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Friday, December 25, 2009

Aid for Business

There is a brand new addition into the overflowing field of literature on the merit and de-merits of aid to the developing world. The Aid Trap, by Glenn Hubbard and William Duggan. Columbia University Press, September 2009.

Glenn Hubbard and William Duggan both of Columbia Business School are the authors of this new addition. Their central thesis is aid for business development through the private rather than the public sector, welfare programmes. Aid for business they argue, has been the key to economic development in countries that have grown fast, but it is only rarely the principal focus of development aid.

Microfinance is increasingly the best anti-poverty programme in the developing world. However it has not received the support in deserves from aid agencies or governments in developing countries.

Hubbard and Duggan point out the Marshall Plan was used to provide resources for local businesses in post-war Europe. They advocate for a new Marshall Plan for poor countries, with aid (capital) flowing directly to private local businesses who in turn build companies and create wealth. C. K Prahalad and William Easterly have made similar arguments.

But is the well heeled aid industry ready for reform? Does Africa have the requisite entrepreneurial and skilled labour to harness massive capital flows to business?

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