The Loans That Were, the Growth That Wasn't

A Halfway-through Review...

William Easterly's The Elusive Quest for Growth reads as much like sociology as it does economics. It explains and deconstructs the modern history of thought on why some poor countries develop and others do not including theories related to: low investment, low investment in education, high fertility, and contingent lending. More than that, it tells why outside efforts usually fail to make a difference--as a (now former) economist at the World Bank, Easterly is in a great position to provide insight.

Sometimes the detail makes it read a bit slow but that's okay as long as you don't mind skipping bits because the detail is brilliant and captivating in some parts.

You should read chapter 6. I cannot recommend it highly enough. The Marshall Plan approach characterized by attaching loans to policy reform requirements is often seen as the best way to help countries develop. Theoretically, it gives countries aid through loans and makes them adopt policies that will help them grow. In chapter 6, Easterly explains why this theoretically sound approach has often been a failure. One reason:

Most donor institutions are set up with a separate country department for each country or group of countries. The budget of this department is determined by the amount of resources it disburses to recipients. A department that does not disburse its loan budget will likely receive a smaller buget the following year...so the people in the country departments feel the incentive to disburse even when loan conditions are not met.