In this concluding chapter, we discuss the role of foreign aid in development. The central question is whether aid works. To what extent and under which conditions does aid make a positive contribution to socio-economic development?

The decision to discuss foreign aid at the end of this book is a deliberate one. After all, socio-economic development is determined by a complex of factors, including proximate sources of growth, historical experiences, natural circumstances, demographic factors, power structures and processes of state formation, institutions, attitudes and aptitudes, international economic relations and economic policies. Foreign aid is just one of many factors. At best, its contribution can be only modest. The original theories of economic aid formulated in the 1950s and the 1960s by authors such as Chenery and Strout, Rostow and Rosenstein-Rodan, recognise this explicitly. They state that under certain conditions foreign aid may contribute to an acceleration of growth and development, but it cannot transform processes of stagnation into dynamic processes of development. In the debates between the supporters and opponents of foreign aid this tends to be forgotten.

Until the 1990s, the desirability of development aid was not questioned in the political debate. In the 1980s, all donors together granted approximately 60 billion dollars per year in official development assistance. Despite the substantial resources involved, the budgets for foreign aid were exempted from expenditure cuts in most countries until the late 1980s.