Here'a a link to an impassioned interview Der Spiegel conducted with James Shikwati, a Kenyan economist. Shikwati contends that foreign aid has been counterproductive in Africa, and has worked better at propping up corrupt and useless governments than at improving the lives of average Africans. There is increasing scholarly support for this view, see, e.g., here, here, here, and here, but the interviewer makes a good point too -- you can't just let people starve. Shikwati assures us that the ending of aid would lead to better trade policies and the development of market economies, and thus ameliorate the threat of starvation, but this is a long-term (and by no means inevitable) solution while starvation is a short-term problem that demands a solution NOW -- as dead people can't eat, an absence of food this month cannot be made up in a future of glorious plenty way down the road.
What, then, shall we do? First, recognize aid has a role -- a big role -- to play in emergencies, such as a threat of widespread starvation. Second, acknowledge aid's limitations in promoting long-term development. Even if you believe aid is more effective than the skeptics claim -- as this report by Craig Burnside and David Dollar suggests, the truth is probably somewhere in between Shikwati's view and the rosy views of the foreign aid establishment -- the fact that many recipients of billions of dollars in aid are now worse off than they were many decades ago shows that, when it comes to development, foreign aid (at least as traditionally provided) can't be the only game in town. The implications of this acknowledgement are two-fold. One -- foreign aid must be delivered more effectively. The recent movement to link the delivery of aid to good governance and anti-corruption efforts is a positive step in this direction. Two -- the developmental ends of foreign aid are too great to be accomplished by the means of foreign aid alone. Among other things, foreign direct investment also is necessary if developmental goals in Africa are to be achieved.
What does this have to do with migration, the ostensible subject of this blog? Well, as we discuss in our book, migrants, especially high skill migrants, can facilitate foreign direct investment in several ways. For example, they can influence their home country to create conditions (respect for property rights, the rule of law, etc.) that will attract foreign direct investment. They also can influence decision-makers in their new country to invest in their country of origin, or, if at a senior level, make the decision themselves. They additionally can add to the comfort-level of decision-makers by agreeing to return to the home country to oversee an investment. All this is in addition to the infusion of capital that migration brings in the form of remittances, an infusion that greatly exceeds in amount the funding foreign aid provides. The bottom line is that development is an extremely complex process, and that contributions of many different kinds are necessary to achieve it. (Hat tip, Instapundit.)
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