Description

Abstract: “Can’t get ahead for falling behind.” The entrapment and powerlessness this phrase evokes applies as much to development policy caught in a vicious circle of vulnerability, crisis and reactive aid as it does to the lives of the very people aid policies are designed to benefit. We consider these in turn, first exploring the trap of reactive aid which recent research suggests is costly of limited effectiveness, and commonly crowds out efforts to address underlying structures that create and perpetuate vulnerability. We then consider the related micro-level poverty traps that emerging analysis attributes largely to the ills of dysfunctional factor markets compounded by social exclusion. Both traps can be escaped only through a simultaneous effort to retarget development assistance to firm up factor markets and crowd-in investment. Foreign aid must be properly targeted toward remedying market deficiencies that set vulnerability traps for both the poorest and for development assistance.