Thoughts on Foreign Aid

Matt Collin, a research fellow over at CGD – Europe, has a nice quick and dirty video on the issues and reality of foreign aid.

He brings up a good point that is often hastily brushed over in the aid vs. trade debate. (Which apparently is still a thing, because my post on ‘The Great Aid Debate’ is still constantly one of my most viewed blog posts.)

It seems to me (at least in the public realm) we’ve lost track of the long-run vs. short-run dynamic.

In the long-run economics 101 tells us that markets are efficient, profits converge on zero, price equals marginal cost, etc. etc. In the long-run aid is, ideally, not a thing we want to be dealing with. Here’s where it gets tricky.

J.M. Keyens (yes, the Keynes v Hayek guy) has this quote that is often said in jest: “In the long-run… we’re all dead.”

The sad reality is for too many people around the world this is not a joke. And THAT’S why we need to ditch this meaningless aid vs. trade debate and focus on three things:

  1. Advocating our national governments to budget for more foreign aid.
  2. Invest in organizations and agencies who are committed to using aid most effectively. (i.e. elevating the most poverty per dollar spent.)
  3. Learn how aid can be used in ways were it doesn’t harm long-run development, but also doesn’t forget about those who are currently trapped in grinding poverty.

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