Putting aid in its place: Insights from early structuralists on aid and balance of payments and lessons for contemporary aid debates

Abstract

AbstractRecent debates on aid and development are waged on narrow terms in comparison to earlier debates in the 1950s and 1960s. The principal concern of the ‘structuralist’ pioneers of development economics, and the key absence in the current debates, was an understanding of the structural impediments faced by countries going through late industrialisation and rapid urban growth. These result in chronic trade deficits, shortages of foreign exchange and persistent balance of payments disequilibria. The positive potential of aid was understood to lie in its ability to mediate these imbalances in the context of national industrialisation strategies. By the same logic, this potential is lost if countries run trade surpluses. Current debates on aid mostly overlook this dual logic, despite the fact that both positive and negative experiences of post‐war development largely vindicate these structuralist insights, particularly in light of current global financial imbalances. Copyright © 2009 John Wiley & Sons, Ltd.