The Millennium Development Goals (MDGs) are noble goals for a world sorely in need of urgent action to solve pressing social problems. They rest, however, upon completely new principles whose long-term effects are neither well thought through nor well understood. In this chapter, I shall attempt to explain why the MDGs do not represent good social policy in the long run.

One novelty of the MDG approach lies in the emphasis on foreign financing of domestic social and redistribution policies rather than on domestic financing by the developing countries themselves. Disaster relief, which used to be of a temporary nature, now finds a more permanent form in the MDGs. In countries where more than 50 per cent of the government budget is financed by foreign aid, huge additional resource transfers are being planned. This raises the question of the extent to which this approach will put a large number of nations permanently ‘on the dole’, a system similar to ‘welfare colonialism’, which will be discussed at the end of the chapter.

The pursuit of the MDGs may appear as if the United Nations institutions have abandoned the effort to treat the causes of poverty and have instead concentrated on attacking its symptoms. In this chapter, I shall argue that palliative economics has, to a considerable extent, taken the place of development economics. Indeed, the balance between development economics (radically changing the productive structures of poor countries) and palliative economics (easing the pains of economic misery) is key to avoiding long-term negative effects.

How we used to deal with problems of development

In less than one generation, a stark contrast has emerged between the type of economic understanding underlying the Marshall Plan, on the one hand, and the type of economic theory behind today's multilateral development discourse and the Washington institutions, on the other. The Marshall Plan grew out of recognition of the flaws of its precursor, the Morgenthau Plan.