The Trade-And-Aid Myth

G8 nations talk as if the pairing of free trade and aid is the
key to economic salvation for every country struggling with the
realities of poverty. But providing aid, relieving debt, and
increasing developing countries’ access to privileged markets are
not the answers to lessening economic hardship,

Dani Rodrik argues on TomPaine.com. As the cases of
Vietnam and Mexico demonstrate, it’s internal policies that do the
most to boost economies.

Vietnam hasn’t received any economic favors from the West. It
couldn’t borrow from the International Monetary Fund or the World
Bank. And though the United States lifted its embargo on the
country in 1994, Vietnam still isn’t part of the World Trade
Organization. Mexico, on the other hand, has fostered close
economic ties with the United States in the form of the North
American Free Trade Agreement, US investment, and the ability for
Mexican citizens to work across the border. While the economy of
Vietnam grew annually at 5.6 percent per capita between its 1988
reforms and 1995 (and has grown 4.5 percent annually since then),
Mexico’s economy has inched along with a growth rate of 1 percent
per capita since signing NAFTA in 1992.

A broader global trend illustrates that, as with Vietnam and
Mexico, the countries that institute strong economic development
programs internally succeed in improving economic growth and
alleviating poverty. South Korea, China, and India all pulled their
economies up by their bootstraps, according to Rodrik, and all
three have flourishing economies today.

Rather than continuing to focus on opening market access to
cultivate trade and providing aid to developing countries, the
economically powerful should, Rodrik claims, work at making it
easier for individual nations to improve their own economic
development policies. He urges rich countries to help this process
by sharing financial information, expanding the ability for
citizens of developing nations to work abroad, and loosening WTO
regulations.
— Rose Miller

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The Trade-And-Aid Myth

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