Abstract
Government to government economic assistance programs on concessional terms that aim to promote the development of the recipient is a post-World War II phenomenon, although there were occasional official loans and other assistance in earlier periods. Most consider that aid started with the US Marshall Plan in 1947. Over time other bilateral donors as well as multilateral financial institutions such as the World Bank emerged as important sources of finance for development. The complexity of donor policy objectives and multiplicity of actors make an assessment of the effectiveness of aid in promoting development extremely difficult. A lot depends on the individual donor and recipient. Still, over the last fifty years enough experience has been accumulated on what works and what does not. This chapter traces the evolution in this thinking starting with the simple notions of the 1950's and 1960's to about 1980. The focus is on the US and the World Bank, both because of my familiarity with the two instituions and because of their importnace both in the volume of assistance they provided during this period and their contribution to the evolution of thinking about aid.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsNotes
- 1.
George Marshall’s speech occurred on June 5, 1947. The assistance legislation authorizing the Marshall Plan passed the US Congress in 1948.
- 2.
This is the traditional calculation, which results in overestimating the aid contribution for countries such as Japan which traditionally provided a lot of ODA in the form of loans on relatively hard terms (Leipziger 1983). In 2014, going in the direction suggested by Leipziger some decades earlier, DAC changed the definition and starting in 2018 the grant element will be differentiated by recipient with ODA to LDCs and low-income countries requiring a 45% grant element to qualify, while for other countries the threshold will be reduced to 10%. At the same time, the commercial interest rate against which the grant element will be calculated was reduced from the traditional 10–5%. (OECD , Why Modernize Official Development Assistance, Third International Conference on Financing for Development, Addis Ababa, 2015).
- 3.
As a lot of bilateral aid is not given for development objectives, one has to be careful in assessing this aid’s effectiveness: if it is given for foreign policy objectives, its effectiveness should be judged in achieving those objectives. We have learned a lot about what is required for developmentally effective aid by observing and analyzing the weak developmental impacts of aid driven by commercial or strategic or other goals and objectives.
- 4.
Other AID superiors in later years such as Philip Birnbaum, Alexander Shakow and Peter McPherson were equally supportive.
- 5.
According to Jagdish Bhagwati , this ‘was the idea of Sir Arthur Lewis, a Jamaican economist who was adviser to Hugh Gaitskell, leader of the Labor Party, who wanted a target for his political platform in the 1950s (OECD 2002).
- 6.
How much of a shift had occurred by the 1970s is open to some discussion because of problems in measuring what is a ‘poverty’-oriented activity or project, see Chap. 4.
- 7.
- 8.
This was US government committee that was used in the 1970s to coordinate US aid policy.
References
Adelman, I. and H.B. Chenery (1966) “Foreign Aid and Economic Development: the Case of Greece”, Review of Economics and Statistics, XVVIII (February, 1966), 1–19.
Bauer, P.T. (1972) Dissent on Development, (Cambridge, Mass.: Harvard University Press).
Bauer, P.T. and B. Yamey (1981) ‘The Political Economy of Foreign Aid’ Lloyds Bank Review, October.
“Basic Needs: The British Position” (1978) Overseas Development Paper No. 11, London: Her Majesty’s Stationary Office.
Burki, S.J. and J. Voorhoeven (1977) “Global Estimates for Meeting Basic Needs” Basic Needs Paper No. 1, (processed) World Bank, Washington DC.
Cassen R. and Associates (1986) Does Aid Work? (Oxford: Clarendon Press).
Chenery, H.B. et al. (1974) Redistribution with Growth (London: Oxford University Press).
Chenery, H.B. and A. M. Strout (1966) “Foreign Assistance and Economic Development” American Economic Review LVI (September 1966), 679–733.
Crosswell, M. (1978) Basic Human Needs: A Development Planning Approach, AID Discussion Paper No. 38, (Washington, DC: USAID).
Crosswell, M. (1981) “Basic Human Needs” in D. Leipziger Ed. Basic Needs and Development, (Cambridge, Mass: Oelgeschlager, Gunn and Hain).
Focus on Poverty (1983) Report of the Task on the World Bank’s Poverty Focus, (‘Shakow Report’), revised edition, February (Washington, DC: World Bank).
Fuhrer, H. (1996) The Story of Official Development Assistance (Paris: OECD).
Keith L. Griffin and J.L. Enos (1970) “Foreign Assistance Objectives and Consequences” Economic Development and Cultural Change, 18 April, 313–337.
Mahbub ul Haq (1977) “Basic Needs: A Progress Report” (processed), (Washington, DC: World Bank).
Teresa Hayter (1971) Aid as Imperialism, (Harmondworth, Middlesex: Penguin Books).
Hicks, John (1965) Capital and Growth, (New York and Oxford: Oxford University Press).
Albert O. Hirschman and Richard M. Bird (1968) Foreign Aid-A Critique and a Proposal, Essays in International Finance, No. 68, (Princeton: Princeton University).
ILO (1976) Employment, Growth and Basic Needs, (Geneva: ILO).
Johnson, H. (1972) “The Link that Chains’, Foreign Policy, fall.
Kapur, D., J. P. Lewis and R. Webb (1997) The World Bank Its First Half Century (Washington DC: Brookings Institution Press).
Krueger, A.O., C. Michalopoulos and V. Ruttan (1989) Aid and Development (Baltimore: Johns Hopkins University Press).
