This article first appeared on the Ottawa Citizen blog on aid and development.
Aid hasn’t done much for development, and even less for sustainable
growth in countries. In fact everything but aid – trade liberalization,
productivity and technology gains, income redistribution, remittances,
the new “gangnam style”
dance (ok, I made that bit up) – have been at the heart of the dramatic
improvement in living standards in a number of emerging economies in
This is the main premise of the Globe & Mail’s March 29 editorial, “Towards better, smarter foreign aid”,
on their rationale for why merging the Canadian International
Development Agency (CIDA) into one Department of Foreign Affairs, Trade
and Development makes total sense.
Forget building bridges, roads
and dams. Together, aid can better used to promote trade, which in turn
will lead to more sustainable growth and long-term development. Just
look at Brazil and Mexico and South Africa, the Globe says.
So I did.
recent years, there has been a growing body of evidence that has
analyzed some of the factors that encouraged sustained and inclusive
growth and development in many emerging and developing economies.
The World Bank -sponsored 2008 Commission on Growth and Development
drew its “strategies for sustained and inclusive growth” from 13
developing economies that enjoyed a sustained (25 years) period of
strong growth (seven percent) and human development. The UNDP’s 2013 Human Development Report
on “The Rise of the South” was released just one month ago. It taps the
experience of 40 countries that had “done better than expected” in
terms of both income and non-income dimensions of human development.
reports (like me) unequivocally agree that while trade and growth are
important, growth is an insufficient condition to ensure long-term,
positive and sustainable human development.
So what then? Each
report highlights a number of key factors that contributed to the
success of these economies in terms of both positive growth and human
development outcomes. They overlap in three areas worth highlighting:
1) Strong leadership and an active government and society –
While the private sector has an important role to play in development,
both the Commission and UNDP reminds us of the necessity of a pro-active
developmental state and society. Supported by a talented and well
compensated public service, the Commission’s cases identified the
importance of active governments that were invested in, and committed
to, long-term plans to bring about inclusive growth in their economies
and to effective institutions to deliver on this commitment. But
governments also need social policy that promotes inclusion, adds the
UNDP, to ensure non-discrimination and equal treatment. As the Arab
Spring has reminded us, this also requires space for people – in
particular young people - to voice their concerns and demands, influence
and shape policy, participate in political processes and demand
2) A healthy questioning of unfettered liberalization
– While the Commission acknowledges the need for open markets and a
responsive economy that supports innovative new industries and dumps
obsolete ones, it acknowledges that none of the countries they studied were free market
purists (nor was the US and UK, for that matter). These countries
developed industrial strategies to promote investments in new sectors,
subsidized industries that otherwise wouldn’t have emerged, managed
their exchange rates, implemented capital controls, and built up their
reserves. (It is enough to make Adam Smith
roll over in his grave.) Although neither the UNDP nor Commission
advocate for such policies long term, they do recognize that there is a
time and a place for such policies. Likewise, while the UNDP notes that
tapping global markets is key, “success is more likely to be the result
not of a sudden opening but of gradual and sequenced integration with
the world economy, according to national circumstances, and accompanied
by investment in people, institutions and infrastructure.”
3) Impressive levels of public investments
– Both the Commission and UNDP underscore the importance of investing
heavily in people (quality education and skills development, in
particular for girls, and nutrition and health care), and in
infrastructure (roads, ports, airports, electricity,
telecommunications). But this must also be accompanied by a strong focus
on job creation and equality of opportunity that can shape (and be
shaped by) the nature and pace of the job market, in synch with the
skill-set of the new workforce. Furthermore, social safety nets, legal
empowerment and access to basic services help smooth the transition for
people between jobs. According to the Commission, this produces
“healthy, educated workers, passable roads, and reliable electricity”
and actually crowds in private investment, creating what the UNDP calls
“virtuous cycles in which growth and social policies reinforce each
Which leaves me wondering: wouldn’t “better, smarter foreign aid”
have more leverage and impact if it aligned less with how we think
growth and development works, and more with how it is actually happening
– and quite successfully – in many parts of the developing world?
What do you think?
This blog was written by Fraser Reilly-King, Policy Analyst (Aid), CCIC. The views expressed are his own, and do not necessarily represent the views of CCIC or its members.