More Aid, Less Growth

By Alex Singleton | 2 July 2005

Allister Heath writes in tomorrow's issue of The Business, a UK newspaper, that:

[A] study from the Globalisation Institute this weekend finds that for every 1% increase in aid received by a developing country, there is a 3.65% drop in real GDP growth per person. Contrary to the conventional wisdom in the aid industry, the study finds that even where recipients have good governance, the effect is also negative. The report More Aid, Less Growth by Tomi Ovaska, of the University of Regina in Canada, says that instead of top-down approaches to aid, helping and encouraging developing countries to create business environments that are compatible with free markets is a promising and a potentially cost-effective way to unleash the individual effort and creativity in those countries.