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Democratization Issues, Politics of Economic Reform, Aid Effectiveness, Africa
Nicolas van de Walle is a non-resident fellow at the Center for Global Development and the Maxwell M. Upson Professor of Government at Cornell University. His primary field is comparative politics. His teaching and research focuses on the political economy of development, with a special focus on Africa; on democratization, and on the politics of economic reform.
Two new working papers examine problems with aid delivery. In An Aid-Institutions Paradox, Todd Moss, Gunilla Pettersson, and Nicolas van de Walle show how aid can undermine institutional development, particularly in Sub-Saharan Africa. Aid Project Proliferation and Absorptive Capacity, by David Roodman, uses a mathematical model to show how the marginal utility of aid can decline as aid increases and projects proliferate. Both papers suggest possible solutions.
Does foreign aid help develop public institutions and state capacity in developing countries? In this Working Paper, the authors suggest that despite recent calls for increased aid to poor countries by the international community, there may be an "aid-institutions paradox." While donor intentions may be sincere, the authors conclude that it is possible that aid could undermine long-term institutional development, particularly in sub-Saharan Africa.
Traditional economic theory predicts that capital mobility and international trade will push the world's national economies to one income level. As poorer nations race ahead, richer ones should slow down. Eventually, theory says, national economies would reach equilibrium. The reality of the last few decades, however, defies this notion; most of the poorest economies continue to lag far behind. For 50 years, foreign aid has been the main way the international community has promoted economic development. Yet it has not proven to be a silver bullet.
In this book, Nicolas van de Walle identifies 26 countries that are extremely poor and grew little if at all in the 1990s. His sample excludes North Korea and countries where civil war explains some of their failure to grow (Afghanistan, Sierra Leone, Sudan, Tajikistan and others). The 26 countries have limited infrastructure and human capital and the small size of their markets deter private savings and investment. Aid was meant to help overcome these problems, and these countries received a lot. Yet they have failed to grow. What is wrong? Is foreign aid a solution or part of the problem? What changes might make aid more effective? Given these countries require the financial and technical resources of the West, why haven’t aid programs made a difference?