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The Aid Trap: Hard Truths About Ending Poverty

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Over the past twenty years more citizens in China and India have raised themselves out of poverty than anywhere else at any time in history. They accomplished this through the local business sector& mdash;the leading source of prosperity for all rich countries. In most of Africa and other poor regions the business sector is weak, but foreign aid continues to fund governmen Over the past twenty years more citizens in China and India have raised themselves out of poverty than anywhere else at any time in history. They accomplished this through the local business sector& mdash;the leading source of prosperity for all rich countries. In most of Africa and other poor regions the business sector is weak, but foreign aid continues to fund government and NGOs. Switching aid to the local business sector in order to cultivate a middle class is the oldest, surest, and only way to eliminate poverty in poor countries.A bold fusion of ethics and smart business, The Aid Trap shows how the same energy, goodwill, and money that we devote to charity can help local business thrive. R. Glenn Hubbard and William Duggan, two leading scholars in business and finance, demonstrate that by diverting a major share of charitable aid into the local business sector of poor countries, citizens can take the lead in the growth of their own economies. Although the aid system supports noble goals, a local well-digging company cannot compete with a foreign charity that digs wells for free. By investing in that local company a sustainable system of development can take root.


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Over the past twenty years more citizens in China and India have raised themselves out of poverty than anywhere else at any time in history. They accomplished this through the local business sector& mdash;the leading source of prosperity for all rich countries. In most of Africa and other poor regions the business sector is weak, but foreign aid continues to fund governmen Over the past twenty years more citizens in China and India have raised themselves out of poverty than anywhere else at any time in history. They accomplished this through the local business sector& mdash;the leading source of prosperity for all rich countries. In most of Africa and other poor regions the business sector is weak, but foreign aid continues to fund government and NGOs. Switching aid to the local business sector in order to cultivate a middle class is the oldest, surest, and only way to eliminate poverty in poor countries.A bold fusion of ethics and smart business, The Aid Trap shows how the same energy, goodwill, and money that we devote to charity can help local business thrive. R. Glenn Hubbard and William Duggan, two leading scholars in business and finance, demonstrate that by diverting a major share of charitable aid into the local business sector of poor countries, citizens can take the lead in the growth of their own economies. Although the aid system supports noble goals, a local well-digging company cannot compete with a foreign charity that digs wells for free. By investing in that local company a sustainable system of development can take root.

30 review for The Aid Trap: Hard Truths About Ending Poverty

  1. 5 out of 5

    Laila

    I really enjoyed reading this book and learned a lot from it about world aid organizations and the world business system. I've trouble to understand the theory and application of Mashall Plan that obviously has to be redesigned to suit the present need in poor countries post-WWII. It's a long-term business project in which success is a gradual progress, so what happens when what seems running according to plan and suddenly without warning, a civil war broke out? That's one way to look at it. How I really enjoyed reading this book and learned a lot from it about world aid organizations and the world business system. I've trouble to understand the theory and application of Mashall Plan that obviously has to be redesigned to suit the present need in poor countries post-WWII. It's a long-term business project in which success is a gradual progress, so what happens when what seems running according to plan and suddenly without warning, a civil war broke out? That's one way to look at it. How about fending the projects from competing forces, must be a tedious and protracted endeavor indeed. Also not much been said about educating the masses which in my mind should run parallel with the project, you can't just assumed that educated, skilled labor-force are readily and locally available to support the projects; after all this is not a micro-business project but a project designed specifically for small, medium and large scale business projects. So what happens when you have all the resources in place but lack of locally skilled labor-force to carry out the project?You'll end up outsourcing and we're back to square one. Even so, I strongly believe this new way of ending poverty should be given a chance. When you do the same old thing over and over you'll get the same result, why not trying a new way of doing thing, eh?

  2. 4 out of 5

    Paul,

    This is a really good book on poverty and development by the Chicago School of Business. The idea is simple: the Marshall plan worked because it put money directly into the business sector instead of into the government. These loans to the business sector were then repaid to the national government, who was then supposed to invest in infrastructure. The way that the World Bank and co. work today is that they propose a project to a government, calculate how much extra revenue the government will This is a really good book on poverty and development by the Chicago School of Business. The idea is simple: the Marshall plan worked because it put money directly into the business sector instead of into the government. These loans to the business sector were then repaid to the national government, who was then supposed to invest in infrastructure. The way that the World Bank and co. work today is that they propose a project to a government, calculate how much extra revenue the government will earn as a result of the increase in GDP generated by the project, and then allow the government to repay the loan based on that extra income. Guess what? You shouldn't count your chickens before they hatch, as has been so often proved by the failure of nations to pay back their loans. Not to mention the fact that these loans also keep corrupt, anti-business governments in power. According to the authors, business has always been the driver of prosperity. The more pro-business a country becomes, the wealthier it grows. There is a direct correlation between the World Bank "Doing Business" scale (which measure how easy it is to do business in a country) and that countries GDP and poverty rate. Unfortunately, the West has fallen into the "Aid Trap" which is the idea that giving money always helps. And yes, Hubbard would say that aid is a key part of relief (making sure people don't starve and have life-saving drugs). However, aid in other areas, particularly aid earmarked for economic development, typically crowds out the business sector and therefore drives prosperity farther away. For example, if a Nigerian woman has a water selling business and then an aid agency comes to her town and starts handing out free water ... she's out of a job. You can't compete with free. So, basically, Hubbard is calling for a reduction of aid to relief and to businesses. That aid should be contingent upon measurable advancement in the World Bank "Doing Business" scale. Hubbard projects that, given direct investment into business, we can end world poverty in 40 years. This was a good book. Hubbard is familiar with the other major players, and he does a good job speaking to the issues, even Hernando De Soto.

