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Rebel without a cause!

Wednesday, February 20, 2008

Economics of Aid

This article surveys and discusses the most important work done in the field of economics today. And to my pleasant surprise, the author sees the work on studying ways to improve the actual positive impact of economic aid, done at the Jameel Poverty Action Lab at MIT, led by Esther Duflo and Abhijit Banerjee, as the one.
This part of their finding is very interesting :

"Banerjee estimates, conservatively, that $15 billion a year out of roughly $100 billion in annual development aid worldwide could be spent on programs that have been proven to work. Unfortunately, the actual figure is much closer to zero than to $15 billion."

It reminds me of Rajeev Gandhi's famous statement that only 15 paise out of 1 rupee spent by the government of India reaches the poor. The rest is lost in form of inefficiencies and corruption. And now this research shows that even out of the 15 paise that reaches them only 15 % is actually doing real benefit.

3 comments:

Id it is said...

A shame no doubt! I wonder why the micro financing model of Mohammad Yunus is not being utilized on a world wide scale. The model worked wonders in Bangladesh, so there is every reason to believe that it would work even better in other developing nations which are less challenged than Bangladesh is (referring to the challenges of a burgeoning population, paucity of space, and difficult weather)

Sreekumar said...

Micro-financing seems a nice idea. And it is being implemented by many people around the world. There are other schemes which work at the small level, but if these things started to work so well, then what will happen to the big governments and the big agencies like IMF, World Bank? And what of the stud young shots fresh out of MBA and policy schools who want to work in these agencies?
The world is skewed and a strange place. But then this is the only world we have, so I guess its better to accept the facts and make change one thing at a time.

Sreekumar said...

Maybe this article might have some answers as to why microcredit is not pursued more.

The specific part-
Microcredit funds provide families with three or four or five days of livelihood, Brilliant said, but "no country has ever emerged from poverty because of microcredit. Jobs make that possible. China did it with manufacturing, India did it with outsourced call centers."