Дарон Аджемоглу - Why Nations Fail

Despite this unflattering track record of “development” aid, foreign aid is one of the most popular policies that Western governments, international organizations such as the United Nations, and NGOs of different ilk recommend as a way of combating poverty around the world. And of course, the cycle of the failure of foreign aid repeats itself over and over again. The idea that rich Western countries should provide large amounts of “developmental aid” in order to solve the problem of poverty in sub-Saharan Africa, the Caribbean, Central America, and South Asia is based on an incorrect understanding of what causes poverty. Countries such as Afghanistan are poor because of their extractive institutions—which result in lack of property rights, law and order, or well-functioning legal systems and the stifling dominance of national and, more often, local elites over political and economic life. The same institutional problems mean that foreign aid will be ineffective, as it will be plundered and is unlikely to be delivered where it is supposed to go. In the worst-case scenario, it will prop up the regimes that are at the very root of the problems of these societies. If sustained economic growth depends on inclusive institutions, giving aid to regimes presiding over extractive institutions cannot be the solution. This is not to deny that, even beyond humanitarian aid, considerable good comes out of specific aid programs that build schools in areas where none existed before and that pay teachers who would otherwise go unpaid. While much of the aid community that poured into Kabul did little to improve life for ordinary Afghans, there have also been notable successes in building schools, particularly for girls, who were entirely excluded from education under the Taliban and even before.

One solution—which has recently become more popular, partly based on the recognition that institutions have something to do with prosperity and even the delivery of aid—is to make aid “conditional.” According to this view, continued foreign aid should depend on recipient governments meeting certain conditions—for example, liberalizing markets or moving toward democracy. The George W. Bush administration undertook the biggest step toward this type of conditional aid by starting the Millennium Challenge Accounts, which made future aid payments dependent on quantitative improvements in several dimensions of economic and political development. But the effectiveness of conditional aid appears no better than the unconditional kind. Countries failing to meet these conditions typically receive as much aid as those that do. There is a simple reason: they have a greater need for aid of either the developmental or humanitarian kind. And quite predictably, conditional aid seems to have little effect on a nation’s institutions. After all, it would have been quite surprising for somebody such as Siaka Stevens in Sierra Leone or Mobutu in the Congo suddenly to start dismantling the extractive institutions on which he depended just for a little more foreign aid. Even in sub-Saharan Africa, where foreign aid is a significant fraction of many governments’ total budget, and even after the Millennium Challenge Accounts, which increased the extent of conditionality, the amount of additional foreign aid that a dictator can obtain by undermining his own power is both small and not worth the risk either to his continued dominance over the country or to his life.

But all this does not imply that foreign aid, except the humanitarian kind, should cease. Putting an end to foreign aid is impractical and would likely lead to additional human suffering. It is impractical because citizens of many Western nations feel guilt and unease about the economic and humanitarian disasters around the world, and foreign aid makes them believe that something is being done to combat the problems. Even if this something is not very effective, their desire for doing it will continue, and so will foreign aid. The enormous complex of international organizations and NGOs will also ceaselessly demand and mobilize resources to ensure the continuation of the status quo. Also, it would be callous to cut the aid given to the neediest nations. Yes, much of it is wasted. But if out of every dollar given to aid, ten cents makes it to the poorest people in the world, that is ten cents more than they had before to alleviate the most abject poverty, and it might still be better than nothing.

There are two important lessons here. First, foreign aid is not a very effective means of dealing with the failure of nations around the world today. Far from it. Countries need inclusive economic and political institutions to break out of the cycle of poverty. Foreign aid can typically do little in this respect, and certainly not with the way that it is currently organized. Recognizing the roots of world inequality and poverty is important precisely so that we do not pin our hopes on false promises. As those roots lie in institutions, foreign aid, within the framework of given institutions in recipient nations, will do little to spur sustained growth. Second, since the development of inclusive economic and political institutions is key, using the existing flows of foreign aid at least in part to facilitate such development would be useful. As we saw, conditionality is not the answer here, as it requires existing rulers to make concessions. Instead, perhaps structuring foreign aid so that its use and administration bring groups and leaders otherwise excluded from power into the decision-making process and empowering a broad segment of population might be a better prospect.

EMPOWERMENT

May 12, 1978, seemed as if it were going to be a normal day at the Scânia truck factory in the city of São Bernardo in the Brazilian state of São Paulo. But the workers were restless. Strikes had been banned in Brazil since 1964, when the military overthrew the democratic government of President João Goulart. But news had just broken that the government had been fixing the national inflation figures so that the rise in the cost of living had been underestimated. As the 7:00 a.m. shift began, workers put down their tools. At 8:00 a.m., Gilson Menezes, a union organizer working at the plant, called the union. The president of the São Bernardo Metalworkers was a thirty-three-year-old activist called Luiz Inácio Lula da Silva (“Lula”). By noon Lula was at the factory. When the company asked him to persuade the employees to go back to work, he refused.

The Scânia strike was the first in a wave of strikes that swept across Brazil. On the face of it these were about wages, but as Lula later noted,

I think we can’t separate economic and political factors.… The … struggle was over wages, but in struggling for wages, the working class won a political victory.

The resurgence of the Brazilian labor movement was just part of a much broader social reaction to a decade and a half of military rule. The left-wing intellectual Fernando Henrique Cardoso, like Lula destined to become president of Brazil after the re-creation of democracy, argued in 1973 that democracy would be created in Brazil by the many social groups that opposed the military coming together. He said that what was needed was a “reactivation of civil society … the professional associations, the trade unions, the churches, the student organizations, the study groups and the debating circles, the social movements”—in other words, a broad coalition with the aim of re-creating democracy and changing Brazilian society.

The Scânia factory heralded the formation of this coalition. By late 1978, Lula was floating the idea of creating a new political party, the Workers’ Party. This was to be the party not just of trade unionists, however. Lula insisted that it should be a party for all wage earners and the poor in general. Here the attempts of union leaders to organize a political platform began to coalesce with the many social movements that were springing up. On August 18, 1979, a meeting was held in São Paulo to discuss the formation of the Workers’ Party, which brought together former opposition politicians, union leaders, students, intellectuals, and people representing one hundred diverse social movements that had begun to organize in the 1970s across Brazil. The Workers’ Party, launched at the São Judas Tadeo restaurant in São Bernardo in October 1979, would come to represent all these diverse groups.