Glen Hubbard’s The Aid Trap

Highlighting the success of post-WWII’s Marshall Plan which was designed to bolster the private sector, Glenn Hubbard argues that aid should be given to local businesses in developing nations. Fostering growth in the private sector will expand the middle-class and lift distressed societies out of poverty. Read The Aid Trap by Glenn Hubbard and William Duggan.

EXCERPT: Chase the Devil: Details for a Marshall Model

We can best understand how to adapt the key technical details of the Marshall Plan by taking the case of Greece. In its economy and politics, Greece was the Marshall Plan country most like poor countries today from various angles: in population, economy, and politics. The example of Greece gives us both concrete ideas to borrow and the hope it can work again.

Greece is smaller than the major countries of Europe. Its population at the time was 7.5 million, versus nearly 50 million each for Britain, France, Germany, and Italy. Of the sixteen Marshall Plan countries, Greece was the third poorest and the most unstable at the time. Only Portugal and Turkey were poorer, but both escaped most of the fighting of World War II. Greece suffered invasion from both Italy and Germany, which an active Greek resistance fought with the help of the British army. After the war the resistance split and fought a civil war: Greek communists with Russian help versus Greek royalists and democrats with British help. So among the war-torn countries, Greece was the poorest and stayed war-torn longest. And it was less than a full democracy before, during, and right after the Marshall Plan: The Greek king stayed in power to some degree through the 1940s and 1950s.

Small, poor, war-torn, and semi-democratic—that sounds a lot like many poor countries today, especially in Africa. Of course, Greece did not have forty years of aid to undo. And although its farmland was the poorest in Europe, it still had its ancient advantages of a single written language, excellent ports, and a prime location at the hub of Mediterranean trade. We cannot expect most poor countries to mimic Greece’s success in whole. But how the Marshall Plan helped, at scale and quickly, is worth learning from and mimicking in part.