Rationalizing Foreign Aid

Abstract

Professor Keyfitz has outlined the several conditions which would provide foreign aid with the means to achieve its long-run objectives; namely, the most rapid increase in living standards for more of the world's peoples in the shortest time.* Since, regardless of methods or policies, this will consume a considerable span of years, the shortest time for the whole planet to be developed is perhaps, as Keyfitz states, by the end of the century (p. 250). If his programme is not effected, not only will planet-wide development be slower, but some countries, those which do not reach the take-off point, might never participate at all in a lifting of per capita living standards. The economic base on which Keyfitz builds his nexus of policies is theoretically sound, given the assumptions. It is, in fact, a network of policies much akin to theories of unbalanced growth, or development. The object is to concentrate on those economies nearest to the take-off, fill their resource and institutional gaps, and push them over into self-acceleration. Keyfitz is doing with nations what the economist does with sectors or regions within any one economy. There are also certain analogies between Keyfitz's criticisms of foreign aid, as presently designed, and criticisms of customs unions between underdeveloped countries. Attempts to share returns under such redistribution schemes, which perhaps satisfy certain welfare objectives, might actually detract from the concentration of capital needed to spearhead rapid growth and to engender higher productivity industries. But, like many another logically consistent theoretical framework, the assumptions as to the nature of the real economic and political worlds on which Keyfitz's system rests are, I think, worth re-examining. One of the important ingredients in the structure is the presence of nations near to the point of take-off. Assume for the moment that we have quantitative and qualitative measurement techniques for appraising all the world's economies with consistent measuring rods, and putting them on the continuum Keyfitz describes (this is an enormous assumption, as Keyfitz realizes). The economies least able to absorb capital are on the extreme left, and those able to use indefinite quantities are on the right. There is a point somewhere on