The Economics of International Development



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Former World Bank economist says advancing political & economic freedom is the way to alleviate poverty

  • Hopes for development aid remain high among Western politicians and pundits, but the evidence is depressing. Foreign aid has on average probably no effect on long-run growth.

  • To understand the failure of many development projects, we need a deeper consideration of the failure of top-down planning in general, a lesson Hayek taught. Without the mechanisms of free markets and entrepreneurial actions to guide them, development agencies and governments are consistently unable to determine which projects will be successful and which will fail.

  • Foreign aid and development efforts often focus exclusively on technical solutions to the problem of poverty. There is a ‘technocratic illusion’ that we can ignore politics, and the battle of values between freedom and dictatorship. But, as economists or as development workers, we cannot do our work in a value-free, politics-free environment.

  • Even during the times of slavery, the British and Americans made specious technocratic arguments that slavery somehow made slaves better off, for example in relation to diet. Concern for the rights of the poor should be universal and should be a non-partisan and bipartisan effort in free societies that value the rights for themselves.

  • We should not be hypocritically criticising dictators in Africa without looking at our own role in the US and the UK in supporting dictators to promote our own foreign policy interests while ignoring the rights of poor Africans that are being violated. The problem of poverty is not a shortage of experts: it is a shortage of rights.

  • When there is an environment of universal rights for poor people, then technical solutions can happen. In the absence of those rights, there will be no incentive to bring about technical solutions on a permanent basis.

  • Despite these problems, freedom is making gradual progress in Africa. The ratio of democrats to dictators among African leaders is rising. Consequently, since the mid 1990s, Africa has had very healthy economic growth.

  • There is still too much poverty, but the trends are in the right direction and the fastest progress against poverty is being made precisely because of the advance in political and economic freedom around the world.

  • We need to convince fellow voters in the US and the UK that our own aid agencies should not violate the rights of the poor, our own foreign policy should not violate the rights of the poor, and our own military should not violate the rights of the poor. We should look at ourselves to see if we are complicit in violating the rights of the poor.

  • One neglected area of development policy is advocacy for more freedom for poor people, for more political and economic rights: this should be our focus.

This paper featured in The Times, City AM, The Guardian, The Daily Express and The Daily Mail. Ryan Bourne also appeared on the Daily Politics to discuss the report’s findings.

Download the Greek translation here.

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