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Last Updated: Wednesday, 4 October 2006, 19:32 GMT 20:32 UK
Can aid bring an end to poverty?
By Mark Doyle
BBC World affairs correspondent

The debate about the effectiveness of development aid has been rekindled by a new book, the ironically-titled White Man's Burden by New York University Economics professor William Easterly.

Indian factory worker Dipali Das handles reams of thread as she prepares it for weaving on handlooms in Agartala
Some experts argue that trade, not aid, lifts people out of poverty

He argues that "The West" has arrogated to itself the role of saviour of "The Rest", when people in developing countries often know better for themselves how to improve their lot.

The professor says development aid - $2.3 trillion (1.2 trillion) of it over the past 50 years - has not and cannot work because aid can never replicate the infinitely complex market mechanisms that make countries rich.

Supporters of development aid strongly disagree.

Jeffrey Sachs, the top economist involved in the United Nations' Millennium Development Goals (the main one is to halve poverty by 2015) says more aid, not less, is needed.

'Grandiose plans'

Mr Sachs argues in his recent book, The End of Poverty, that the amount of development aid which has reached the poor is in fact tiny when items like emergency food aid (which is not designed as long-term development assistance) and repaid debts are taken into account.

He claims that the average amount of real development aid given to each citizen in sub-Saharan Africa, for example, was just $12 (6.37) in 2002.

Twelve dollars is not enough to buy either of the books written by these two gentlemen - let alone enough to teach someone to read.

We are very close now to eradicating polio from the face of the earth. So there is progress to point to
Hilary Benn, UK development minister
Mr Easterly's main thesis is that the world is divided between "Searchers" - the people who struggle and strive to make a living through the market - and top-down "Planners", the army of aid bureaucrats from the alphabet soup of what could broadly be called aid agencies like the International Monetary Fund (IMF), the UN Children's Agency, Unicef, the World Health Organisation (WHO) and the Asian Development Bank (ADB).

He told me that the "Planners" try to do too much with their grandiose plans for "structural adjustment" and "poverty reduction".

"If you try to do everything, unfortunately you end up doing nothing... the aid agencies would do better to act more like private companies act to satisfy their customers."

Beneficiaries or customers?

The customers of the aid agencies are the world's poor people.

Mr Easterly gave me an example of how this approach could work.

A girl plays among flags in a park in Beijing, China
China's success suggests economic growth is key to improving lives

"The kind of thing that could work well would be selling subsidised anti-malarial bed nets so pregnant mothers can protect themselves and their small children.

"This is a free market approach that awards everyone along the supply chain so the nets are always in stock - unlike the typical official aid effort where drugs get diverted to the free market and are always out of stock."

Britain's Development Minister, Hilary Benn, has a budget of about $10bn (5.3bn) a year for his Department for International Development (DfID).

Not surprisingly, he disagrees with much of what Mr Easterly says.

Mr Benn pointed me to some development successes, "We are very close now to eradicating polio from the face of the earth. We eradicated smallpox just over 30 years ago. So there is progress to point to."

Bureaucratic quagmires

One of the difficulties of this debate is that "aid" is an extremely broad topic.

It encompasses the official development aid distributed by rich countries, as well as much more targeted project aid such as the water wells built in remote villages by non-governmental organisations (NGOs) like Oxfam.

If you scratch the surface of Mr Easterley's book, he is far less critical of NGOs than he is of the big aid bureaucracies like the IMF or USAID.

Few people disagree that the most dramatic reductions in poverty in the last few generations have been in India and China.

Hundreds of millions of people in the two countries have climbed their way out of destitution.

These economic success stories had little to do with development aid.

Rather, it is widely accepted that what could broadly be called free market reforms - the abandonment of collective farming in China and the cutting of government red tape in India - were critical in fostering their dramatic economic growth.

Growth not gifts

Gurcharan Das, an Indian author and former head of the multinational Procter and Gamble, told me the free market had been the key motor in achieving economic growth in his country.

"The best tonic for poverty is growth, and the growth has come where the government has de-controlled and allowed competition and enterprise to flourish."

A woman examines sacks of emergency aid for Lebanon
Emergency relief makes up an increasing part of total aid

But Mr Das said he also saw a role for NGOs to promote development.

"I would rather [rich countries] gave the money to private NGOs and let them run good schools and good health clinics. I would not give the money to governments."

Jeffrey Sachs argues that, while India and China have done well, this does not necessarily mean the free market is the answer to all development needs.

The UN economist says that some countries, particularly in Africa, have such poor infrastructure - for example very little irrigated agriculture - and a tropical climate which encourages devastating strains of diseases like malaria, that outside assistance will be required even if international and domestic government policies are right.

Helping themselves

One of the big criticisms of government-to-government aid (often called "budget support") is that it is not controlled by the donors and is subject to corruption.

I asked Mr Benn whether it would not be simpler to stick to easily measurable project aid - to just provide, for example, schools. He said this would be wrong:

"You could devise a development system where the world's donors said to each other: 'OK - you do the schools and we'll do the hospitals.'

"But in the end that's not the right approach because I don't want people coming to me and saying: 'Mr Benn, please come and sort out my country.'

"I want them to be giving their own governments a hard time," Mr Benn continued.

"Governments need to build their own capacity to solve their own problems. So I make no apology for the fact that a lot of what we do is to work with governments so they can in the end do it for themselves."




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