Monthly Archives: January 2014

The Gates Annual Letter – Oh No the Gates foundation 2014 annual letter reads inspiringly, but unfortunately a lot of it is off base. It sets up a straw man – a quasi-ignorant opponent of foreign aid who lumps together and attacks all types of aid and cannot see how the poor world is getting richer.  It says that many countries that used to be poor are now doing well, including in Africa, if only the doubters and naysayers would open their eyes. The basic problem with this assertion is that it involves a huge non-sequitur. Anyone who knows what’s going on would agree that many of even the poorest countries have been getting richer (at least up until 2009). But the whole point is that the countries that have done the best over time are simply not the countries that got a lot of development aid ! Take Morocco, Brazil, Mexico, Chile, Costa Rica , Peru, Thailand,  Mauritius, Singapore, Malaysia – all these countries that are specifically named in the Gates letter as doing well have none of them received significant  development aid in relation to the size of their economies (which is the relevant measure). As for other countries often held up as aid success stories, South Korea had a lot of aid but this was during the war of the early 1950s. The economy did not move for another 20 years so where was the connection? In fact the origin of South Korea’s industrial growth was probably the long term result of return migration of Korean workers from Japan. Take Botswana – this is not a story about development aid at all. It is a story about diamonds and sensible governance. Take China –  enormous growth but its aid to GDP ratio has never exceeded one half of one percent, a hardly noticeable proportion even of its annual GDP growth. Take India – now growing but its aid to GDP ratio has been less than one percent. These two countries account for a third of the World population so what has happened to them is significant.  Sorry Melinda, the countries that have suffered from high dependence on aid (over 10% of GDP for a long period of time) are clearly those that have done worst – a few in Asia, Latin America and the Pacific, but mostly in Africa, and it is Africa where the problem is now. Over the first decade of the millennium African countries at last started to do much better. But there is no evidence that this was to do with  development aid and plenty that it was to do with booming Global economic conditions.

But please note – I speak of development aid. This is in fact not exactly the business of the Gates Foundation. The Gates Foundation is rather about global health, global nutrition, education and global humanitarian aid. Much of this work is different  because it involves global public goods – inter- country help, emergencies and humanitarian activity, not so much national development strategies. So stick to global health and global nutrition. But in other respects the only way most poor countries can become wealthier, in the end, is through developing over time their own institutions, capabilities,  motivations, governance and capital, with development aid as a marginal help on technical issues if it can be done right. Development of a people’s capacity to produce wealth will not occur through massive infusions of cash from outside.

Easterly and Millennium Villages



Bill Easterly complains of fatigue in discussing whether aid works with Jeffery Sachs. I agree. Sachs’ ‘Millennium villages Project’ for example  was something that could only have been conceived by someone who had little sense of the history of the failure of these types of projects. Look back to the ‘development villages’ of the 1960s in Africa. Economic Development  comes from people’s capacities, motivations and energy. It simply cannot be done through outside (charitable) cash assistance, and the larger the number of assistance providers the more dysfunctional it becomes. The recent history of Africa shows at last some increase in indigenous capacity and motivation, and the diaspora is investing – eg in Somalia expatriate Somalis are way ahead of the aid agencies in trying to put the economy on the road to recovery.  Diasporans at least have the cultural affinity with the beneficiaries, the motivation to succeed and to the take greater investment risks than aid agencies, (or general foreign investors).