Abstract
Government to government economic assistance programs on concessional terms that aim to promote the development of the recipient is a post-World War II phenomenon, although there were occasional official loans and other assistance in earlier periods. Most consider that aid started with the US Marshall Plan in 1947. Over time other bilateral donors as well as multilateral financial institutions such as the World Bank emerged as important sources of finance for development. The complexity of donor policy objectives and multiplicity of actors make an assessment of the effectiveness of aid in promoting development extremely difficult. A lot depends on the individual donor and recipient. Still, over the last fifty years enough experience has been accumulated on what works and what does not. This chapter traces the evolution in this thinking starting with the simple notions of the 1950's and 1960's to about 1980. The focus is on the US and the World Bank, both because of my familiarity with the two instituions and because of their importnace both in the volume of assistance they provided during this period and their contribution to the evolution of thinking about aid.
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Notes
- 1.
George Marshall’s speech occurred on June 5, 1947. The assistance legislation authorizing the Marshall Plan passed the US Congress in 1948.
- 2.
This is the traditional calculation, which results in overestimating the aid contribution for countries such as Japan which traditionally provided a lot of ODA in the form of loans on relatively hard terms (Leipziger 1983). In 2014, going in the direction suggested by Leipziger some decades earlier, DAC changed the definition and starting in 2018 the grant element will be differentiated by recipient with ODA to LDCs and low-income countries requiring a 45% grant element to qualify, while for other countries the threshold will be reduced to 10%. At the same time, the commercial interest rate against which the grant element will be calculated was reduced from the traditional 10–5%. (OECD , Why Modernize Official Development Assistance, Third International Conference on Financing for Development, Addis Ababa, 2015).
- 3.
As a lot of bilateral aid is not given for development objectives, one has to be careful in assessing this aid’s effectiveness: if it is given for foreign policy objectives, its effectiveness should be judged in achieving those objectives. We have learned a lot about what is required for developmentally effective aid by observing and analyzing the weak developmental impacts of aid driven by commercial or strategic or other goals and objectives.
- 4.
Other AID superiors in later years such as Philip Birnbaum, Alexander Shakow and Peter McPherson were equally supportive.
- 5.
According to Jagdish Bhagwati , this ‘was the idea of Sir Arthur Lewis, a Jamaican economist who was adviser to Hugh Gaitskell, leader of the Labor Party, who wanted a target for his political platform in the 1950s (OECD 2002).
- 6.
How much of a shift had occurred by the 1970s is open to some discussion because of problems in measuring what is a ‘poverty’-oriented activity or project, see Chap. 4.
- 7.
- 8.
This was US government committee that was used in the 1970s to coordinate US aid policy.
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Michalopoulos, C. (2017). Growth Constraints, Aid Targets and Basic Needs. In: Aid, Trade and Development. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-65861-2_2
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