The Berlin Wall of Aid
When Will It Fall?

On November 9, Germany and the world will celebrate the 20th anniversary of the fall of the Berlin Wall. The fall marked the end of Eastern Europe's failed system of state-run economic development. But systems of top-down economic development continue in most of the poor countries of the world, where aid donors continue to fund government development projects despite their decades of failure. Why is this so? Why has the "Berlin Wall of Aid" not fallen despite its record of failure?

The answer is simple: the Soviet Union controlled the system throughout Eastern Europe. Once Mikhail Gorbachev decided to stop supporting the system by force, it crumbled. In poor countries today, the system is fragmented among dozens of unconnected national governments and dozens of unconnected aid donors. There is no Gorbachev to pull the plug. So the failing aid system continues, and unfortunately, there is no obvious remedy on the horizon.

The failure is not hard to diagnose. Prosperous countries developed their wealth through the growth of a domestic business sector. India and China are only the most recent examples. A thriving local business sector is the only path to prosperity and business the world has ever known.

Click here to read the full article in the Wall Street Journal.

R. Glenn Hubbard is a visiting scholar at AEI.

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About the Author

 

R. Glenn
Hubbard
  • Glenn Hubbard, a former chairman of the President's Council of Economic Advisers, is currently the dean of Columbia Business School. He specializes in public and corporate finance and financial markets and institutions. He has written more than ninety articles and books, including two textbooks, on corporate finance, investment decisions, banking, energy economics, and public policy. He has served as a deputy assistant secretary at the U.S. Treasury Department and as a consultant to, among others, the Federal Reserve Board and the Federal Reserve Bank of New York.
  • Assistant Info

    Name: Brittany Pineros
    Email: brittany.pineros@aei.org

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