There is controversy at the World Bank over a paper published by a research team there. When aid to certain countries rises so too do the Swiss bank accounts of those who rule there. “Swiss” here just standing in for private and secret and not in the country being ruled. The controversy being that all know this to be true but such things are not to be said. Rather like commenting upon the gastrointestinal interestingness of the elderly aunt at the tea table - obvious but not mentioned.
To us quite the most interesting part is this:
For countries receiving more than 2 per cent of GDP in aid “the implied average leakage rate is approximately 7.5 per cent”, the report, by three economists, states. “On the other hand, raising the threshold to 3 per cent of GDP (sample of seven countries), we find a higher leakage rate of around 15 per cent. This is consistent with existing findings that the countries attracting the most aid are not only among the least developed but also among the worst governed and that very high levels of aid might foster corruption.”
Poor places are badly governed. We would go further and insist that there’s no excuse left either. Places are poor because they are and have been badly governed. For what the past few decades have shown is that a modicum of capitalism and markets - Adam Smith’s peace, easy taxes and the tolerable administration of justice being much the same thing - can make anyplace rich. Places that were colonies have done it, places that were not. Places with natural resource endowments, places without. Places of every religion and none. There is simply nothing left to blame but that bad governance - something we could and would define as not allowing that modicum of capitalism and free markets.
Another way around to put much the same point. Assume that those who would plan an economy are correct - they’re not, but assume. That does require that those governing are competent and at least vaguely honest. If that government doing said planning and economic direction is a nest of thieves then it’s all most unlikely to work. In fact, the place would do better with the thieves having nothing whatever to do with the economy. That is, if poverty is caused by bad government then riches will be achieved with less of it.