This was a great summary of US foreign aid. I appreciate the research that went into this to synthesize deeply yet succinctly the key features of the system. I recently read Prof Angus Deaton’s book, ‘The Great Escape’ in which he argues against broad based foreign aid, especially in the form that is described in this piece. I key element of his argument (as I understood it) is that there is a correlation between countries that receive aid and countries that depend on aid. Prof Deaton goes on to argue that those countries that are receiving aid are the ones that are actually negatively impacted by receiving aid due to corruption, poor administration, institutional challenges etc. Furthermore, Prof Deaton goes on to argue that how aid is provided will only perpetuate these issues in receiving countries.
Given these challenges, I would be interested in your views on the very premise of foreign aid as an effective use of resources.
Hi Tony. I just released a second post Is Foreign Aid Effective? where I share a review of aid effectiveness literature. Overall I think that yes aid is an effective mechanism to do good in the world. Important functions like food security and humanitarian relief are almost entirely dependent on foreign aid and are definitely “effective.”
Of course the effectiveness of aid is still far from ideal. There lot of examples in which foreign aid projects had no impact or even a negative impact on the recipient countries. Much like we have discovered with charities, effectiveness often varies at orders of magnitude. I imagine foreign aid programs are similar. Foreign aid also hasn’t produced much measurable economic growth in poor countries for reasons which I highlight in my second post.
I think there is also reasons for optimism regarding trends in foreign aid. There seems to be a significant shift among countries to implement more randomized control trials and generally be more transparent.The transformation of USAID is a good example a positive step towards more effective foreign aid.