The Aid Trap: Hard Truths About Ending Poverty

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The Aid Trap: Hard Truths About Ending Poverty
By R. Glenn Hubbard and William Duggan
Columbia Business School Publishing, 2009
212 pp. $22.95
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The authors, both from the Columbia Business School, have a strong thesis: that the best way, really the only effective way, to reduce poverty around the world is by fostering private business. They allow much room for charity, but they argue that charity should not be confused, as it frequently is, with economic development. The foreign aid establishment, both bilateral and multilateral, too often makes this error and, by operating through government bureaucracies, impedes the growth of a robust business sector in country after country. So do the activities of now-fashionable nongovernmental organizations, which provide free goods and services that could be provided by local businesses. The authors call for trimming back conventional aid and substituting it with a new Marshall Plan, mainly for Africa. The original Marshall Plan worked in the late 1940s by providing dollar loans to European businesses to help them get back on their feet; the repayment of the loans to governments kickstarted investments in infrastructure. Hubbard and Duggan make a case that their program would work in a similar way.