Abstract

It is a commonplace that economic and social progress in developing countries since the Second World War has been faster than in any comparable period in history. There have been large improvements in incomes, in literacy, in health and in life expectancy. Hundreds of millions have been taken out of a grinding poverty to which in earlier eras they would have been consigned. Yet there still remain over one billion people, almost a fifth of the world’s population, in absolute poverty – that is to say, living on less than one US dollar a day and suffering from undernourishment and much else. The incidence of absolute poverty has certainly fallen; but because of rising population, the total number of poor people has not changed very much. 2 Global income inequality may or may not have increased. What is certain is that the income gaps in the world economy remain enormous. International aid has helped to reduce the incidence of poverty – through additions to physical investment, enhancement of human capital, transfer of technology, support for economic and political reform, and food and other relief in situations of humanitarian crisis. But it has not had the impact it could have had. This of course is not the only reason why extreme poverty has persisted on such a large scale: there are a number of other reasons internal and external to the developing countries, including the relatively slow growth of the world economy. One cause of aid having fallen well short of its poverty reducing potential has been its low volume relative to what many countries could have effectively absorbed, and relative to what on moral grounds the developed countries should have provided. I will come back to this later. The other issue, which I will initially focus on, is whether – and if so, how – aid could have been used more effectively