1. Lecture 20: Foreign Aid Benjamin Graham

2. Lecture 20: Foreign Aid Benjamin Graham
Reading Quiz
What is/are one/some of the problems mentioned in “The Problem with International Development and How to Fix It” article?
A. Donors don’t want their money to go to overhead, but overhead is necessary for large-scale programs
B. Programs outcomes are not tested enough once implemented on a larger scale
C. Just because a program works well for a small village or small group of people doesn’t mean it will work well on a large scale
D. B & C
E. All of the above
Lecture 20: Foreign Aid Benjamin Graham

3. Lecture 20: Foreign Aid Benjamin Graham
Reading Quiz
Charles Kenny’s main argument in his article ”Get an MBA, Save the World” is:
A. MBA’s are the most sought-after professional degree and for good reason
B. Getting an MBA and working for a Multinational corporation can be an effective way to contribute to international development
C. Multinational corporations are the monopolistic hegemons that should be blamed and repudiated for their negative influences on globalization.
D. Technological advancement is the only necessary goal to strive for in aid.
Lecture 20: Foreign Aid Benjamin Graham

4. Lecture 20: Foreign Aid Benjamin Graham
Reading Quiz
Give Directly is running a basic income experiment in what country (discussed in the NPR story)?
A. Mongolia
B. Thailand
C. Peru
D. Bolivia
E. Kenya
Lecture 20: Foreign Aid Benjamin Graham

5. Lecture 20: Foreign Aid Benjamin Graham
Four Famines in 2017
Yemen: Famine and Cholera outbreak (ongoing)
Political Causes: Civil war, Saudi blockade
North-East Nigeria: Displacement and Famine (ongoing)
Political Cause: Boko Haram Insurgency
South Sudan: Famine (improving a bit)
Political Cause: Civil War, displacement
Somalia: Famine
Political Cause: No central government, Al Shabab
Lecture 20: Foreign Aid Benjamin Graham

6. Lecture 20: Foreign Aid Benjamin Graham
The Politics of Aid
Poor countries are poor because they are poorly governed
Two choices (rock and a hard place)
Deliver aid through governments
Give money to governments
Try to control how they spend it
Deliver aid around governments
Deliver services directly
Lecture 20: Foreign Aid Benjamin Graham

7. Working Through Governments
The good:
Respect sovereignty
Build government capacity and legitimacy
The bad
Leads to corruption
Inefficient use of funds (waste)
Funds rarely reach the poorest individuals
Lecture 20: Foreign Aid Benjamin Graham

8. Working Around Governments
The good:
More efficient service delivery
Donor control of priorities
The bad
Undermines government capacity
Undermines government accountability
Lecture 20: Foreign Aid Benjamin Graham

9. Lecture 20: Foreign Aid Benjamin Graham
The Sachs Argument
We need a comprehensive plan and a big push
With $200 billion a year, we can achieve “transformative development”
Long-term planning and coordination are key
Lecture 20: Foreign Aid Benjamin Graham

10. Lecture 20: Foreign Aid Benjamin Graham
The Easterly Argument
Big plans are the wrong approach for aid
Needs to be locally driven, locally tailored
Planning itself sucks up government resources
Makes governments serve the wrong masters
Lecture 20: Foreign Aid Benjamin Graham

11. The Dambisa Moyo Argument
Aid is bad for growth
Corruption, dumping and market distortions, dutch disease
Also a resource-curse argument
Control of the central government gives access to aid $$, so motivates coups
Negative stigma of aid dependence for investors
Argues that “short, sharp, finite” aid can be good
Long-term, open-ended aid creates dependence
Lecture 20: Foreign Aid Benjamin Graham

12. The Ethics of Randomized Controlled Trials
Claim:
RCTs (experiments) are the best ways to know what works.
Wasting money (and failing to produce results) in development economics literally kills people.
It is unethical NOT to test programs fully
Counterclaim
We don’t run many experiments in rich countries
And definitely not on rich people
When the “treatment” is valuable, control groups are inherently unethical.
Lecture 20: Foreign Aid Benjamin Graham

13. Lecture 20: Foreign Aid Benjamin Graham
Alternatives to Aid
Trade
Particularly opening rich-country markets in agriculture and textiles
Cut subsidies for Ag
Lower tariffs for textiles
Migration
Poor people are poor because they live in poor countries
Remittances
Transnational brokers and FDI
Lecture 20: Foreign Aid Benjamin Graham

14. Poor Democracies, Trade Openness, and Revenue
Paper by Nita Rudra
When countries lower tariffs, they lose a source of revenue
Tariffs are easy to collect, other taxes are really hard
Democracies have a harder time replacing that revenue
Without revenue, government services decline
This hurts the poorest individuals most
In autocracies, trade openness tends to be better for the poorest individuals than in democracies
Lecture 20: Foreign Aid Benjamin Graham