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23 Cato J. 175 (2003-2004)
The Failure of Development Aid

handle is hein.journals/catoj23 and id is 181 raw text is: THE FAILURE OF DEVELOPMENT AID Tomi Ovaska In the last half century, developed countries have paid increasing attention to the problems of developing countries. Not only has the disastrously low level of economic development in large parts of the world become apparent over time, but also all the undesired side effects of enduring poverty: poor health, widespread diseases, low life expectancy, and the general lack of means of entire nations to deal with basic needs. Wealthy countries do not necessarily have purely unselfish motives when helping poorer countries through financial aid. Part of any aid constantly flows back to donors through highly stipulated procurement contracts. Aid has also increased the potential for donors to buy preferential future treatment for the business firms of their own nationality. Politically, aid can be seen as serving to buy increased international and regional clout through new political allies. Moreover, aid may bring more stability to world affairs, assuming it increases economic growth in recipient countries. Development aid is also seen as a way to advance some core values of the donors. Despite the steady flow of development aid to poor countries in the last 50 years, the results have been somewhat disappointing, as noted by Bovard (1986), Burnside and Dollar (2000), the World Bank (1998), Visquez (1998), Easterly (2001), and Easterly and Levine (2001). Even though some countries, notably in East Asia, have man- aged to break out of poverty, many of the poorest countries have actually seen their real per capita incomes decline since the 1970s. More than one billion people still live on less than $1 a day. Many of the advances in basic health care and education in the last few de- cades have been negated by the rapid spread of HIV/AIDS, particu- larly in the world's poorest countries. Given the ineffectiveness of past aid and fiscal constraints the donor countries have faced in the 1990s, Cato Journal, Vol. 23, No. 2 (Fall 2003). Copyright @ Cato Institute. All rights reserved. Tomi Ovaska is Assistant Professor of Economics at the University of Regina. He gratefully acknowledges the helpful comments of Russell Sobel, Ryo Takashima, Ronald Balvers, Strat- ford Douglas, George Hammond, 1illiam Trumbull, and seminar participants at West Virginia University. 175

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