  3. 4 out of 5

    Jim

    It covers a lot of ground that William Easterly has already covered. Worse, the book chooses Greece as an example of how the Marshall Plan succeeded in stimulating business development, creating a vibrant economy from the rubble of World War II. Trouble is, the book was written before the economic collapse of 2008. The collapse revealed just how weak Greece's economy really is -- after two massive infusions of cash, its frailty threatens to bring down the entire European Union. Furthermore, the b It covers a lot of ground that William Easterly has already covered. Worse, the book chooses Greece as an example of how the Marshall Plan succeeded in stimulating business development, creating a vibrant economy from the rubble of World War II. Trouble is, the book was written before the economic collapse of 2008. The collapse revealed just how weak Greece's economy really is -- after two massive infusions of cash, its frailty threatens to bring down the entire European Union. Furthermore, the book proposes a new "ECA" (Economic Cooperation Agency), which sounds suspiciously like the new Millennium Challenge Corporation. One can't help but feel that the authors started writing the book before MCC's success came to light, stealing a bit of the book's thunder.

  4. 4 out of 5

    Michael McCormick

    A great book about a great idea for lifting Africa out of poverty: A Marshall Plan for Africa. The authors make a great argument for the power of business for creating wealth, and they furthermore make a convincing case for the elimination of the "Aid Trap", when free development aid stifles sustainable business development. To quote the book, "Business is the worst path to prosperity, except for all the others." A great book about a great idea for lifting Africa out of poverty: A Marshall Plan for Africa. The authors make a great argument for the power of business for creating wealth, and they furthermore make a convincing case for the elimination of the "Aid Trap", when free development aid stifles sustainable business development. To quote the book, "Business is the worst path to prosperity, except for all the others."

  5. 5 out of 5

    Carmen

    This was a thought-provoking read. It opened up a different facet of the aid world to me -- the economic impact and that we shouldn't count out a business sector as a viable option to lift 3rd world countries out of poverty. I don't know about a real world implementation; it would take a re-wiring of our views and feelings towards business and our giving to help 'end poverty.' I did skim the last bits, as they seemed just reiterations of what had already been said, but the first go-around was we This was a thought-provoking read. It opened up a different facet of the aid world to me -- the economic impact and that we shouldn't count out a business sector as a viable option to lift 3rd world countries out of poverty. I don't know about a real world implementation; it would take a re-wiring of our views and feelings towards business and our giving to help 'end poverty.' I did skim the last bits, as they seemed just reiterations of what had already been said, but the first go-around was well worth the read.

  6. 4 out of 5

    E

    Treatise on a new Marshall Plan for third-world nations Prosperous nations today spend more than $100 billion annually on aid to developing countries. Still, according to the World Bank “1.4 billion people live on less than $1.25 per day.” Columbia University Business School academics R. Glenn Hubbard and William Duggan warn against funneling more money to corrupt governments and tinpot dictators for development projects that never materialize. Instead, they propose “a new Marshall Plan for the w Treatise on a new Marshall Plan for third-world nations Prosperous nations today spend more than $100 billion annually on aid to developing countries. Still, according to the World Bank “1.4 billion people live on less than $1.25 per day.” Columbia University Business School academics R. Glenn Hubbard and William Duggan warn against funneling more money to corrupt governments and tinpot dictators for development projects that never materialize. Instead, they propose “a new Marshall Plan for the world’s poorest nations.” Like the original Marshall Plan that helped European countries rebuild their economies after World War II, the new program would focus on loans to help local businesses get off the ground. The authors thoroughly discuss where alternative plans have failed and are not shy about presenting the foreseeable obstacles and obvious downsides of their own plan. They explain in detail how to launch it, what institutions would be in charge and how they’d have to function. The authors even particularize the financing scheme by providing a detailed budget in the appendix. getAbstract recommends this vital, thoughtful, interesting proposal on how rich nations can help poor nations lift their people out of poverty. To learn more about this title, check out the following Web page: http://www.getabstract.com/summary/12...

