This week the United Nations reported that the recession has created a $4.8bn (£3bn, €3.4bn) shortfall in its 2009 aid programmes – more than half the $9.5bn it seeks. On the one hand, that is bad, because the UN does much valuable humanitarian work. On the other hand, financial constraints may force the UN to rethink the portion of its aid aimed at economic development. The UN continues to fund government and non-governmental organisations to run economic development projects. But that is not how to end poverty: only the local business sector does that.
Instead of helping local business in poor countries, the UN continues to champion the current aid system, along with its celebrity allies such as the rock star Bono, the Columbia University economist Jeffrey Sachs and Bill Gates through his foundation. They argue that rich countries have both the technology that poor countries need to prosper and the wealth to provide it to them. For decades this philosophy emphasised the idea of a Big Push – co-ordinated, macro changes to produce balanced growth. More recently, this idea has returned in celebrities' moral argument for the west to save Africa.
But as a matter of economics, how can these policies work? They do not, according to Africa Unchained by George Ayittey, White Man's Burden by William Easterly, and Dead Aid by Dambisa Moyo. They document not only that aid has failed to make poor countries more prosperous, but also that the aid system continues to do the same things again and again despite evidence that they do not work. Economic evidence is not kind to the proposition that “aid” is the answer if “growth” is the question. But neither can abandoning aid be the answer.