Is aid depressing?

Aid is the most depressing topic in economics.  I don’t know how William Easterly and Jeffrey Sachs stand it.

That is Meg McArdle reacting (in part) to my pointer to evidence that NGOs might be killing entrepreneurship in Africa.

I have good news for Meg (sort of). Aid is only depressing if you start off with the wrong expectations.

Aid is not a mythical goddess, walking through a barren field, greenery spouting in her wake. None of us, including McArdle, really believe such a thing, but we do approach charity as though rapid transformation is possible.

It’s uplifting (well… less depressing) to remember a few things.

1. This takes time. Once upon a time England was the one developed country and a respectable thinker could write a book wondering when the backward nations of France and Italy would ever catch up. The decades that separated growth in Britain and the European continent are mostly forgotten now. But it helps to remember that the accumulation of capital, the diffusion of technologies, and innovation and adaptation in social organization can take generations.

2. Aid can only speed this diffusion or accumulation a little. Ultimately it’s up to the Africans or South Americans or Central Asians. If you’re not from there, the best you can do is help those willing (or unable) to help themselves.

3. When you throw gobs of money and people at an economy, there are going to be side effects. Some of them will be bad. Some will surprise you. The main difference between prescription drugs and aid is that, when we give countries aid, no one makes us give them a four minute speech telling them that aid may cause rashes, stomach pain, and erectile dysfunction.

4. Failure happens. In all big systems. Hollywood brought us Star Wars Episode One. The private sector brought us Google Wave. Western medicine brought us bleeding. In aid, the state of our knowledge is a little closer to bleeding than web programming. That’s actually what makes studying aid so different: we’re going to learn a tremendous amount in our lifetimes.

5. Most of the failures are small, while the victories are huge. Think the falling cost of AIDS treatment. Other important discoveries (they really were discoveries) were “don’t have 200% tariffs on capital goods,” and “Don’t print money to pay your bills.” Lant Pritchett compares aid to piano recitals: “kind of boring and it’s tedious and most of the people are wasting their time. But every now and again by God we make a difference and when we do make a difference it really transforms economies and lives for a very long time”. (Yes, we also have innovations like “let’s displace large populations to new villages!” but these seem to die out faster than the good kind.)

Think about working in aid differently. Aid is hard and messy. But so are a lot of jobs. Example: You can start working in a rich-country finance ministry your whole life, suffer the slings and arrows of excessive partisanship and, if you’re lucky, you’ll tweak the growth rate of your country a notch. And at the end of the day you can go home and tell your kids: “I helped the citizens of this country afford to buy a second flat screen television.” Now THAT is depressing.

Give me aid any day.