How to help developing countries: Less aid, more open borders

A lot have been said and written about Angus Deaton who today has been awarded the Nobel Prize in Economics and I don’t have much to add to that other than just saying that I came across a great quote from his latest book “The Great Escape: Health, Wealth, and the Origins of Inequality” that perfectly well sums up my view on economic development and what policies developed nations should pursue to help the populations in developing nations:

“The effects of migration on poverty reduction dwarf those of free trade. Migrants who succeed in moving from poor countries to rich countries become better off than they were at home, and their remittances help their families to do better at home. Remittances have very different effects than aid, and they can empower recipients to demand more from their government, improving governance rather than undermining it.”

These are issues I have been thinking and talking about a lot lately – unfortunately for most of my readers here – in Danish.

Hence, in this “Video blog” I argue the case for Open Borders quoting works by among other Michael Clemens and in this oped from the Danish business daily Børsen I argue that Danish government sponsored foreign aid should be cut in half and give mostly in the form of unconditional cash transfers to the people who are extremely poor.

For half of the Danish government’s foreign aid budget you could give nearly 3 million people 1.25 US dollars a day and thereby ensure that they would get an income above the World Bank’s definition of “extremely poor”.

This is what Angus Deaton has to say about direct cash transfers:

What about bypassing governments and giving aid directly to the poor? Certainly, the immediate effects are likely to be better, especially in countries where little government-to-government aid actually reaches the poor. And it would take an astonishingly small sum of money – about 15 US cents a day from each adult in the rich world – to bring everyone up to at least the destitution line of a dollar a day.

I hope that with Deaton’s well-deserved Nobel Prize some of his ideas will gain more influence on global policy debate over development, immigration and foreign aid.

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  1. Wirtschaftsnobelpreisträger Angus Deaton: Einwanderung statt Entwicklungshilfe! | evaziessler

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