Leipziger, D.L. (1981) Basic Needs and Development, (Cambridge, Mass: Oelgeschlager, Gunn and Hain).
Leipziger, D.L. (1983) “Lending versus Giving: The Economic of Foreign Assistance” World Development, 11 (4) pp. 329–335.
Leipziger, D.L. and M. Lewis (1977) A Basic Needs Approach to Development, Paper presented at the Western Economic Association Meetings, Honolulu, Hawaii.
Little, I.M.D. and J.M. Clifford (1966) International Aid, (Chicago: Aldine Publishing Company).
McKinnon, R.I. (1964) “Foreign Exchange Constraints in Economic Development and Efficient Aid Allocation” Economic Journal LXXIV (June) 388–409.
Michalopoulos, C. (1968) “Imports, Foreign Exchange and Economic Development: The Greek Experience” in P. B. Kenen and R. Lawrence The Open Economy, (New York: Columbia University Press).
Michalopoulos, C. (1970) “The Foreign Exchange Constraint Tariffs and Import Substitution” Kyklos XXIII, (2) pp. 315–331.
Michalopoulos, C. (1973) Financing Needs of Developing Countries: Proposals for International Action Essays in International Finance No. 110, (Princeton: Princeton University).
Michalopoulos, C. (1982) “Basic Needs Strategy: Some Implementation Issues of the U.S. Bilateral Assistance Program” in M. Crahan Ed. Human Rights and Basic Needs in the Americas, (Washington, DC: Georgetown University Press).
National Advisory Council for Development Co-operation (1977) Recommendation on Bilateral Development Co-operation, 55, The Hague.
Nekkers, J.A. and P.A.M. Malcontent Eds. (1999) Fifty Years of Dutch Development Co-operation 1949–1999 (The Hague: Jdu Publishers).
Nurkse, R. (1967) Problems of Capital Formation in Underdeveloped Countries and Patterns of Trade and Development, (New York: Oxford University Press).
Papanek, G.F. (1973a) “Aid, Foreign Investment, Savings and Growth in Less Developed Countries” Journal of Political Economy 81 January-February 120–130.
Papanek, G.F. (1973b) “The Effect of Aid and Other Resource Transfers on Savings and Growth in Less Developed Countries”, Economic Journal 82 (September) pp. 934–980.
OECD (1969) The Flow of Financial Resources to Less Developed Countries, (Paris: OECD).
OECD (1976) DAC Chairman’s Report, (Paris: OECD).
OECD (1977) OECD Development Assistance Committee “Communique” Sixteenth Annual High Level Committee Meeting Press/A (77) 47, 27th October, Paris.
OECD (1980) DAC Chairman’s Report, (Paris: OECD).
OECD (2002) DAC Journal Vol. 3, No. 4, (Paris: OECD).
OECD (2015) Why Modernize Development Assistance Third Finance for Development Forum, Addis Ababa.
Owens E. and R. Shaw (1972) Development Reconsidered, (Lexington, Mass: D.C. Heath and Company).
Partners in Development (1969) Report of the Commission on International Development (London: Pall Mall Press).
Schiavo-Campo, S. and H. W. Singer (1970) Perspectives on Economic Development, (Boston: Houghton Mifflin Company).
Shakow, A. (1978) Statement of the Honorable Alexander Shakow, Assistant Administrator for Program and Policy, Agency for International Development, before the Subcommittee on International Development, House International Relations Committee, (US Congress, Washington DC).
Streeten, P. (1977) “The Distinctive Features of a Basic Needs Strategy” (processed) World Bank, Washington DC.
Task Force on International Development (1970) “U.S. Foreign Assistance in the 1970s: A New Approach” Report to the President of the United States (processed) Washington DC.
UNCTAD (1966) “Alternative Projections of the Foreign Assistance Gap: A Reconciliation” TD/B/C.3/30 29 November.
UNCTAD (1967a) “Consideration of the Adequacy of the Rates of Growth Achieved by the Developing Countries: Growth and External Development Finance” TD/B/C.3/34 February 17.
UNCTAD (1967b) “Growth and External Development Finance” TD/7/Supp. 1, October 17.
US AID (1978) “A Strategy for a More Effective Bilateral Development Assistance” An A.I.D. Policy Paper, Washington, DC: US AID).
US AID (1979) “Basic Human Needs Strategy” Development Coordination Committee, Washington, DC: US AID).
U.S. Congress (1976) “New Directions in Development Aid, Excerpts from Legislation” Committee on International Relations (Washington, DC: US Government Printing Office).
Warne, W.R. and C. Michalopoulos (1971) “Study of SDR-Aid Link” (processed) (Washington, DC: Department of State and US AID).
Weisskopf, T.E. (1972) “The Impact of Foreign Capital Inflow on Domestic Savings in Underdeveloped Countries” Journal of International Economics 2 February pp. 25–38.
World Bank (1996) “Issues in Adjustment Lending” (processed) Development Economics, January 10.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2017 The Author(s)
About this chapter
Cite this chapter
Michalopoulos, C. (2017). Growth Constraints, Aid Targets and Basic Needs. In: Aid, Trade and Development. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-65861-2_2
Download citation
DOI: https://doi.org/10.1007/978-3-319-65861-2_2
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-319-65860-5
Online ISBN: 978-3-319-65861-2
eBook Packages: Economics and FinanceEconomics and Finance (R0)