In IB Economics unit 5, Development Economics, several strategies for achieving improvements in the welfare of the world’s poorest people are investigated. Foreign aid has been one of the main focuses of economic development strategies over the last several decades. But is aid in the form of development loans and grants from international organizations and foreign governments always beneficial to those who receive it in the poorest countries (the bottom billion as described by development economist Paul Collier)?

In the discussion that follows, Paul Collier of Oxford and Zambian economist Dambisa Moyo argue that the developed world’s focus on aid to Africa, resulting in a trillion dollars in loans and grants over the last 50 years, has missed the mark and completely failed to achieve meaningful economic development. The focus must therefore shift to opening markets, improving governance, achieving security and creating jobs for the poorest people on the African continent. Watch the two videos below, and respond to the discussion questions that follow. [the time in the video where the question is discussed is in brackets]

Part 1:

Part 2:

Discussion Questions:

Part 1:

1. What factors does Paul Collier point to that contribute to the “poverty traps” many African nations find themselves in? [3:07]
2. What have the two main goals of foreign aid policy been over the last 50 years, according to Dambisa Moyo? [4:45]
3. What are the “four horsemen of the African apocalypse?” How does Moyo think these four obstacles to development can best be overcome? [5:14]
4. What is Paul Collier’s opinion of the role of free trade in promoting human and economic development in Africa? What does he think about Africa’s traditional dependence on primary products and commodities? [7:45]
5. Before economic growth and development can occur, security must be achieved. Why is security, according to Collier, the number one obstacle to achieving meaningful development in Africa? [8:30]
6. In a dissenting view, Dr. Jeffery Sachs argues for more aid to Africa. What types of aid does Sachs believe is absolutely crucial for Africa to continue to receive? [10:39]

Part 2:

1. Collier makes the claim that aid may create “moral hazard” in Africa. What is moral hazard and how could reducing aid to African governments actually “force good governance”? [5:30]
2. Is there any historic record of aid working? What strategies accompanied foreign aid that contributed to its greatest historical success? [8:10]
3. What’s the main difference between Europe’s economic successful development during the second half of the 20th century and Africa’s unsuccessful experience during the same period? [9:00]

Econstories.tv – A new resource for Econ teachers and students, from Russ Roberts and John Papola

The long awaited rap video from George Mason University’s Russ Roberts featuring the theories of John Maynard Keynes and F. A. Hayek has been released at last!

We’ve heard some decent Econ raps before (remember “Demand, Supply” by Rhythm, Rhyme, Results?) But this song covers all bases in the predominant macroeconomic schools of thought. Keynes and Hayek are brought back to life and their theories pitted against one another in an all out liquor fueled debate on the streets of New York City.

The video was just released this week. It is packed full of theory from the Classical, supply-side school of macroeconomics (represented by Hayek) and the demand-side school (represented, of course, by Keynes). The video includes cameos from Fed chairman Ben Bernanke and Treasury Secretary Tim Geithner, whose role as bartenders filling Keynes glass reflects their role in the real economy at keeping the money supply and government spending at high levels, fueling economic booms and the eventual busts that result.

Stay tuned to this blog for more feedback on the video, including some graphical analysis and discussion questions for Macro teachers to use in class!