Development Without Destination – Harvard Political Review
Despite the large amount of aid apparently invested in the Global South, intergenerational mobility (IGM) has largely stalled in low-income countries. According to a World Bank report assessing the global distribution of economic mobility outcomes, developing economies account for 46 of the 50 worst performing economies in terms of upward mobility measures. This is a striking and counter-intuitive reality: although billions of dollars have been spent trying to improve the national welfare of “developing countries”, many individuals in these countries do not earn a percentile of income superior to that of their parents. In short, economic well-being does not progress from one generation to the next: many individuals remain increasingly constrained by the socio-economic circumstances of their birth.
Negative intergenerational effects are particularly acute in least developed countries (LDCs). These countries, characterized as the most vulnerable to environmental and economic shocks, are disproportionately located in Africa and Southeast Asia and represent 38% of the “extremely poor” world population. Even with the overall increase in GDP due to the advent of globalization and foreign aid, almost half of the national population of LDCs remains constantly in extreme poverty.
It is not a random phenomenon. On the contrary, the personal geopolitical interests of aid donors have created financing gaps that have crippled upward mobility in the world’s poorest countries. This has enabled a recursive loop in which vulnerable countries are unable to improve over generations due to insufficient funding, leaving them to continually need aid. The global distribution of foreign aid explains this trend: although the overall amount of aid has continued to increase, the proportion of this aid reaching the least developed countries has decreased in parallel.
In 2019 alone, before the COVID-19 pandemic, total foreign assistance hit a record high of $152.8 billion. The United States, Germany and the United Kingdom were the main recipients of this development assistance, together contributing more than half of the total global share. Although funding priorities vary each year and depend on local contexts, they have always focused on improving water supply and sanitation conditions, strengthening health infrastructure and implementing education programs to build a strong national workforce. International development is a broad field with a myriad of goals, but its primary goal is ideally to create lasting improvements in individual well-being around the world, thereby enhancing human freedoms.
However, foreign aid mechanisms are not exclusively needs-driven: they necessarily reflect the interests of their patron countries. The share of funding to LDCs has declined in favor of increased assistance to middle-income countries, especially those with special donor country interests. For example, countries like the UK, Austria and Canada have consistently given more aid to developing countries. countries from which they import the most. Similarly, proximity and migrant networks are also correlated with increased help received. For example, since the second Bush administration, the United States has emphasized disproportionate aid to Central American countries, citing American security and welfare interests. Ultimately, these contributing factors mean that development assistance is not as inclusive of poor countries without existing donor relationships as it should be. In a cycle of self-propagation, this then prevents many LDCs from receiving the required amount of aid, freezing the results of the intergenerational mobility of their citizens.
Smart funding decisions often have the power to transform the outcomes of intergenerational mobility in developing countries, especially LDCs. The overall lack of improvement in this dimension for many developing economies can therefore be attributed to the fact that finance is actually being provided to countries that need it.
When invested thoughtfully, social policy funding has enormous potential to boost upward mobility outcomes. In the United States, Opportunity Insights research has illustrated the huge geographic disparities in social mobility across the country. For example, a child growing up in the bottom fifth of the income distribution in Charlotte, North Carolina, has a 4.4% chance of earning in the top fifth of the income bracket, compared to 12% for a child in San Jose, California. . In response to such disparities in economic opportunity, researchers used federal tax data to study the impact of housing vouchers, which would allow families with young children to move to less poor neighborhoods. The results were tremendous, showing that children under 13 who moved to a low-poverty area earned around 31% more than those who did not. It follows that continued and targeted financial support from a housing voucher scheme would significantly equalize the results of upward mobility.
This logic according to which directed funding improves intergenerational mobility is also valid in the countries of the South. Empirical studies show that countries receiving a higher percentage of foreign aid relative to their total GDP have higher measures of upward intergenerational mobility, compared to countries receiving less foreign aid. In particular, investment in educational programs has been most effective in increasing upward mobility. For example, when projects across Africa have increased the number of teachers per student in secondary schools, upward mobility projections have increased. In regions where the student-teacher ratio did not improve, downward intergenerational mobility was much more likely.
For foreign aid to equitably improve the outcomes of upward mobility around the world, as it has demonstrated its potential, we must stop thinking of foreign aid as an act of benevolent charity. Global wealth is concentrated in the Global North due to historically extractive economic systems, such as colonialism and imperialism. Therefore, foreign aid should aim to be distributed universally, where it is really needed, in order to repair persistent inequalities – and not where the donor country personally finds it most useful to invest. Only then will we see sustained upward mobility in developing countries, realizing our hopes for global progress.