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The Aid Trap

The Aid Trap: Hard Truths About Ending Poverty

Copyright Date: 2009
Pages: 216
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  • Book Info
    The Aid Trap
    Book Description:

    Over the past twenty years more citizens in China and India have raised themselves out of poverty than anywhere else at any time in history. They accomplished this through the local business sector-the leading source of prosperity for all rich countries. In most of Africa and other poor regions the business sector is weak, but foreign aid continues to fund government and NGOs. Switching aid to the local business sector in order to cultivate a middle class is the oldest, surest, and only way to eliminate poverty in poor countries.

    A bold fusion of ethics and smart business, The Aid Trap shows how the same energy, goodwill, and money that we devote to charity can help local business thrive. R. Glenn Hubbard and William Duggan, two leading scholars in business and finance, demonstrate that by diverting a major share of charitable aid into the local business sector of poor countries, citizens can take the lead in the growth of their own economies. Although the aid system supports noble goals, a local well-digging company cannot compete with a foreign charity that digs wells for free. By investing in that local company a sustainable system of development can take root.

    eISBN: 978-0-231-51950-2
    Subjects: Political Science, Business

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
    (pp. ix-xiv)
    (pp. 1-10)

    If you stroll along Wall Street in New York, you see that it ends at Trinity Church. It’s a famous view, down the narrow street to the elegant spire of the brownstone church. You can find the view in countless postcards, guides to New York City, and snapshots that tourists took themselves. For two centuries Trinity has been the “Wall Street church,” and remains so to this day.

    If you went to Trinity on Easter Sunday, 2008, you heard the children’s choir and a stirring sermon by the rector. In the Prayers of the People you prayed for the Episcopal...

  5. 2 BUSINESS FIRST: The Roots of Prosperity in the Modern World
    (pp. 11-48)

    In this chapter we trace the history of economic success around the globe, from the dawn of history to the present day. We note especially the role of business in helping countries make the shift from mass poverty to mass prosperity over the centuries. We see that no two countries ever follow identical paths or end up in exactly the same place. But there is a clear pattern: Large numbers of people rise out of poverty as elements of a thriving business sector replace the previous economic system. In all cases it was a struggle: Some form of competing system...

  6. 3 BUSINESS LAST: The Roots of Failure in Poverty Aid
    (pp. 49-88)

    In 1960 Rome hosted the Summer Olympics. The closing ceremony took place on September 11, and the final results shook the world. The medal count was 103 for the Soviet Union and 71 for the United States. In gold medals the Soviet Union won forty-three and the United States took thirty-four. In the previous thirteen Olympics the host nation had won five times, because it fielded far more athletes. The United States won the other eight times. The 1960 victory by the Soviet Union was the first time a country other than the host or the United States won the...

  7. 4 STRONG MEDICINE: The Marshall Plan as a Business Model
    (pp. 89-112)

    In previous chapters we saw how a thriving domestic business sector has stood out as the only viable path to large-scale prosperity in the history of human endeavor, how rival systems thwarted it to some degree everywhere on earth, and how the aid system adds yet another rival system that makes things even worse in the poor countries it aims to help. In the next three chapters we turn from problem to solution: how to use aid to support rather than thwart a thriving domestic business sector.

    Our basic model remains unchanged: the ten elements of the World Bank’s Doing...

  8. 5 CHASE THE DEVIL: Details for a Marshall Model
    (pp. 113-152)

    The great historian Marc Bloch showed in meticulous detail how difficult it was and how long it took for the old feudal regimes of France to yield to new commercial agriculture. Feudalism had four centuries to take root in France, and over the next four centuries the business system replaced it. That is a warning. There is no quick and easy way for the aid system to yield to a normal pro-business system in the poor countries of the world. The aid system has been with us only five decades, but in that short time its scale and complexity have...

  9. 6 CONCLUSION: Make It Your Business
    (pp. 153-166)

    Every year for the past few decades, thousands of young people from rich countries enter the aid system. They come in through the existing institutions, these days often NGOs, as interns or on a short project, a study tour, or research grant. On their first trip to a poor country, many of them hit the ground and fall in love with development. It’s exotic, altruistic, exciting, and it changes their whole outlook on life. They learn so much they want to keep going back. Some do. Or they might come home and go into some other career but stay involved...

    (pp. 167-174)
    (pp. 175-178)
    (pp. 179-188)
  13. INDEX
    (pp. 189-202)