8. Contemporary consensus and controversy
After all these reactions, Burnside and Dollar's results
appear to be seriously weakened. The idea that «foreign aid has a positive
impact on recipient's economic growth provided that those countries have sound
economic policies» is not so well accepted anymore38. Actually,
while it is difficult to deny that «good» policies and institutions
could enhance aid effectiveness, there is still a strong controversy regarding
what constitutes good policies or institutions. Nowadays, an incontestable
majority of studies find some positive impact of aid on economic growth
irrespectively of policy variables39. We lack time to present in
details
38 Still, some studies confirm Burnside and Dollar (1997):
Burnside and Dollar (2004), Collier and Dollar (2001 2002), Collier and Dehn
(2001), Collier and Hoeffler (2002).
39 Some of these optimistic articles have already been mentioned
amongst the reactions to Burnside and Dollar (1997), in the previous
section.
this optimistic literature40. In order to
illustrate this real consensus, we will rather present some extracts that speak
for themselves:
Dalgaard (2005, p1): «Recently, there appears to be an
emerging consensus that aid does increase growth - on average. By the same
token it is also well accepted that aid does not seem to be equally effective
in all countries.»
Dalgaard et al. (2004, p1): «In the last few years, the
pendulum has swung, and a gradually forming consensus view has emerged that aid
`works'... Nevertheless, controversy remains since it also seems clear from the
data that foreign aid is far from equally effective everywhere.»
Morrissey (2005, p5): «At one extreme is the Burnside and
Dollar (1997) view that aid is only effective in a good policy environment. At
the other extreme, is the Hansen and Tarp (2001) view that aid is effective
irrespective of policy... An intermediate position is that better policies will
improve growth performance and therefore may be associated with more effective
aid.»
McGillivray (2005, p1-4): «The overwhelming majority of
recent, widely circulated empirical studies find that economic growth would
have been lower in the absence of aid... Inclusive Burnside and Dollar (1997),
36 studies have been conducted during 1997 to 2004, therefore. Thirty-four of
these studies conclude that aid works»
Beynon (2001, p29): «In summary, while the question of
whether aid is effective irrespective of policy remains disputed, there is at
least agreement that aid works better in good policy environments.»
Hansen and Tarp (2000, p16-17): «When all studies are
considered as a group, the positive evidence is convincing. The micro-macro
paradox is non-existent. Microeconomic studies indicating that aid is
beneficial are consistent with the macroeconomic evidence.»
Quibria (2004, p3 1): «The single most robust conclusion
that has emerged from recent cross-country regression studies is that aid has
in general been effective in developing countries across a wide
variety of policy environments. This result repudiates the idea of conditional
effectiveness, a much-vaunted notion that argues that aid works only in
countries with good polices and as such should be directed only to those
countries.»
These few examples are convincing enough. Although the
dominating tendency in the present literature is bringing aid back into favour,
there is also some kind of agreement around the idea that aid's productivity is
subject to diminishing returns.
In addition, beside this optimistic stream, we should not
neglect a few influent outliers. Among this pessimistic resistance we find
Easterly et al. (2003), Rajan and Subramanian (2005), Jensen and Paldham
(2003), Ovaska (2003), Brumm (2003), etc41. These studies are
beneficial in the sense that they stimulate the debate and the production of
new analysis.
40 Not exhaustive list of recent optimistic aid-growth
studies: Durbarry et al. (1998), Hansen and Tarp (2000, 2001), Lensink and
Morrissey (2000), Lensink and White (2001), Dalgaard and Hansen (2000),
Guillamont and Chauvet (2001), Hudson and Mosley, (2001), Lloyd et al. (2001),
Lu and Ram (2001), Chauvet and Guillamont (2002), Dalgaard et al. (2004), Cungu
and Swinnen (2003), Dayton-Johnson and Hoddinott (2003, Gomanee et al (2003),
Ram (2003, 2004), Economides et al. (2004), Clemens at al. (2004), Heady et al.
(2004), Outtara and Strobl (2004), Roodman, (2004).
41 The «pessimistic» articles published in the
Cato Journal are amongst the most aggressive against foreign aid.
However, we have never seen them cited in any other article. They seem to be a
bit too committed to be really reliable.
Though, they also deteriorate the handsome consensus
abovementioned. On the other hand, they should not attract too much attention
as they clearly represent a small minority of the literature.
Another observation about the optimistic consensus seems to be
important. If the majority of studies agree on the fact that foreign aid
enhances economic growth, there is no harmony at all on the extent of this
improvement. This debate about the degree of unconditional efficiency of aid
remains largely inconclusive. Furthermore, as we have seen earlier, some
authors may observe a better effectiveness of aid in presence of some
conditioning variables. All this together encourages us to qualify the
statement that «aid works».
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