Nobel winner Angus Deaton and the impact of foreign aid

Earlier this month, Princeton’s Angus Deaton was awarded the Nobel Memorial Prize in Economic Sciences—an award richly deserved for Deaton’s path-breaking work on consumption, poverty, and welfare.

Much attention has also been given to Deaton’s much more controversial opinions on foreign aid, and his arguments that aid does not work, and that it can accelerate corruption and keep bad leaders in power. Of course, the evidence on aid is not definitive. Partly that is because aid for different purposes has different impacts in different country contexts. Still, a growing body of recent evidence tends to show a net positive impact of aid on development.

The United States has led the way in supporting efforts to fight HIV/AIDS, and deaths have fallen by more than one-third in just seven years. Malaria deaths have dropped in half since 2000, again in large part due to the President’s Malaria Initiative. Tuberculosis infections have fallen by 25 percent just since 2002, and the world is on the brink of eradicating polio once and for all. Donor-financed programs helped increase the number of children receiving basic vaccinations from 20 million in 1980 to 200 million today, and in reducing deaths from diarrhea from 5 million to less than 800,000 children a year. Remarkably, the rate of child death has fallen in every single country in the world since 1980—there are no exceptions. Leadership and hard work in developing countries deserve much of the credit, but these gains would not have happened without foreign assistance.

Aid has also supported progress in education, especially girls’ education. In Afghanistan, less than 1 million children attended schools in 2002, and almost all of them were boys. Girls and women were excluded. But since then, the Afghan government, USAID, and other donors have built more than 13,000 schools, recruited and trained more than 186,000 teachers, and increased net enrollment rates to 56 percent. Just one decade later in 2012, there were 8 million children in school—more than eight times more than in 2002—including 2.5 million girls.

More contentious are the debates about aid and economic growth. But even here the pendulum has swung, with more evidence that aid has a modest positive impact on growth.

[Excerpts of Brookings Opinion by Steve Radelet]

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