Sunday, 2 February 2014

Various links

1. Why aid fails. Acemoglu and Robinson have an excellent post on this depressing subject.  (and bank bailouts are the equivalent extractive institution in the West as Chris Dillow points out).

A depressing excerpt from Acemoglu
In the meantime, more than a quarter of the countries in sub-Saharan Africa are poorer now than in 1960 — with no sign that foreign aid, however substantive, will end poverty there. Last year, perhaps the most striking illustration came from Liberia, which has received massive amounts of aid for a decade. In 2011, according to the OECD, official development aid to Liberia totalled $765 million, and made up 73 per cent of its gross national income. The sum was even larger in 2010. But last year every one of the 25,000 students who took the exam to enter the University of Liberia failed. All of the aid is still failing to provide a decent education to Liberians.
I also just finished reading Nina Munk "The Idealist". The Jeff Sachs idea was to spend a lot of money on millenium villages in order that when stopping spending they would be self-sustaining.  They weren't.  As Munk says, even in this case, aid means charity, not development.

I just listened to Nigel Crip, ex CEO of the NHS talking about the importance of "co-development" to developing country health.  He also said that Sachs is at least trying to do something about the situation.   Munk's book though raises a very difficult issue: that doing something might make things worse by aid/development actually crowding out co-development. Two examples. First, the Ethopian government, whilst pleading poverty, spent billions on fighter aircraft.  Second, a plan to supply (I think it was ) water pipes for free ran into the problem that a local water pipe company had emerged and would be potentially put out of business by the implicit undercutting via aid.  Again, very depressing.

2. The equation at the heart of modern macro is wrong.... From the brilliant noahopinion.