When it comes to aid and development, the question we should be asking is not whether aid works (a.k.a the Great Easterly-Sachs Debate), but rather what kind of aid works and under what conditions.
Here’s CGD’s Jonathan Glennie and Andy Sumner on the subject (read the whole paper here):
Part of the problem is the polarised and non-nuanced public policy debate between the ‘aid works’ versus ‘aid is a waste of money’ camps. In our review we are constrained by reviewing how the literature has approached this question. We thus take aid ‘working’ or ‘effective aid’ to mean aid that contributes to, or is associated with, even if only modestly, positive development outcomes such as economic growth and social development. This is not an ideal definition but it is common in the literature and thus a review is constrained in opening this question further. Meanwhile the lack of a counter-factual is the biggest barrier to ever knowing for certain the impact of aid. The idea that aid ‘works’ can be questioned by interested parties, both informed and uninformed; assertions that aid is wholly or in part responsible for impressive improvements in human development in the past couple of decades are questionable. It is also not difficult to find examples where aid has been detrimental to countries and communities and where there may be trade-offs in terms of positive and negative impacts. More modesty is needed in any claims for how aid can contribute to development. However, the evidence, which we discuss in this paper, does suggest that aid has contributed in many countries and, despite its many flaws, can continue to do so.
Read the whole paper here (highly recommended).