Development is mostly not about aid

Whether you believe aid is effective or not, it has always struck me that, as a quantitative matter, it is a drop in the ocean. I am not saying that we should abandon aid; I am convinced it mostly makes things better. What I am saying, however, is that given how little it is and how widespread poverty is, the effect on national-level indicators can only be very, very small.

While aid can realistically only ever be a small part of the solution, other policies pursued by rich countries can have very widespread effects, and have perhaps received less attention than is warranted. In other words, we may be giving x euros in aid, but how much are we taking back by pursuing a Common Agricultural Policy? How much aid would a country have to give to make up for the effect on the poor of tight immigration policies?

The excellent Owen Barder links to a worthwhile attempt to rank rich countries according to how well they perform on development along these dimensions:

Though the effects of aid on development are uncertain, there is a huge amount that industrialised countries can do – or not do – which affects how quickly countries develop.  The policies of rich countries on trade, investment, migration, the environment, security and technology can make a huge impact on how quickly poor countries are able to develop. Yet we tend to judge industrialized countries too much according to how much aid they give, and too little to how they behave in all these other ways.

The Center for Global Development provides an essential service by ranking the rich each year so we can see how we are doing.  They use a series of quantitative measures on all these dimensions to create a composite picture of how a country’s policies affect development. 

The 2010 results are now in. An excellent effort; I hope the next step is an attempt to monetize the value of the different policies pursued. However arbitrary this exercise may be, it will be another step in going beyond a qualitative understanding of the effect of aid, trade policies, etc, allowing us to better focus our collective efforts.