Immediately following World War II, the United States set out on an ambitious plan to help develop the war-torn European nations. In what became known as the Marshall Plan, named after the Secretary of State, George Marshall, the plan aimed to reduce poverty and suffering. During its implementation between 1948 and 1952, Europe saw the fastest economic growth in its modern history. While there is argument as to what degree the Marshall Plan can be credited with this growth, economic historians are agreed that it was significantly beneficial for both Europe and the United States.
Across Europe and the U.S., the next two decades would see some of the greatest economic growth and, more importantly, fairly equal distribution of that growth across all classes. According to IRS income data, between the end of WWII and the early 1970’s, income in the United States grew up and down the income ladder by roughly double. While it would be a stretch to suggest that economic growth and equality in the United States are directly caused by our giving aid to developing countries, it could be safely stated that, in at least one case, helping developing countries did have positive correlation with U.S. economic and social growth.
Today, the fastest growing economies in the world are also places where the United States could potentially benefit or is benefiting from providing purposeful development aid. According to the International Monetary Fund (IMF), some of the fastest growing economies in the world, in terms of GDP, include Ethiopia at 10.2 percent, Cote d’Ivoire at 8.5 percent, and Laos at 7.4 percent. These are significant growth rates when compared to the average growth rate of developed countries, which is around 2 percent, with the United States specifically around 2.6 percent. It only makes sense for the United States to work with nations experiencing such tremendous growth. As stated by MIT economist, David Autor, “economists…have known…since the 1950s… that the integration between trading partners, raises GDP [and] national incomes in both countries”. However, he continues, “…but can have adverse distributional consequences.”
While the economic growth rate of these countries, usually measured in change in GDP, is impressive, often their human rights, poverty, and inequality are not. William Nordhaus, an economist from Yale, has suggested that GDP, while beneficial, often is incomplete in attempting to measure changes in standards of living. By partnering with these countries, it also allows the United States to better influence human rights and social justice in these countries.
Some have hesitation about what can sometimes be termed as “alternative motives” of the U.S. government’s aid. They ask why the U.S government should ever be involved in aid, even non-wasteful development aid. Some even go as far to suggest that while the United States ultimately benefits economically and socially from providing aid, it is often at the expense of other nations. However, the work of Harvard economist, Amartya Sen can bring powerful perspective. In his groundbreaking research on famine and food shortage in developing countries, he suggests “poverty is not the result of diminished food supply. It can more likely be tied to ownership and exchange.” He elaborates that politics has a closer relationship to starvation and famine than geographical or soil data. Thus, without political interventions, such as those made by the U.S. government, NGO’s and other aid organizations, many nations do not have enough of what is needed to really solve some of their toughest challenges.
Admittedly, development aid is often not a perfect solution. However, by continuing to provide development assistance around the world, like the Marshall Plan of the past, the United States can not only be helped on the home front, but can promote prosperity globally. As the former director of USAID, Rajiv Shah, suggested, “By doing good, we do well.”
Joseph Wright is a member of Progress Through Business. He graduated from University of Oxford with his Masters and did his undergraduate degree at Brigham Young University.