Blattman Asks: What Good is Aid?

Chris Blattman has an interesting post about aid's effectiveness. To summarize, he says that if we consider aid as a tool to improve health and mortality then surely it has been a success: witness the growing population in the developing world.

But rising population may help us understand why aid hasn't worked especially well to spur sustainable economic growth. Blattman points out that unless an economy industrializes (or discovers / extracts valuable natural resources), GDP won't bump up substantially. Even with newer and better technologies, a rise in the productivity of subsistence farmers will not be enough to raise these figures in a significant way. Industrialization, or a resource discovery, on the other hand, often will. Unless there's growth in manufacturing or service industries, a county with a growing population will not experience GDP per capita increases and may, in fact, experiences decreases.

To read this in the gloomiest neo-Malthusian light, aid that saves lives contributes to keeping the rest of a society poor. Unless, of course, aid helps a country to effectively industrialize, which it typically doesn't. Here's an article from the Miami Herald highlighting some of the problems of a rising population for families in Africa.

What to make of this? Blattman posted this as a very preliminary idea and welcomes feedback. I agree with his conclusion that on humanitarian grounds aid has been something of a success--though he doesn't pose the "what about compared to other, private-sector efforts by NGOs, etc.?" question. Whether traditional development aid could ever overcome its inherent problems and spur industrial growth is a very different question.

- Karol