The Rational Optimist (P.S.)

by Matt Ridley

Some of the most urgent needs of Africa can surely be met by increased aid from the rich world. Aid can save lives, reduce hunger, deliver a medicine, a mosquito net, a meal or a metalled road. But statistics, anecdotes and case histories all demonstrate that the one thing aid cannot reliably do is to start or accelerate economic growth. Aid to Africa doubled in the 1980s as a percentage of the continent’s GDP; growth simultaneously collapsed from 2 per cent to zero. The aid that Zambia has received since 1960, if invested instead in assets giving a reasonable rate of return, would by now have given Zambians the income per head of the Portuguese – $20,000 instead of $500. Although in the early 2000s some studies managed to find evidence that certain kinds of aid sometimes trigger growth in countries with specific economic policies, even these conclusions were later dashed by Raghuram Rajan and Arvind Subramanian of the International Monetary Fund in 2005. They could find no evidence that aid resulted in growth in any countries. Ever.