The effects of corruption and
foreign aid on developing countries
2007 Foreign Aid contribution
UK and N.Ireland
£6,299,418,300
The Reality…
 "Between 1970 and 1998, when aid flows to Africa were
at their peek, poverty in Africa rose from 11% to a
staggering 66%"
-Dambisa Moyo, Dead Aid
Can Foreign Aid Buy Growth? - Easterly
 William Easterly (2003)
 “Financing Gap”
 Burnside and Dollar's Aid, Policies and Growth
(2000)
 Flaws?
 “The Big Idea”
 A Real World Perspective
Corruption and Development - Pranab
Bardhan
 1. Good policies do not necessarily have to be
moral.
 2. The only thing worse than a rigid over
centralised DISHONEST bureaucratic government
is a rigid over-centralised HONEST one'
-Samuel P. Huntington
 3. The concept of Speed Money
 4. Misuse of foreign Aid policy
Resources and Incentives to Reform
A Model and some evidence on sub Saharan African countries
 Low rates of investment and growth can be due to poor
infrastructure, bad policies and institutions.
 The ruling elite will implement "bad policies" to sustain
their position where aid can become ineffectual.
 The proposed Model…
 A self interested government concerned with :
a) the welfare of its supporters
b) society's welfare as a whole.
 Conclusion: aid should be conditional
The Question and Verdict...
To what extent does policy in
government influence the
effectiveness of foreign aid?