Not so fast:
After 43 years and $568 billion (in 2003 dollars) in foreign aid to the continent, Africa remains trapped in economic stagnation.
Why do big, comprehensive, utopian plans fall so flat?
The biggest problem is that the rich people paying the bills do not share the same goals as the poor people they are trying to help. The wealthy have weak incentives to get the right amount of the right thing to those who need it; the poor are in no position to complain if they don’t. A more subtle problem is that if all of us are collectively responsible for a big world goal, then no single agency or politician is held accountable if the goal is not met. Collective responsibility for world goals works about as well as collective farms in agriculture, and for the same reason. To make things worse, utopian-driven aid packages have so many different goals that it weakens the accountability and probability of meeting any one goal. The conditional aid loans of the IMF and World Bank (structural adjustment loans) were notorious for their onerous policy and outcome targets, which often numbered in the hundreds. The eight Millennium Development Goals actually have 18 target indicators. The U.N. Millennium Project released a 3,751-page report in January 2005 listing the 449 intermediate steps necessary to meet those 18 final targets. Working for multiple bosses (or goals) doesn’t usually work out so well; the bosses each try to get you to work on their goal and not the other boss’s goal. Such employees get overworked, overwhelmed, and demoralizedÃ¢â?¬â??not a bad description of today’s working-level staff at the World Bank and other aid agencies. Top-down strategies such as those envisioned by President Bush, Prime Minister Blair, and Bono also suffer from complex information problems, even when the incentive problems are solved. Planners at the global top simply don’t know what, when, and where to give to poor people at the global bottom.
Important nugget here:
[L]et’s not kid ourselves that spending more money on foreign aid accomplishes anything by itself. Letting total aid money stand for accomplishment is like the Hollywood producers of Catwoman, recently voted the worst movie of 2004, bragging about their impressive accomplishment of spending $100 million on its production.
And let’s not forget how wealthy nations got wealthy:
Progress in wealthy countries arrived through piecemeal steps, gradual reforms, incremental improvements, and experimental probing, accompanied by gradually accelerating economic growth, rather than through crash programs.