  7. 5 out of 5

    asih simanis

    Firstly I need to say here that I didn't give a one star to this book because I didn't agree with the main message of pro-business development it carries, rather the reason I rated it so poorly was because the argument he gave was to me weak and ignorant. I think Heilbronner is a much better convincer on why capitalism can bring prosperity. As always, with anyone who is against Jeffrey Sachs idea of development, I always wonder if they even read his books. Putting aside all my dislike (which is Firstly I need to say here that I didn't give a one star to this book because I didn't agree with the main message of pro-business development it carries, rather the reason I rated it so poorly was because the argument he gave was to me weak and ignorant. I think Heilbronner is a much better convincer on why capitalism can bring prosperity. As always, with anyone who is against Jeffrey Sachs idea of development, I always wonder if they even read his books. Putting aside all my dislike (which is basically the first 2-3 chapters or probably more than 50% of the book), they had some helpful conclusion on how to reform the business sector in poor countries. I just wished they didn't spend half of the book trying to rationalize the wealth of the western world through an argument of merit. I probably would've liked them better. In any case, they should feel lucky that I've been sold this pro business idea by more capable economists, because if they were to convert me based on this book, i would be absolutely appalled.

  8. 5 out of 5

    Alexander

    Essential reading for all who give money or assistance to charities and NGOs operating in Africa and other distressed areas. Are you really helping or are you putting local entrepreneurs out of business. Who can grow and sell food if people are getting it free from a foreign NGO? The book is a high-speed trip through the economic history of mankind followed by an overview of a proposed "Marshall Plan" for Africa. While convincing about the benefits of business development and capitalism, rather Essential reading for all who give money or assistance to charities and NGOs operating in Africa and other distressed areas. Are you really helping or are you putting local entrepreneurs out of business. Who can grow and sell food if people are getting it free from a foreign NGO? The book is a high-speed trip through the economic history of mankind followed by an overview of a proposed "Marshall Plan" for Africa. While convincing about the benefits of business development and capitalism, rather skates over its "unacceptable face" -- exploitation of workers, environmental destruction, concentration of wealth in a small number of hands, etc. But, as the authors say, it is a terrible system but the best we have got, and has done more for human well being than any other system.

  9. 5 out of 5

    MikeFromQueens

    Compelling. I especially liked the historical beginnings. A little too much on the "how to" details, but the argument is sound. It was a quick read and though-provoking. I will look at charitable aid in a completely different light going forward. Compelling. I especially liked the historical beginnings. A little too much on the "how to" details, but the argument is sound. It was a quick read and though-provoking. I will look at charitable aid in a completely different light going forward.

  10. 5 out of 5

    Michael

    Short version: the Marshall Plan works, requires buy in from all stakeholders, and should be country-customizable based on the world bank's doing business top ten list. Also, stop building wells without an ongoing maintenance plan. Short version: the Marshall Plan works, requires buy in from all stakeholders, and should be country-customizable based on the world bank's doing business top ten list. Also, stop building wells without an ongoing maintenance plan.

  11. 4 out of 5

    Aly Jones

    Meh. If you like economical readings...go for it.

  12. 5 out of 5

    Michael

    Does a good job explaining the business side of poverty reduction but does too little to account for the government, law and order, and basic human well being that must go hand-in-hand with it.

  13. 4 out of 5

    Lance Cahill

    Really a 2.5 star book but rounded up for the latter half. Reads, to some extent, like a typical B School book which I am not find of. Pretty basic and general.

  14. 4 out of 5

    David Miller

    Heard an interview with the author on NPR's Fresh AIR. How invtsting in local businesses can save Africa. Heard an interview with the author on NPR's Fresh AIR. How invtsting in local businesses can save Africa.

  15. 5 out of 5

    ah li

    makes sense and is very logical but would require great dedication and cooperation from all parties for execution.

  16. 4 out of 5

    Straton

    Glen Hubbard does an amazing work dissecting the aid paths and how it can easily turn into a vicious cycle.

  17. 4 out of 5

    Stig Aune

  18. 5 out of 5

    Sean

  19. 4 out of 5

    Benjamin Anderson

  20. 5 out of 5

    Jackie

  21. 4 out of 5

    Jeremiah

  22. 4 out of 5

    Janete

  23. 5 out of 5

    Cale Brodersen

  24. 4 out of 5

    Minnie Lanting

  25. 4 out of 5

    Liz

  26. 4 out of 5

    Bobbi

  27. 5 out of 5

    Daniel

  28. 4 out of 5

    Ian

  29. 5 out of 5

    Jill

  30. 5 out of 5

    Pamela Ann

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