Is aid a roadblock to development? Some thoughts on Angus Deaton’s new book

I was talking with a prominent development economist a couple of weeks ago. He expressed surprise that Angus Deaton’s new book on development wasn’t getting more attention. Deaton is one of the three or four intellectual giants of the field, and so when he sums up a lifetime of work in one volume, it’s worth reading by definition.

You have to be careful what you wish for. The NY Times wrote a positive but skeptical review this weekend, and my Twitter feed has been full since then with some support but a great deal more skepticism for the book. I hesitated to write a blog post, in part because my two little monsters kept me from reading the book (any book) as closely as I would like. And, frankly, it’s a little dangerous as junior faculty to say what you like and don’t like about a senior colleague’s book. But it brings up important questions that I can’t answer in 140 characters. So here goes.

The bulk of Deaton’s book is an overview of half of humanity’s climb from abject poverty to health and wealth. It sums up Deaton’s bread and butter research. He and others of his generation defined and rewrote the field. It is a marvelous overview for the newcomer and the oldcomer.

Where he’s enflamed passions, though, is his last chapter: “How to help those left behind”. It’s a tirade against aid, especially naive aid. Overall one message comes through: Aid is a roadblock to development.

I’m half with Deaton and half not. He derides dollar aid targets, blind targeting of money to poor countries, and the fact that good money chases the bad. He throws his hands up in frustration at the philosophers of the world who argue that not giving aid to save a life is (ethically speaking) like ignoring a drowning child. It’s hard to imagine these writers have either run a development project or saved a drowning person in their lives. If so, I think they might have written more nuanced books. (Especially if you start from the assumption that you don’t know how to swim.)

I’m completely with Deaton here. He gives a bunch of good ideas how to make aid better. They might or might not work, but they are clever and they ought to be tried. He also reminds us that trade and migration and other things could be more impactful.

You can buy all this but still balk at his stronger point–aid is a roadblock. To see why, it helps to make a simple point: The answer to “Does aid work?” is the same answer to every question in social science: “It depends”.

For instance, it depends we mean by “aid” and it depends what we mean by “work”. (No one roll yours eyes–if I was truly academic, I’d also say it depends on what “does” means.)

Aid isn’t a uniform mass. Deaton knows this, and my guess is he’s talking about a particular kind of aid. I don’t think he means emergency relief for disaster and conflicts. I don’t think he means the money behind peacekeeping forces and post-war assistance. He might exclude child sponsorship. I’m guessing he’s not talking about money spent on vaccine research in the West. He might even exclude support for elections and party-building and other democratization.

I think Deaton has his sights aimed at dollars sent by the West to local governments to supposedly reduce poverty, improve health, and ignite growth. This is a lot (if not the bulk) of money sent to poor countries, and so it’s a fair target.

This makes it easier to see what he means by aid not working. It probably hasn’t produced growth, even if most of Africa has been growing steadily for ten years. And it might not be what’s responsible for falling poverty levels. Frankly we don’t know, but I think we can say that if aid did ignite this growth, it certainly has been coy about it.

But I wouldn’t diminish these other kinds of aid. I’d say that emergency aid has been pretty good at saving lives for fifty years. I’d say that child sponsorship has done impressive things. You cannot work in northern Uganda or Liberia without seeing the importance of peacekeeping and post-war assistance and administration. I’m thrilled to see promising new malaria vaccines, and I’m glad I live in a world where millions are now getting treatment for the world’s greatest ever pandemic, HIV/AIDS.

And, frankly, I personally find it hard to believe that levels of democracy in Africa would be as high as they are without aid. I think the most important forces driving democracy are probably internal to Africa, and the example and economic success of advanced democracies comes second. But aid and foreign meddling comes a close third. I simply find it hard to believe that aid–both the direct democratization kind, and maybe aid more generally–hasn’t played a big role.

Of course, I haven’t seen much evidence to support my gut feel, which (as we’ll see in a minute), is part of my larger point.

Deaton actually highlights aid and politics a good deal, which is heartwarming to us development economists who took jobs in political science departments.

One of his major arguments: Aid is a roadblock to development because it distorts incentives and corrupt politicians, and undermines fundamental functions of the state like tax collection and representation.

This is an important point. It’s one that aid boosters like to ignore.

At the same time, I’m not sure it’s true that aid corrupts politics and the state. This is the best summary I know of the evidence. It’s short, because we don’t know much. And the basic conclusion is “maybe”. (For detail and nuance on Africa, one of the best political scientists to read on this is Nic van de Walle–see this and this.)

I don’t doubt that aid has corrupted a good many politicians. And having that much money get pumped blindly into a poor economy can’t help but distort incentives. But I have to square that in my brain with the fact that I think aid and foreign meddling also has a big part to do with better politics: more accountable Presidents, greater citizen voice, or fewer wars and genocides.

I can honestly say I don’t know how it balances out.

We are all influenced by the countries we know best. In my case it’s Uganda. And Uganda makes me overall supportive of aid, even if I’m frustrated with its deficiencies. Here was a country in 1986 demolished by decades of dictatorship and war. Fundamentally, I believe luck and a strong society with a strong party with a strong leader helped turn things around. That strong leader is now more or less elected in more or less competitive elections. Average growth is about 6 or 7% for more than twenty years. It is far from perfect, and aid has enriched a good many thugs (and kept the current thug in office longer than he should). But it’s almost impossible for me to imagine Uganda maintaining its stability through the 1990s, and reaching its current literacy, trade and health, without a leading role for outside money. And that outside money was recently turned off, rightly so, because of corruption and thuggery. This is exactly the right thing I would like aid to do.

It comes down to: What’s your counterfactual world without aid? Mine is not a Uganda with less corrupt politicians and a stronger fiscal base. My best guess is a continued cycle of war and a more dictatorial strongman at the helm.

Without a doubt, big chunks of the aid machine are broken. I’d prefer to fix them and not throw them away. In large part, this is what Deaton recommends. He also reminds us there are things that are harder to do than give money, like opening our borders, that could help more.

The polemic will sell more books and get people talking about the world’s problems. That’s exactly what polemic is supposed to do. But I would recommend paying the most attention to the concrete suggestions and solutions in the book. I think the promoters and detractors are all closer to sharing the same opinions than we think.

You can buy Deaton’s book here. Recommended.