Foreign Aid, the Rule of Law, and Economic Development in Africa

Abstract

Foreign aid has failed to bring about any significant development results in the poor countries of Africa in over sixty years of existence. The failure of aid is due to the fact that development planning faces an insurmountable calculation problem. Attempting to salvage aid by making it more selective does not address this problem, and will not make aid effective. Aid by its very nature causes waste, corruption, politicization, privilege seeking, and statism, all of which are detrimental to economic development. Instead of relying on aid, African economies should occupy themselves with creating legal institutions that are commensurate with the protection of private property and the Rule of Law, which are foremost among the institutions necessary for sustainable, long run economic growth.

Keywords: Rule of Law, development, Africa, economic calculation

JEL Classification: O55, P41