Nobel-winning economist Deaton's controversial aid ideas

GMT 18:51 2015 Monday ,12 October

Arab Today, arab today Nobel-winning economist Deaton's controversial aid ideas

US-British microeconomist Angus Deaton
Stockholm - AFP

New Nobel economics laureate Angus Deaton is an optimist about economic progress but his theory that poor countries' development could be accelerated by cutting international aid has triggered controversy.

In his 2013 book "The Great Escape: Health, Wealth and the Origins of Inequality", Deaton, a professor at Princeton University in the US, charts how human welfare has risen enormously over time.

But he also says Western countries are wasting money trying to put poor countries on the same path of development they followed themselves.

He writes extensively about improvements in living conditions and wellbeing since the 18th century, and says it is necessary to separate these from the accumulation of wealth and the increase in the level of economic activity -- which is the ultimate aim of aid.

This approach led Deaton to become part of the "Stiglitz commission" set up by the then-French president Nicolas Sarkozy in 2008 to find alternative measures of economic progress to GDP.

"You cannot talk about consumption and poverty in a serious way without mentioning him," Philippe Aghion, economist and professor at the College of France, told AFP, adding that Deaton's Nobel is "absolutely deserved".
But Deaton's ideas on aid remain highly controversial. He argues that health, in particular the fight against malnutrition, should take precedence above all else.

Improving the health of people in developing countries could be done more cheaply by financing research into diseases or distributing vaccines and food rations directly to the population, he argues.

"If assistance is geared towards encouraging economic growth, but increasing income still does not lead to noticeably increased calorie intake, there is an argument for reorienting assistance towards direct food aid," the Royal Swedish Academy of Sciences said in its citation.

- 'Big progress' in west Africa -

One major critic of Deaton's theory is Bill Gates, the billionaire Microsoft founder and philanthropist. He has said he admires Deaton but finds his aid argument "very weak" and "strange".
"Deaton and other aid critics look at, say, aid that was designed to prop up some American industry, see that it didn't raise GDP in poor countries, and conclude that aid must be a failure," Gates said on his blog.

Charles Kenny, an expert at the Center for Global Development, a Washington thinktank, makes the same criticism.

"There is evidence that even in poorly governed assistance-dependent countries, aid can sometimes help build basic health systems," Kenny wrote in a review of "The Great Escape".

Duncan Green, a senior advisor at anti-poverty campaign group Oxfam, said Deaton "throws the baby out with the bathwater". The idea that aid promotes corruption more than democracy "might be true in some instances, but by no means justifies, as Deaton suggests, the elimination of all aid forms," Green said.

Deaton has given the example of west Africa to defend his theory, pointing out that over the long term, the region saw major health improvements despite little economic growth.

"People say to me sometimes when I've talked about the book, if I would give you $5 billion to help poor people in the world, would you just burn it? And I say, no, I wouldn't," Deaton said.

"If I am Washington... I'd start a whole new national institute of health within the system which would look at diseases like tuberculosis, malaria and so on."


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