Policy Forum 7 (March 2019)
Since World War II, Western countries have rich (but not always exciting) experience to use official development aid (ODA) to help poor countries in economic development and political reform. As seen in Figure 1, the total ODA from OECD countries in 2017 reached 144.16 billion USD, compared to 35.67 billion USD in 1960. However, a dismal fact is that no consensus has been achieved so far among economists, even after tons of efforts have been made on the effectiveness of aid. On the one hand, economists such as Jeffrey Sachs believe that foreign aid and technical support are an ideal shortcut for poor countries to improve their people’s living conditions in the areas of sanitation, healthcare and education. In his popular book (The End of Poverty, 2005), he said that “[cutting aid] amounts to a death sentence for more than 6 million Africans a year who die of preventable and treatable causes, including undernourishment, a lack of safe drinking water, malaria, tuberculosis and AIDS” and that “increased financing could help end school fees, pay for more classrooms and teachers, buy school meals that contain locally produced foods and invest in water and power so women and children do not continue to spend their lives fetching water and wood for fuel.” On the other hand, William Easterly, in his great hit White Man’s Burden, argues that foreign aid may crowd out the endogenous drive for development and worsen the institution quality. The highlighted winners from Western aid are the dictators from the “Old Boys Club” in rogue nations.