Poverty is history, not yet

The Aid Trap shatters the well-entrenched myth that development aid will erase global poverty. Conversely, it argues that aid helps keep the poor alive to confirm the biblical certainty that 'the poor you always have with you'. Else, the trillions of dollars spent in development aid since the 1960s would have made a dent in poverty. Paradoxically, poverty has been perpetuated without any decline in the flow of development aid.

In the three decades that I've spent in the development sector, I haven't come across anything more clear, concise and incisive as The Aid Trap. It conclusively proves that the current systems of development aid and the nonprofit sector in the developing countries keep the poor poor. Neither does top-down aid that is often delivered to governments work, nor the bottom-up charity through non-profit system affect the poor.

Authors R. Glenn Hubbard and William Duggan, both of Columbia University's Business School, present a radical prescription to end poverty. 'Enhancing local businesses alone can generate jobs to tackle poverty', they suggest. The authors are seized of the fact that 'business is a very imperfect system' but leaf the history books to reveal evidences that give credence to their prescription that favors 'business' over 'charity'.

But if current economic crisis is any indication, should business be projected as a panacea? The authors favor local businesses over stronger foreign-owned businesses, though it will always be hard to draw a line between foreign and domestic firms. Rather then getting bogged down into the specifics, the crucial question worth addressing would be: 'what is the effect of your business on the domestic business sector'?

Curiously, there are no easy answers to global poverty yet. May be, a mix of strategies will contribute crucial pieces to the enduring poverty puzzle. However, by conclusively proving that development aid doesn't work, Hubbard and Duggan have set the pigeon out-of-the-hat. In doing so, they have reiterated the commonly-held adage which suggests that 'aid cannot be the answer if growth is the question'. But who decides what 'growth' is?

The Aid Trap: Hard Truths about Ending Poverty
by R Glenn Hubbard & William Duggan, Columbia University Press, New York, 198 pages, $ 22.95