Escaping Poverty : Foreign Aid, Private Property, and Economic Development

P.T. Bauer boldly conjectured two hypotheses about the process of escaping poverty. First, he argued that foreign aid not only fails to promote economic progress, but may actually retard this process. Second, Bauer argued that private property rights are necessary and sufficient for economic development. This paper evaluates both of Bauer’s controversial claims. First, I consider the theoretical mechanisms through which aid might depress recipient-country development and examine the empirical evidence that addresses this hypothesis. Second, I theoretically investigate the role of private property in economic development and examine the evidence for Bauer’s claim regarding the primacy of private property. My analysis finds support for both of Bauer’s provocative hypotheses and suggests that his work anticipated the most important results in the contemporary field of economic development