay On The Cultural RevolutionEthical Case Studies In EducationPrimary School Report Writing SDavid Foster Wallace ThesisResearch Paper Topics History
Since the people ultimately hold the purse strings, they have a certain amount of control over their government.
If leaders don’t deliver the basic services they promise, the people have the power to cut them off.
Deaton and his supporters offer dozens of examples of humanitarian aid being used to support despotic regimes and compounding misery, including in Zaire, Rwanda, Ethiopia, Somalia, Biafra, and the Khmer Rouge on the border of Cambodia and Thailand.
Citing Africa researcher Alex de Waal, Deaton writes that “aid can only reach the victims of war by paying off the warlords, and sometimes extending the war.” He also gives plenty of examples in which the United States gives aid “for ‘us,’ not for ‘them’” – to support our strategic allies, our commercial interests or our moral or political beliefs, rather than the interests of the local people.
The countries that receive less aid, those on the left-hand side of the chart, tend to have higher growth — while those that receive more aid, on the right-hand side, have lower growth. The answer wasn’t immediately clear, but Deaton and other economists argued that it had to do with how foreign money changed the relationship between a government and its people.
Think of it this way: In order to have the funding to run a country, a government needs to collect taxes from its people.
In the mid-20th century, economists widely believed that the key to triggering growth — whether in an already well-off country or one hoping to get richer — was pumping money into a country’s factories, roads and other infrastructure.
So in the hopes of spreading the Western model of democracy and market-based economies, the United States and Western European powers encouraged foreign aid to smaller and poorer countries that could fall under the influence of the Soviet Union and China.
Yet that is what Angus Deaton, the newestwinner of the Nobel Prize in economics, has argued.
Deaton, an economist at Princeton University who studied poverty in India and South Africa and spent decades working at the World Bank, won his prize for studying how the poor decide to save or spend money.