China Expansion Jeff Hutchens/Getty Images

Development Beyond Aid

Modern economic development is a process of continuous structural change in technologies, industries, and hard and soft infrastructure – all of which increases labor productivity, and thus per capita income. To account for this, development assistance should be expanded beyond aid, to include trade and new forms of investment.

BEIJING – Despite the apparent tranquility of this year’s spring meetings of the International Monetary Fund and World Bank, there are reasons to be concerned about the global economy. The United Kingdom’s impending “hard” Brexit from the European Union and US President Donald Trump’s anti-globalization agenda are creating economic uncertainty, and will continue to do so for some time.

In contrast to Trump, Chinese President Xi Jinping has come to the defense of globalization, and made new capital available for creating global pubic goods, enhancing connectivity, and creating jobs in developing countries. More than 60 countries have welcomed Xi’s “One Belt, One Road” initiative, and 28 heads of state will attend an OBOR summit in Beijing on May 14. So, what is China’s rationale for pursuing this grandiose vision – one that so many countries, especially in the developing world, have embraced?

In our new book, Going Beyond Aid: Development Cooperation for Structural Transformation, we argue that official development aid (ODA) need not always be concessional, and make the case for going “beyond aid,” toward a broader approach – like that taken by China – that includes trade and investment. Right now, the OECD’s definition of ODA does not even include some of the more effective instruments for facilitating structural transformation in recipient countries, such as equity investment and large non-concessional loans for infrastructure.

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