By Adrian Wood

Ministers from developed and developing countries are gathered this week in Accra, Ghana’s capital, for the latest high-level forum on aid effectiveness. Learning from past successes and failures, reformers are pressing for more ownership by developing countries of aid relationships, more predictability of aid flows and less fragment­ation of aid delivery. This agenda is important. If implemented, these reforms would give the taxpayers of rich countries better value for money and increase the benefits of aid to people in poor ones. Aid cannot on its own cause development, but if properly delivered and well used it can be enormously beneficial.

However, one can have too much of a good thing. Some developing countries, most of them in Africa, have had high levels of aid dependence – in excess of 10 per cent of gross domestic product, or half of government spending – for decades. It is questionable whether this has been helpful.

There are various reasons to be concerned about high aid dependence, but the most worrying is the undermining of good governance by distortion of political accountability. Governments that are highly dependent on aid pay too much attention to donors and too little to their citizens. This might not matter if the interests of citizens and donors were identical. But all donors have some non-developmental motives and, even when they seek to promote development, they have their own priorities. The result is confused and shifting policies, volatile aid and spending and, as a result, slower growth.

I therefore propose that donors collectively set an upper limit on the amount of aid they give to any developing country. This limit should be 50 per cent of the amount of tax revenue that the aid-receiving government raises from its own citizens, by non-coercive means and excluding revenue from oil and minerals.

This column continues here. Read comments from forum members below.

by Pranab Bardhan

As the petro-authoritarianism of Russia flexes its muscles and the economic prowess of China struts in Olympic glory, developing countries in the world might start rethinking about the lectures on democracy and development they have heard all these years from the West. This is at a time when advanced capitalist democracies are reeling under the shock of unregulated financial overreach and years of living beyond their means, a far cry from the end-of-history triumphalism of capitalist democracy of less than two decades back.

The Chinese case in particular is reviving a hoary myth of how particularly in the initial stages of economic development authoritarianism delivers much more than democracy. This is also backed by the memory of impressive economic performance of other East Asian authoritarian regimes (like those in South Korea and Taiwan in the recent past). The lingering hope of democrats had been that as the middle classes prosper in these regimes, they then demand, and in the latter two cases got, the movement toward political democracy.

But the relationship between authoritarianism or democracy and development is not so simple. Authoritarianism is neither necessary nor sufficient for economic development. That it is not necessary is illustrated not only by today’s industrial democracies, but by scattered cases of recent development success: Costa Rica, Botswana, and now India. That it is not sufficient is amply evident from disastrous authoritarian regimes in Africa and elsewhere.

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Today, almost two-thirds of humanity lives in high-income or high-growth countries. That proportion is up from less than a fifth 30 years ago. Unfortunately, the remaining 2bn live in countries with stagnant, or even declining, incomes. What makes this even more important is the worrying fact that some two-thirds of the 3bn increase in global population expected by 2050 will live in countries today enjoying little or no growth.

The overriding challenge is to shift more poor countries into the high-growth category. This is addressed by the recently published Growth Report, product of a commission consisting mainly of policymakers from developing countries, under the chairmanship of Michael Spence, a Nobel-laureate economist at Stanford University.

So what does the report contribute? Nothing useful, argued William Easterly of New York University (this forum, May 28). He suggested, instead, that its pragmatism represented “the final collapse of the ‘development expert’ paradigm that has governed the west’s approach to poor countries since the second world war”.

Thereupon, Professor Easterly promptly offered his own expert opinion, namely, that “more economic and political freedoms are associated with much less poverty”. This is true. But it is harsh, to put it mildly, for Prof Easterly to condemn the report when he offers what appears to be even emptier advice.

The remainder of this column can be read here. Debate from our expert panel appears below.

Read the debate - contributors so far include William Easterly, Michael Spence, Martin Wolf and Clive Crook.

By William Easterly

The report of the World Bank Growth Commission, led by Nobel laureate Michael Spence, was published last week. After two years of work by the commission of 21 world leaders and experts, an 11- member working group, 300 academic experts, 12 workshops, 13 consultations, and a budget of $4m, the experts’ answer to the question of how to attain high growth was roughly: we do not know, but trust experts to figure it out.

This conclusion is fleshed out with statements such as: “It is hard to know how the economy will respond to a policy, and the right answer in the present moment may not apply in the future.” Growth should be directed by markets, except when it should be directed by governments.

My students at New York University would have been happy to supply statements like these to the World Bank for a lot less than $4m.

Why should we care about the debacle of a World Bank report? Because this report represents the final collapse of the “development expert” paradigm that has governed the west’s approach to poor countries since the second world war. All this time, we have hoped a small group of elite thinkers can figure out how to raise the growth rate of a whole economy. If there was something for “development experts” to say about attaining high growth, this talented group would have said it.

What went wrong? Experts help as long as there are useful general principles, such as could be established by comparing low-growth and high-growth countries. The Growth Commission correctly pointed out that such an attempt to find secrets to growth has failed. The Growth Commission concluded that “answers” had to be country specific and even period specific. But if each moment in each country is unique, then experts cannot learn from any other experience – so on what basis do they become an “expert”?

The remainder of this column can be read here. Debate from our panel of economists appears below

Read the debate - contributors so far include Paul Seabright, Roberto Zagha and William Easterly.